News & Reviews News Wire Railroads once again emphasize interline intermodal as way to compete with trucks

Railroads once again emphasize interline intermodal as way to compete with trucks

By Bill Stephens | November 15, 2023

Joint intermodal service was scaled back as the U.S. railroads adopted Precision Scheduled Railroading operating models beginning in 2017, but now they say cooperation is the way to gain freight off the highway

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Container train passing overhead signals
A westbound Norfolk Southern intermodal train passes through Goshen, Ind. David Lassen

Class I railroads, which pruned their interline intermodal service as the Precision Scheduled Railroading operating model spread in the U.S. over the past few years, have rediscovered joint service and say it’s a way to capture freight moving on the highway.

Several interline intermodal initiatives have been announced since May. Among them:

  • The Canadian National-Union Pacific-Ferromex cross-border Falcon Premium service.
  • CN service to Kansas City and Atlanta via Norfolk Southern.
  • UP service from Mexico to the Southeast via Memphis and interchange with both CSX and NS.
  • Expanded NS service to Florida via regional Florida East Coast Railway.
  • And Canadian Pacific Kansas City-CSX service linking Mexico and the Southeast via a new interchange they’ll create in Alabama by acquiring and operating Genesee & Wyoming short line Meridian & Bigbee.

“If we’re successful — and I’m confident we’ll be successful — I think the Falcon service will be the role model of how rails need to work together to gain market share from other modes of transportation,” CN Chief Financial Officer Ghislain Houle told an investor conference yesterday.

Railroads have long concentrated their intermodal efforts on single-line routes where they control the origin and destination. They also have streamlined their interline offerings to simplify their intermodal networks. But that will only get you so far. “You’re limited by your network reach. You go to where you go and you don’t go to where you don’t go,” Houle says.

“The issue in the past is railroads have not worked well together,” Houle says, noting that railroads have traditionally quibbled over where to interchange and how to split revenue.

“When we started the Falcon service we looked at this and said where is the best route and the best interchange point to be competitive with the truck from a customer standpoint,” Houle says.

Chicago was chosen as the interchange point, with Falcon traffic exchanged at UP’s Yard Center terminal and CN’s nearby Markham terminal.

In the past, interline partnerships might have been developed when CEOs dined together, Houle says. “But it wouldn’t permeate itself into the organization,” he says, noting that service would suffer because the railroads didn’t work well together.

UP and CN closely monitor Falcon Premium service, including terminal dwell, incoming interchange volume, and operational details like swapping power. “The notion is we need to run as a single-line railroad,” Houle says.

The coordination has been helped by the arrival of CN veteran Jim Vena as UP’s chief executive, Houle says.

The service offers shippers cost savings and environmental benefits compared to trucks, Houle says. “Shame on us if we screw this up,” he says.

Vena says UP is working to improve and better coordinate joint service with Ferromex via the Eagle Pass, Texas, gateway. UP has a 26% stake in the Mexican railroad. “We need to leverage that better,” Vena told an investor conference yesterday. “We need to look with the FXE as if we’re one railroad.”

The Falcon Premium service is a win-win, Houle says, because it gives CN access to Mexico and UP access to Canada. CN officials estimate that the service could attract 350,000 containers annually, based on research done as part of their failed bid to acquire Kansas City Southern.

“There’s no reason why freight in a can going 1,300, 1,400, 1,500 miles should be on a truck,” Houle says. “It should be on a train.”

CN expects volume to ramp up gradually from its new interline partnerships with UP and NS.

“You won’t see this needle moving in the short term as much because a customer that has done business with trucks for the last 10 years won’t give you all that business tomorrow morning,” Houle says. “They’ll test you out.”

CPKC Chief Marketing Officer John Brooks touted the benefits of the railroad’s single-line service linking Canada, the U.S., and Mexico. “At the end of the day, a single-line haul, one-stop shop, fastest service in the industry matters. It usually wins,” Brooks told an investor conference yesterday.

But the biggest competitor is trucks — not other railroads — he says, and the volume of truck traffic moving between Mexico and the Southeast is huge.

“The truck market available to everybody out there is massive,” Brooks says. “And I think we’ve long been criticized, maybe the rails historically have just been too focused on stealing from each other versus really stealing from the true competitor, and that’s trucks.”

CPKC relies on interline service to connect Mexico and the Southeast.

“We’ve got an existing partnership and great route with NS,” Brooks says. “We’re developing a new route with CSX that just opens up a whole ‘nother world of customers … We’re super excited to work with both those partners to attack — and I mean attack — the truck market in that lane.”

25 thoughts on “Railroads once again emphasize interline intermodal as way to compete with trucks

  1. Seeing all the comments here: 1) I understand that the key to BNSF’s getting that business from Hunt in the first place was the SPEED! EHH was wrong in once saying the BNSF didn’t need to run that service so fast. 2) Railfanning the NYC Main w from Albany shows running “fewer, slower, longer” trains was EHH’s basic model. Fewer trains–but easier to chase! 3) A lot of Democrat-Biden Bellyaching about “WALL ST” (NOT the RDG train I once rode!. TRUTH is Hedge Funds (leave aside their illegality as “Stock Market Pools” under the 1934 Act) are dominated by their Pension and Insurance Fund customers. THEY are the ones wanting the stock buybacks in large blocks so they don’t have to pay for an army of brokers. I went researching to find where the stock buybacks showed up and it’s in block trades and not the Trans Lux ticket parade of retail customers. 4) Was wondering what had become of those lines on the map. That straight line to Mt. Jewett on the Pittsburgh & Western section of the B&O map turned out to be one of the curviest lines in God’s creation when I rode it in 1987! Some of those lines used to be kept for emergency detours until RR’s stopped doing such.

  2. It’s shameful at least one of the interline routes mentioned is the result of some outside force (CPKC) restricting an already-established interline route as a retaliatory measure.

  3. My experience has been that “Buy In” created at track level between white collar and blue collar team members, honestly supported 100% by top level folks on both sides, has been proven to be successful. When you hear pride and commitment to “hot shots” by the operating crews and trainmasters, success and traffic growth follows.

  4. everyone of those containers is still a truck that will be on the highways. you want to truly take trucks off the highway then it needs to go by rail dock to dock

  5. I call BS. UPS has tried several times to get a Z hotshot from New Jersey to California. It never worked because it was “too much work”. Having crews ready, engines fueled & ready, switching in place, slower manifests onto sidings, through tracks in yards cleared in time, Amtrak out of the way. And having to (heaven forbid) skip Chicago!

    Cooperation only as they see fit, not for the customer.

    The USA has the highest capacity for computing and analytics but we can’t get just one express train from NJ to CA because its ‘too hard’. That is pathetic.

    1. Mr. Rice are you familiar with the Q-NYLA the original intermodal hot shot started by Santa Fe more than 30 years ago and still operated by BNSF. Its schedule was and is 76 hours coast-to-coast. And we should also remember Santa Fe’s Super C, the world’s fastest freight train. Super C worked very well but customers were unwilling to pay the rate for that much speed.

      BNSF regularly turns in perfect peak season operations for UPS. And the UPS CACH is located on the Santa Fe main line for a reason.

    2. @James Giblin: My understanding was that the BNSF express route was no longer offered due to what your remarked, as too expensive. I do remember the Super-C.

      The reason given for being so expensive is what I outlined above. Coast to coast express freight by rail is way too labor intensive and extremely manual. There was expressions of frustrations by district managers about how they had to put operations on hold for a couple of hours to maintain a pass through window for the express to come through uninhibited.

  6. What’s old is new again…we just had to wait until enough old guys went to the happy hunting ground for someone else to “discover” this strategy and get a plaque documenting the idea.

    Since we’re rediscovering the past, the ATSF and PRR once jointly owned the TP&W to help siphon traffic away from Chicago. It’s all still there albeit in need of a total rebuild. How long before BNSF and NS “discover” this?

    1. Don’t even get me started on the need for a freight bypass south of Chicago.

      For about the 99th time (if that few) I’m going to post the same thing: CPKC’s route from Detroit to KCMO is just plain stupid.

    2. Mr. Carleton you seem to conveniently forget something called the Streator Connection. This route used the former Kankakee Belt (now operated by NS) for a much shorter and much faster route than using the TP&W.

    3. Oh no, I’ve studied the Streator connection previously. Unfortunately the east end to South Bend was ripped up by ConRail. I would like to avoid Chicago AND reduce mileage. Railroads like to charge by the mile hence the historical hand off in Chicago. ATSF once went all in on the TP&W but ConRail didn’t want to play ball for the aforementioned mileage. I’m hoping the railroads see beyond that now and look to increase intermodal by, amongst other things, decreasing the mileage of their runs.

    4. Charles, I assume you saw the BNSF-JB Hunt reaction to the new “high-speed” CPKC route to Mexico. In a totally deregulated market like domestic intermodal market forces have a way of sorting things out.

    5. Well, I’m sorry Mr. Carleton but mileage does not necessarily equal speed. We looked very hard at the TPW when I was at Santa Fe and the consensus was that it was nothing more than a line on the map. Even the Streator Connection was not that great.

      Any bypass route needs flyovers to be grade separated. Ironically the best physical bypass route in these terms is the Indiana Harbor Belt.

    6. The Kankakee Belt use to interchange with the CB&Q near Ladd. Once the bridge was removed over the Illinois River, it was cut off. NS still brings a few locals over via Schneider, IN. In reality its a branch line with 2 big customer at each end. Marquis Energy in Hennepin, IL and the Schafer Generation on the east end. The power plant at Hennepin uses barged coal from central Illinois via Havana. Tracks were removed ages ago.

      When ATSF took over the TP&W, they tried hard to make it work, but it takes two and no one at the time was willing. An unused intermodal terminal at Wolcott, Indiana is the proof.

    7. Daniel, I agree with your assessment. The Kankakee should be rebuilt to at least the connection with the Chicago District at Knox to have meaningful use as a bypass not only for intermodal but also bulk unit trains.
      I’ve also wondered what it would take to rebuild the bridge (with raised clearances for navigation) over the Illinois River to connect directly with IAIS as to have ethanol, sand, etc. off of them avoid Chicago (and the csx-owned portion of the new rock sub) altogether.

    8. I agree with your thoughts, Daniel, and the points outlined below. At the time Conrail/Rail was formed, the Kankakee Belt was in the same condition as every other ex-PC secondary route. In the mud. Route consolidation wasn’t just in vogue in the mid- to late-70s, but required for CR’s survival. There are so, so many route segments I’m sure railroads wish they could get back from the scorched-earth abandonments of the 70s and 80s; but I would still question the value of the Kankakee as a through route from South Bend to Schneider vs. running a couple manifests and intermodal over to Indiana Harbor and south.

      A lot of “what ifs” can play out, but at the end of the day, ideas like rebuilding the Kankakee just to Knox, Ind., are compelling, but if you were the railroad, ask yourself: Do we fight with the adjacent landowners to buy back our right of way, fight with the same towns and people to agree to a settlement for the “quality of life” we’re going to ruin, and pay the $2 to $3M per mile to rebuild the railroad? Or do we just add more capacity on our existing mainlines into Chicago? Very rarely has “adding another track where we already have track” lost in that choice.

    9. Perhaps we have all lost the thought that when a railroad bypasses Chicago, it does so at great distance from the area. We all have been discussing a bypass like we were in a truck looking for a quicker way.

      The Class 1’s prefer to meet in Chicago. Nuff said. It’s the only place in the US and Canada where all of the railroads agreed to meet in some way. They don’t want to change it because it might give someone an edge. If “everyone” has to meet and exchange there then no one has an advantage.

      When one bypasses Chicago, it means north of the Great Lakes (Canada) or St Louis, Memphis or New Orleans.

      But I think what distorts things is when Class 1’s think they have to push coal drags, oil tankers or long container pulls through the Chicago terminal to reach all points east. This when people start looking at bypasses.

    10. Mr. Giblin, my final temp assignment on the railroad before retirement was six months in that Garden of Eden that is NW Indiana. My hotel in Hammond had the Kankakee Belt running in back and my office window in East Chicago had a panoramic view of the IHB…when it wasn’t iced over. Traffic on the Kankakee line was all but nonexistent belying the overall good condition of the ROW. Capacity expansion with more sidings would be needed to be of any real use. I’m also rather certain the TP&W is in far, FAR worse shape now than in your ATSF days. I was in no way implying a diversion of traffic starting tomorrow. A significant amount investment is needed if not here then somewhere to increase speeds/decrease mileage if the railroads are going recapture time sensitive traffic. Above all, the railroads need to relearn how to WORK TOGETHER mixing and matching routes to their mutual benefit and those of the customers…before the Feds force them to do so at terms that benefit few.

    11. The IC Gruber line bridge over the Illinois River still exists at LaSalle-Peru. It would only be necessary to rebuild approximately 9 miles of the IC from the Kankakee Belt at Lostant to Oglesby to use this bridge. The IC would need to be rebuilt another dozen or so miles to Mendota and the BNSF Chicago to Galesburg line. From Mendota, the Milwaukee to Rochelle would need to be rebuilt. From Rochelle to Rockford, the BNSF Rockford Branch is still intact. The Milwaukee could be used from Rockford all the was to Portage or Watertown. Not sure if the connections are set up correctly in Madison.

  7. The big issue with railroads vs trucks is fleibility. While trucks have the mobility and flexibility in the sense that you can drive a truck from a warehouse or loading dock in let’s say California all the the way to a local store or market in Maine or New York. While the railroad is energy efficient and can move large amounts of freight and containers with 100-150 car freight trains, you still need the trucks to take the goods from the yard or unloading dock to the final destination be it a store, a shopping mall or manufacturing plant. I the trucking industry , there are many small family owned and operated firms where the whole family pitches in with the driving such as Husband and wife driving teams, father and son driving teams or even brothers working together and own their own rigs and will drive cross country. Trucks are more flexible than railroads in shipping and getting the goods to the final destination while trains are more energy efficient and their ability to move large amounts of goods and merchandise on a single frieght train. For example a 100 car intermodal freight train with containers as compared to 100 trucks or more on a crowded highway hauling the same amount. Somewhere in between there has to a solution where both trains and trucks work together as a team to move goods and not be in competition with one another. Both forms of transportation are needed and must work together in a seamless, unbroken smooth path and route to serve the nation’s businesses, companies and merchants. Both forms play their role and part in keeping America moving and running
    Joseph C. Markfelder

  8. Another admission that Hunter Harrison and his profits now at the expense of customer satisfaction, employee relations, and long-term growth ideas were a disaster for the Class 1s. To paraphrase a Mad Magazine piece from the early 1970s concerning the cancellation of The Beverly Hillbillies television program: “Let us hear no more of PSR henceforward from today”, substituting the term “PSR” for the phrase “squirrel stew”.

    1. Yeah, it seems the only thing PSR was good for was Wall St and its short term investors, absolutely nothing else.

  9. Can attest to amount of TT and IM traffic on I-85 south of Atlanta. An estimate is a ten fold increase of that traffic on I-85 in past ten years. Containers on chassis is a big part. Kind of discount the international containers.

  10. Railroads as an industry have existed for nearly 200 years. The concept of interchange has existed for most of those 200 years. Touting that NOW, this time, it will work better is not a compelling pitch. Also going with “before our CEOs cut the deal and that guy just didn’t have enough pull in the organization to get everyone else to go along” is amusing.

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