Summary
Analysis
One significant change affected by railroad management was the storage of excess locomotive power. Not too long ago, management kept all engines in service during downturns in traffic, reasoning that the cost of maintenance was more than offset by the improved train operations. In fact, however, excess locomotive power decreased operating fuel efficiency and the extra fuel costs contributed to rising operating ratios. During the last quarter, fuel efficiency increased for all reporting railroads instead of falling as might have been expected. Storing locomotives only kept fuel efficiencies from falling, but storing the old and less fuel efficient engines and operating proportionately more of the newer and more fuel efficient locomotives allowed efficiencies to improve.
Another significant change in railroad operations relates more to history than any management action. For the first time in recent history (post 1950), railroad management teams have not had to learn how to operate a merged railroad property in over ten years. During all previous decades, at least one or more major railroad mergers have complicated rail operations and hindered management in responding to changes in traffic in a timely manner. As more time passes without any merger activity, operating ratios are expected to keep falling as management gains more expertise in operating their systems.
Finally, more rail traffic today is handled in unit trains and intermodal trains than in the past when most business was handled in single or multi-car shipments than moved on mixed freight trains that carried the loads between classification yards where they were switched and re-directed on another train that moved them closer to their destination. Such shipments often moved on several freight trains and through at least four classification yards before arriving at their destinations. During business contractions, it was very difficult to reduce all of these intermediate operations to the extent that traffic had fallen. With unit trains and intermodal trains however, traffic moves from origin to destination in one train and is not handled by intermediate classification yards. When traffic falls, train operations are reduced accordingly.
