At Florida East Coast Railway, the fastest-growing business is trucking.
Intermodal trucking revenue is growing by double-digits as FECR plans to expand its over-the-road reach in 2012, President and CEO Jim Hertwig said.
Jacksonville, Fla.-based FECR early this year will add a second drayage relay station in Georgia to complement a facility in Savannah and strengthen its business with truckload carriers such as Werner Enterprises and Knight Transportation.
The relay stations allow truckers to drop trailers at points outside Florida where they can find a load nearby without racking up costly empty miles. “We’re trying to make it easier for them to do business with us,” Hertwig told The Journal of Commerce.
That may seem like shocking language to some shippers, but Hertwig underscores just how important rail-trucking cooperation has become in an increasingly intermodal era of tight over-the-road capacity and rising transportation costs.
The two modes, historic rivals since the 1920s, are increasingly interdependent, a trend driven by factors that include the use of multimodal transportation management systems by shippers and third-party logistics companies.
“We think of ourselves as the trucking company’s owner-operator in Florida,” said Hertwig, who worked for motor carriers such as CF Motor Freight, Con-way, Carolina Freight and Landstar System before switching to railroading.
“All we are,” Hertwig said of the truckers, “is an extension of their network.”
Make that a long extension. Truckers hauling freight south to Fort Lauderdale or Miami fret over the potential for a 350-mile empty backhaul up Interstate 95 from Miami. With more than 5.5 million residents, South Florida is a major consumer market, but not a big outbound freight market. “For every four loads going southbound, there’s only one load coming back up,” Hertwig said.
For truckers, that makes an intermodal exchange an attractive alternative to driving I-95, and shuttling loaded and empty trailers between Jacksonville and South Florida is a big part of FECR’s business. That business is getting bigger, Hertwig said, as the railroad’s network expands off-track and onto highways.
Increased intermodal volume and stronger pricing pushed the railroad’s operating revenue up 5.5 percent in the first nine months of 2011 to $156.7 million.
FECR is piggybacking on a trend that’s benefiting all railroads. The U.S. Class I railroads handled a record number of intermodal containers in 2011, with a strong push late in the year that gave the industry a 6 percent gain in volume over 2010. Intermodal volumes kept their momentum through the holidays, with volume at major U.S. railroads shooting up 17.1 percent in the first week of 2012 compared to the previous week, according to the Association of American Railroads.
In the first nine months of 2011, intermodal loads represented 81 percent of FECR’s volume. In the third quarter, intermodal revenue surged 13.8 percent to $31.8 million, or 67 percent of its total freight revenue, on only a 1.8 percent increase in volume. Average revenue per intermodal unit increased 12 percent to $392. However, that’s still much lower than the average per unit revenue for commodities such as chemicals, $1,818; food products, $1,164; or even crushed stone, $615. FECR needs more intermodal volume as carload commodities decline in its freight mix.
That’s one reason FECR wants to work more closely with trucking companies that can easily extend its reach west and north to the Mississippi River and Ohio River Valley.
The Savannah relay was the first step. “We talked to some of our carrier partners and found they often deadheaded to Savannah from Jacksonville for freight,” he said. “We said, ‘All right, let’s open a Savannah relay.’ ” Truckers can drop off trailers in Savannah at the relay and pick up shipments from the Port of Savannah or nearby distribution centers. FEC Highway Services, the railroad’s drayage subsidiary, shuttles trailers between Savannah and Jacksonville, about 140 miles south on I-95.
The next relay station will be in Valdosta or Tifton, Ga., along I-75. That will allow FECR to source Florida-bound loads from farther north, Hertwig said.
“With 11 hours of driving time, it’s a 500- to 600-mile radius from Savannah or another point about 150 miles farther west,” he said. That radius covers an area from Memphis to Louisville, Ky., and Washington, D.C.
“We’re looking at two-day shipments from as far as the Ohio Valley to South Florida,” Hertwig said. “The trucker takes it one day; we take it another.” That can give the intermodal service a jump on traditional solo-driver truckload service, which requires the driver to take a 10-hour off-duty rest break each day.
When a trucker arrives at an FECR relay point, the railroad’s drayage arm takes the trailer to Jacksonville, where it is placed on an intermodal flatcar and sent south. “That load gets delivered while the original driver is still in bed,” Hertwig said.
New hours-of-service rules, electronic onboard recorders and higher fuel prices will pressure trucking companies and shippers to look to intermodal in Florida and other markets, he predicts. “The last thing they want,” he said, “is that driver wasting fuel or hours deadheading.”