Summary
Norfolk Southern rightly claims that it has increased it fuel efficiency by 10% during the past ten years; but that achievement is less than half of what the other major carriers in the U.S. have achieved during the same period. The BNSF has notched a 24% gain, the UP has made a 23% improvement, and its Eastern competitor, CSX has managed a 17% in just the last seven years. So what is there to brag about?
Analysis
Mr. Moorman was mistaken in his claim of a 3% gain in efficiency during this year. By their own records, NS fuel efficiency has fallen by 3% so far in 2009, wiping out the 3% gain they made in 2008. Looking further back, NS had not had any significant improvement in fuel efficiency since 2004.
Over the past 30 years, railroad fuel efficiency has increased by almost 85% according to the AAR. Most of this gain can be attributed to the improvement in locomotive fuel efficiencies over the years, as can most of the gains made by the railroads in recent years as they have replaced almost 20% of their road haul locomotive fleets since 2003 with new fuel efficient units. During the past few years however, several carriers have taken additional steps to increase fuel efficiency, including training engineers in fuel efficient train handling techniques, shutting down idle locomotives, installing flange lubricators on their locomotive fleets to reduce drag, and storing locomotives when traffic levels falls. For most carriers, these efforts have led to significant improvements in fuel efficiency. Unfortunately, NS was not as vigorous in these efforts as they should have been.
Having been the Fuel Czar at the IC RR early in my career, I speak with some knowledge of this subject. Fuel efficiency can be used to evaluate the performance of management in operating the railroad without the distortions from revenue that affects the Operating Ratio, which is the other major gage of management performance. Based on their lagging efforts in this area, NS may no longer be the best managed railroad in the US.
Toby Kolstad consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
