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Most major North American freight railroads reported strong earnings for the first quarter 2011 versus first quarter 2010.

Following is a wrap-up for the quarterly earnings reported by the railroads to the investment community.

Not included is BNSF, which is privately held and does not report its financial results to the investment community.

Mention is made of each railroad’s operating ratio. Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the higher is profit.

Canadian National

Canadian National reported a 31 percent increase in first quarter 2011 profit versus first quarter 2010. This comes following a 19 percent increase in CN profit for calendar year 2010.

CN’s operating ratio for the first quarter 2011 was 69 percent, slightly better than the 69.3 percent reported for first quarter 2010. The railroad’s fourth-quarter 2010 operating ratio was 63.6.

CN is primarily a Canadian railroad. Its U.S. holdings include what were formerly Detroit, Toledo & Ironton; Elgin, Joliet & Eastern; Grand Trunk Western; Illinois Central; and Wisconsin Central.

Canadian Pacific

Canadian Pacific Railway was the only major North American rail system reporting a drop in profit for the first quarter 2011 compared with first quarter 2010. CP cited severe winter weather as the cause of its profit decline.

CP’s calendar-year 2010 profit increased by 39 percent.

The railroad’s first quarter 2011 operating ratio soared to 90.6 compared with 82.3 in the first quarter 2010. CP’s fourth quarter 2010 operating ratio was 77.6.

CP said its 15,143 employee count increased by 613 during the quarter, but gave no indication of whether it would add employees the remainder of 2011.

First quarter 2011 train speeds fell by almost 14 percent and the number of train accidents soared by 57 percent — both attributed to a dramatic increase in the number of avalanches in the Canadian Rockies and winter-long blowing snow throughout CP’s North American rail network.

Canadian Pacific is primarily a Canadian railroad. Its U.S. holdings include Class I Soo Line and regional railroad Delaware & Hudson.

CSX

CSX profit jumped 30 percent during the first quarter 2011 versus the first quarter 2010, the railroad reported April 19. This comes on the heels of a 35 percent improvement in operating profit for calendar year 2010.

The CSX employee headcount rose in March to 30,464 employees, up 3 percent from March 2010, the railroad said.

The CSX operating ratio for the first quarter 2011 was a record low 72.5 for any first quarter. The fourth quarter 2010 CSX operating ratio was 71.1.

CSX operates some 21,000 route miles in 23 states and the District of Columbia.

Kansas City Southern

Kansas City Southern’s first-quarter 2011 profit was almost double that of the first quarter 2010. This followed an 82 percent increase in profit for calendar-year 2010.

The employee headcount remained constant at 6,080. The railroad did not indicate whether it would be increasing its headcount in 2011.

The KCS first quarter operating ratio declined significantly, from 75.2 percent the first quarter 2010 to 73.8 for the first quarter 2011. The railroad’s fourth-quarter 2010 operating ratio was 73.2.

KCS operates some 3,500 route miles in 10 states in the Central and South-Central U.S., as well as Kansas City Southern de Mexico, a primary Mexican rail line.

Norfolk Southern

Norfolk Southern reported a 26 percent increase in profit for first quarter 2011 versus first quarter 2010. This follows a 45 jump in NS profit for calendar-year 2010.

NS said it would add some 1,100 new workers during 2011, returning employment to the same level as in 2008.

NS operating ratio for first quarter 2011 was 77.1 percent, higher than the 75.2 percent in the first quarter 2010, owing, in part, to severe winter weather. The fourth-quarter 2010 NS operating ratio was 71.9 percent.

NS operates some 20,000 route miles in 22 states and the District of Columbia.

Union Pacific

Union Pacific profit rose 24 percent in first quarter 2011 compared with first quarter 2010, This follows a 47 percent jump in Union Pacific profit for calendar-year 2010.

UP said the railroad would increase its 43,000 employee headcount by about 4,500 in 2011.

The railroad reported a best-ever first quarter operating ratio of 74.7 percent — one of the more difficult for railroads because of winter weather. The fourth quarter 2010 UP operating ratio was 73.2.

Union Pacific operates some 32,000 route miles in 23 states in the western two-thirds of the U.S.

Norfolk Southern reported a 26 percent increase in profit for first quarter 2011 versus first quarter 2010. This follows a 45 jump in NS profit for calendar-year 2010.

NS CEO Wick Moorman said the railroad intends to add some 1,100 new workers during 2011, returning employment to the same level as in 2008.

NS operating ratio for first quarter 2011 was 77.1 percent, higher than the 75.2 percent in the first quarter 2010, owing, in part, to severe winter weather. The fourth-quarter 2010 NS operating ratio was 71.9 percent.

Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the higher is profit.

Moorman told Wall Street analysts, “We see continuing opportunities for growth in almost every segment of our business, and we’re optimistic about our prospects for the balance of 2011.”

NS operates some 20,000 route miles in 22 states and the District of Columbia.

 

Shortline holding company Watco is seeking regulatory approval to acquire 43.6 miles of track from Norfolk Southern in Alabama between Maplesville and Autauga Creek, and 10.1 miles of track between Autauga Creek and Montgomery for creation of a new shortline railroad.

The new shortline would be named Autauga Northern Railroad.

Watco currently controls 22 shortline railroads in 18 states.

How did major railroads perform in 2010?

Reviewing their calendar-year and fourth-quarter profit statements, one wouldn’t know they were operating in the midst of a nationwide recession.

Profits soared, stock dividends were raised and operating ratios improved. (Operating ratio — a railroad’s operating expenses expressed as a percentage of operating revenue — is considered by economists to be the basic measure of carrier profitability.)

Wall Street analyst Ed Wolfe reports the level of freight car and intermodal loadings for the year registered “the best” year-over-year growth in more than 50 years.

Wolfe and other analysts also point to the railroads’ pricing strength — the ability to raise rates on shippers with limited effective alternatives to railroad transportation. Many long-term contracts for hauling coal are expiring, and substantial rate increases on that traffic already are reflected in new contracts.

Indeed, railroad CEOs are predicting another strongly profitable year in 2011, which was reflected in year-end railroad stock prices, which were flirting with record highs.

Following are profit reports from the major railroads:

 Canadian National:

  • Fourth-quarter profit increased 19 percent.
  • Calendar-year 2010 profit increased 13.5 percent.
  • Operating ratio improved four percentage points to 63.6.
  • The stock dividend was raised 20 percent.
  • The year-end stock price was up 38 percent. Analysts predict CN’s stock price will rise another 4 percent in 2011.

 Canadian Pacific:

  • Fourth-quarter profit increased 34 percent.
  • Calendar-year 2010 profit increased 39 percent.
  • Operating ratio improved four percentage points to 77.6.
  • The stock dividend was raised 9 percent.
  • The year-end stock price was up 45 percent. Analysts predict CP’s stock price will rise another 8 percent in 2011.

 CSX:

  • Fourth-quarter profit increased 46 percent.
  • Calendar-year 2010 profit increased 35 percent.
  • Operating ratio improved four percentage points to 71.1.
  • The stock dividend was raised 26 percent.
  • The year-end stock price was up 62 percent. Analysts predict CSX’s stock price will rise another 6 percent in 2011.

 Kansas City Southern:

  • Fourth-quarter profit increased 47 percent.
  • Calendar-year 2010 profit increased 82 percent.
  • Operating ratio improved 8.8 percentage points to 73.2.
  • The year-end stock price was up 74 percent. Analysts predict KCS’s stock price will rise another 7 percent in 2011.

 Norfolk Southern:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 45 percent.
  • Operating ratio improved 5 percentage points to 71.9.
  • The stock dividend was raised 11 percent.
  • The year-end stock price was up 41 percent. Analysts predict NS’s stock price will rise another 8 percent in 2011.

 Union Pacific:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 47 percent. UP Chairman Jim Young said 2010 was the “most profitable year in Union Pacific’s nearly 150-year history.”
  • Operating ratio improved 5.5 percentage points to 70.6.
  • The stock dividend was raised 40 percent.
  • The year-end stock price was up 60 percent. Analysts predict UP’s stock price will rise another 8 percent in 2011.

 BNSF:

As BNSF is now privately held, it no longer reports detailed financial data.

UTU conductor double-amputee in NS mishap

Norfolk Southern conductor and UTU Local 768 member Larry McVay, age 43, lost an arm and a leg in a switching accident near Lafayette, Ind., the morning of Jan. 3, and is recovering in an Indianapolis hospital.

McVay

A UTU member since Dec. 1, 2007, McVay is a resident of Dalton City, Ill. He and his wife, Lisa, lost a daughter in an automobile accident in 2008.

A Larry McVay benefit fund has been established at Land of Lincoln Credit Union, 2890 N. Oakland Ave., Decatur, IL. 62526. More information may be obtained from the credit union by calling (217) 875-1300.

Members who have PayPal accounts may also make a contribution through the PayPal website by sending funds to the e-mail address benefitlarry@yahoo.com.

Keith Fitzhugh is a conductor trainee on Norfolk Southern’s Atlanta North District.
He could be playing football with the New York Jets.
If you think trading a National Football League playbook for an operating employee’s rulebook is something akin to carrying the ball toward your own goal line, think again.
The 24-year-old Fitzhugh — who has made application for UTU membership when he completes his probationary period in January — knows the value of steady work and regular paychecks in an economy thrown for a loss. “You can have a fine living working for the railroad,” Fitzhugh said.
Cut by the Jets pre-season, Fitzhugh responded to an early December invitation to return as a defensive back with a polite, “thanks, but no thanks.”
Fitzhugh began conductor training with NS in September, established seniority in November, and looks forward to membership in UTU Local 511 in Atlanta. He was raised in nearby Hampton, Ga.
“For me, having job security is important,” said Fitzhugh, who is helping to support his disabled father, a former truck driver. “I was released three times [twice by the Jets, once by the Baltimore Ravens]. There is no job security [in the National Football League]. Why risk losing a good job with Norfolk Southern? I have buddies with two degrees who can’t find a job.
“Working for Norfolk Southern is one of the best prestigious jobs you can have,” Fitzhugh said. “I don’t want to give up what I have now, go back to playing football a couple of weeks and then be released again. I have to look out for what’s best for me and my family.”
“To sacrifice what he did for his family is the most unselfish thing I’ve heard by a player in sports,” Fitzhugh’s agent told the Associated Press.
“I think riding on a locomotive is one of the coolest things,” Fitzhugh said. “I talked with my parents about it. They have always thought highly of Norfolk Southern, where it’s safety first.”
Fitzhugh, a standout safety at Mississippi State University, was signed by the Jets in 2009. He was named by USA Today as one of the top 200 college football players in the nation, and played as a senior in the East-West Shrine Bowl. At Mississippi State, he earned a degree in communications, with a minor in marketing.

 
 
 
 
 
 
 
 
 
                               Fitzhugh

A Norfolk Southern sought lease of trackage to a newly created short line railroad in Michigan is being opposed by the UTU and the Brotherhood of Locomotive Engineers and Trainmen, which represent affected train and engine workers.

The U.S. Surface Transportation Board (STB) is being asked by the UTU and the BLET to revoke an exemption from regulatory review previously provided a proposed transaction of NS and Adrian & Blissfield Rail Road, a holding company intending to create a new shortline to lease and operate almost 45 miles of NS track near Lansing.

The new short line, to be called Jackson & Lansing, is expected — as is the case with virtually all upstart shortlines — to hire a new workforce that will be paid lower wages and benefits than NS now pays the five trainmen, three engineers and three other employees now assigned to that trackage by NS.

The UTU and the BLET are asking the STB to revoke a previously granted STB exemption that would permit the transaction to move to completion without regulatory scrutiny. Such exemptions are permitted if the STB is satisfied that neither competition, continued rail service, safety nor other so-called public interest considerations will be jeopardized as a result of the transaction.

In fact, STB Vice Chairman Frank Mulvey filed a dissent in the previous 2-1 decision granting the exemption, saying that the outward written commitments imposed by the parties require more information, “particularly when they contain outright bans on interchange with third party carriers or, as here, economic incentives that can only be evaluated with the provision of additional information.”

Specially, the UTU and the BLET ask the STB to reconsider its granting of the exemption for the following reasons:

  • Competition and reasonable rates: The transaction, as proposed, would exclude third party carriers (other than NS) from operating over the line, and limit interchange to and from other carriers. Also, the transaction, as proposed, appears to limit competition in order that Jackson & Lansing be able to increase freight rates to fund upgrades to the leased track and facilities. This would be in violation of congressionally imposed national rail transportation policy that supports rail-to-rail competition and fair and reasonable freight rates.
  • Safety: The so-far known facts of the transaction suggest it is highly unlikely either the holding company or its shortline, Jackson & Lansing, currently have sufficient funds and cash flow to upgrade the leased track and facilities to provide safe and reasonably timely operations. As expected carloadings will contain industrial waste, track and rail operating safety must be of significant concern.
  • Fair wages and working conditions: In the current economy — especially in Michigan, where unemployment is twice the national average — the affected employees and their families, and the State of Michigan, will suffer significant economic harm. By granting an exemption from regulatory scrutiny, the STB is permitting the transaction to move forward without imposing labor protection.

This also would violate national rail transportation policy, as it requires “fair wages and suitable working conditions.” The STB is obligated to consider (which can only be done by revoking the exemption and investigating the transaction) whether the new entity will impose substandard wages and working conditions, thereby significantly circumventing the terms and conditions of current collective bargaining agreements under which the affected employees are now covered.

Click here to read the joint UTU/BLET filing.

Brothers and Sisters:

We know our rail members employed by BNSF, CSX, KCS, NS and UP are anxious about the status of talks with the National Carriers’ Conference Committee (NCCC).

The talks resume Jan. 22 in Jacksonville, Fla.

It has been a year since the UTU and the NCCC held negotiations; and, in the interim, other organizations did reach a new agreement with the carriers.

Our talks stalled, in part, over the matter of entry-level pay tied to training (which was the subject of a side-letter in the previous round of negotiations).

The talks are under the control of the National Mediation Board, and this session in Jacksonville will be the first with President Futhey leading the negotiating team.

There are some changes in the negotiating team owing to retirements and election-related departures. Assistant President Martin has been added to the team, having been on the team that negotiated in two previous rounds.

We do not anticipate we will be returning to square one with the carriers, as there was progress in previous sessions even though a tentative agreement was not forged.

We can say this in advance of the Jan. 22 resumption of negotiations: The UTU negotiating team will encourage a new and progressive attitude by both sides.

As you know, successful negotiations cannot and do not occur in public, but every UTU member affected should be assured that the UTU negotiating team recognizes the issues near and dear to our members, and your negotiating team intends to forge a tentative agreement that can and will be ratified by the membership.

We will provide an update on progress as soon as we are able.

Meanwhile, we have made significant progress in updating International vice president assignments, with the majority of requests for assistance from general committees — some extending back to mid-October — having been made.

Also, assignments for UTU representation on various FRA safety-related committees, as well as National Transportation Safety Board incident and accident committees, are in the process of being updated.

During the past week in Cleveland, we met with the dedicated and loyal International headquarters staff and assured them that this administration is sensitive to their concerns as we embrace change. We emphasized that we are all members of working families, and that working families survive and prosper by standing together and working together.

Additionally, we are working with staff of the UTUIA to ensure that the insurance needs and concerns of active and retired UTUIA policy holders are serviced properly and in a timely manner.

Another area receiving our attention is the Discipline Income Protection Plan (DIPP). The carriers have been accelerating the imposition of discipline and dismissal of UTU members. While we have made some changes to ensure the continuation of the DIPP, the accelerated discipline and dismissal of employees by the carriers requires a complete review of the DIPP.

It is essential to emphasize that while other job benefit plans are looking for ways to AVOID paying claims, the UTU’s DIPP has remained steadfast in looking for ways to pay claims of participants. We intend to shore up this plan and continue to provide the peace of mind expected by members and their families who participate in the DIPP.

With regard to the SMART merger, recall it is on hold through a federal-court temporary restraining order. A status telephone conference call with the judge, involving all parties to the case, is scheduled for Feb. 1, and a court-hearing is scheduled for Feb. 8 and 9. We shall be reporting more on this issue as events warrant.

Finally, we have scheduled a meeting with all International officers, general chairpersons and state legislative directors in New Orleans for the end of January.

On Jan. 29, which is a meeting for International officers only, we shall fulfill a campaign promise to provide training and education in available computer software related to their jobs, as well as work-related resources available to them.

On Jan. 30, International officers, general chairpersons and state legislative directors will be provided a review of the union’s financial condition. Also, at the Jan. 30 meeting, there will be a discussion of various issues facing the International, its officers and membership.

General chairpersons and state legislative directors should attend the Jan. 30 meeting only.

In solidarity,

Mike Futhey, International President

President@utu.org

Arty Martin, Assistant President

AsstPres@utu.org

Kim Thompson, General Secretary & Treasurer

GST@utu.org