The 603 short lines operating in the United States play a critical role in the nation’s freight transportation network. They operate over 47,500 route miles — or 29 percent of the U.S. freight-rail system — and move one in five carloads annually, according to the American Short Line and Regional Railroad Association (ASLRRA).
They work together with Class Is to serve shippers, often providing the first or last mile of service for a shipment set for a longer journey. For example, 48 percent of freight-rail traffic is transferred from a Class I to a short line for final delivery; 9 percent is moved solely on a short line or regional; and 10 percent is moved from one Class I to another by a smaller railroad, according to the ASLRRA.
With a majority of North American Class Is adopting precision scheduled railroading (PSR) operations of late, the question arises: How has the PSR implementation trickled down to impact the short line industry? Has the spread of PSR been a good or bad development for short lines’ business?
Progressive Railroading in February and early March reached out to several short-line railroaders to get their perspective on dealing with the new operating strategy. The upshot? Although PSR has the potential for improving freight-rail efficiency, it’s impact on short lines so far has been mixed.
“There are pluses, minuses and unknowns,” says Chuck Baker, president of the ASLRRA. “On the plus side, ignoring the initial turbulence when this started a few years ago with the rough CSX summer, it’s unquestionable at this point that the network is operating smoother, faster and more efficiently.”
The “rough summer” that Baker refers to occurred in 2017, when CSX — under Chief Executive Officer E. Hunter Harrison — developed service performance issues as it began restructuring operations to a PSR model.
Harrison, who died in December 2017 before overhauling CSX’s operations, is considered by many to be the father of scheduled railroading. He had previously executed PSR strategies at CN and Canadian Pacific while leading those Class Is.
PSR is a departure from the common practice of holding trains until they’re completely full. Instead, deliveries are prioritized and hastened from origin to destination, and each asset is used and monitored constantly so customers can better plan their shipments. The PSR process is designed to improve customer service, control costs, optimize asset utilization, enhance safety and aid workforce development.
Since CSX launched its PSR plan, Norfolk Southern Railway, Union Pacific Railroadand Kansas City Southern also began phasing in the strategy. The Class Is are providing better service, and that allows short lines to help them better serve a customer base that prizes good service, says Baker.
“When you drill down in detail on the positive side of PSR, in a lot of locations there’s more frequent service — going up to five or even seven days a week now. And there are more frequent interchanges and pickups and better things to sell to your customers,” he says. “There are definitely some positives.”
And for short lines, the large roads’ transition to PSR has led to upheaval in the Class I network that, in some cases, enabled small railroad operators to step in and help alleviate those challenges.
“There are some customers who find it easier to locate on a short line — more so than perhaps they would have thought to do so before,” says Baker.
Adapting to change
However, the Class Is’ PSR implementation also has brought with it some challenges, such as aggressive cost and workforce cuts.
“Thousands of people have been laid off [by the Class Is], and some of those people are field sales, marketing, customer service and interline people that customers and short lines had come to rely on. That upheaval — and losing good people — is tough,” Baker says.
Additionally, Class Is have eliminated some less profitable business to focus on business that better fits their revamped networks.
“Short lines want every customer, every carload, every time,” Baker says. “Obviously, we get the reality that some business is more attractive than others, but we want all the business.”
Opinions within the short-line industry vary on whether PSR has presented more problems or opportunities. Stefan Loeb, executive vice president and chief commercial officer at short-line holding company Watco Cos. LLC, views it as more of the latter.
“We want to adapt around what our [Class I] partners are doing. I think a lot of short lines like to get ticked and trash Class Is because PSR involves a lot of change,” says Loeb. “From [our] perspective, the Class Is are implementing PSR for their shareholders and in the name of efficiency and profit. So we’ve said, instead of fighting PSR, how do we adapt around it for it to be successful for us and our customers?”
He acknowledges others in the industry have pegged him “an eternal optimist.” But having a can-do attitude is helpful when trying to sell a short line’s first-mile-last-mile service, Loeb believes.
“From a short-line perspective, the opportunity to succeed — especially in the carload business — has never been better. You are [offering] that entrepreneurial first-mile, last-mile service to the customer, ”he says. “And when you hand that car off to an efficient, faster, long-haul network, that creates the best product I’ve ever seen in the industry.”