BNSF Net Rises 15 Percent to $404M

BNSF Railway struck a different course than most freight companies amid the sharp traffic slump, actually increasing its profit 15.4 percent to $404 million from efficiencies in the second quarter.

The profit jump came despite a 26 percent drop in freight revenue from a year ago to $3.2 billion, and a 19 percent decline in shipments. BNSF cut its operating expenses 33 percent to $2.5 billion.

Matthew K. Rose, BNSF’s chairman, president and CEO, said the results reflect “another strong quarter of cost control in an extremely difficult economic environment.”

Like other rail executives in recent days, he said BNSF officials are seeing freight volume “stabilize in our more economically sensitive businesses.” With the company boosting its productivity, Rose said “we are well positioned to benefit when the economy recovers.”

All railroads saw their fuel costs fall sharply from last year, but so have their receipts from fuel surcharges. They have also been laying off train crews and laying up miles of equipment, both locomotives and freight cars, in the process saving on crew transport or lodging plus equipment maintenance.

And with the lower traffic they are boosting average track speeds and other performance indicators, allowing them to meet contract delivery terms more easily and offer customers service value despite generally rising freight rates. Although BNSF’s freight revenue fell 26 percent, its per-unit average fell just 9.1 percent.

BNSF did not list its end-of-quarter employment level, but said its average workforce of 37,715 for the three months was down 8.9 percent or 3,689 workers from the same point in 2008.

However, it is making investments in its system a bit faster than in first-half 2008, with capital spending of $1.082 billion through June compared with $1.042 billion a year earlier.

BNSF’s earnings were stronger than Wall Street analysts predicted, due to its more-than-expected efficiency gains, but those observers also said the carrier’s plunging traffic counts are more evidence that the freight sector will take a long time to recover.

Contact John D. Boyd at jboyd@joc.com.