Thomas N. Hund, executive vice president and chief financial officer of Burlington Northern Santa Fe Corp., was very bullish on intermodal freight during his presentation June 13 at the Merrill Lynch Transportation Conference.
Calling intermodal the railraod's "growth franchise," Hund said that continued increases in international traffic as well as more use of intermodal by domestic trucking companies will mean strong growth for BNSF's $5bn intermodal business.
Intermodal margins also have improved, thanks to a strong pricing environment and productivity improvements. "Return on investment capital within our intermodal business has improved dramatically," he said, adding that intermodal's reputation for inadequate return no longer applies. "Now BNSF's intermodal network, which is our biggest franchise, competes favorably with all of our other businesses," he said.
Productivity improvements at BNSF include an increase in the percentage of filled slots on doublestack trains, up from 91 percent to 94 percent. With a capacity of 800 platforms per day, that percentage gain is the equivalent of adding four additional trains per day--without the added cost of equipment and crew, Hund said. Another productivity strategy is to make intermodal trains longer. Trailer trains, on average, now handle 120 units, up from 103 units, he said, while stack trains have increased capacity from just under 200 40-foot units to 232 units.
All this has led BNSF to increase capital spending on intermodal. Hund said the company will invest $700m this year, following a similar investment last year. "As long as we see volume, pricing and productivity gains, we are more than willing to invest in the future of intermodal."
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