BN RAISES FORECAST FOR TRAFFIC GROWTH IN 2ND HALF TO 7 PERCENT

BN RAISES FORECAST FOR TRAFFIC GROWTH IN 2ND HALF TO 7 PERCENT

Burlington Northern Railroad boosted its forecast for traffic growth in the second half of 1995 to 7 percent from an earlier projection of 4 percent to 5 percent.

Reaching that volume target could position the railroad - which recently won approval from the Interstate Commerce Commission to merge with the Atchison, Topeka & Santa Fe Railway - to post a fifth consecutive quarter of record earnings."We are presenting a more optimistic outlook than we had in the past," Gerald Grinstein, chairman and chief executive, told securities analysts.

BN was the first railroad to boost its traffic forecast in the current round of second-quarter financial reports to securities analysts, though other carriers have indicated their 1995 results will exceed record 1994 levels.

Conrail reduced its 1995 volume projections by 5 percent last week, blaming a soft economy.

BN officials downplayed the merger with Santa Fe, though Mr. Grinstein did say a joint board meeting had been scheduled for Sept. 22. That is 30 days after the ICC said it would issue a written decision.

The agency unanimously approved the merger Thursday, but completion of the $4 billion deal is contingent on the written decision and the completion of the 30-day appeal period.

Mr. Grinstein and BN's senior vice president of marketing, Ron Rittenmeyer, tied the second-half growth forecast to stronger coal shipments and continued improvement in grain traffic, which surged 30 percent in the second quarter. Revenue increased 52 percent in the same period.

They said the outlook for grain in BN's service area remains favorable, with adequate supply expected despite others' more pessimistic projections.

Coal volumes are expected to approach the 9 percent growth levels in the first half, partly because of hot weather in areas served by utilities that receive coal shipped by BN.

While Mr. Grinstein said he was pleased with across-the-board traffic increases, favorable revenue comparisons and higher operating efficiency, he added that BN and Santa Fe still had a 35 percent market share of Western rail traffic, three percentage points behind Union Pacific and Chicago & North Western.

Mr. Rittenmeyer said BN had gained six-tenths of a point in market share during the second quarter to narrow the gap.

Another reason cited for second-half optimism was improvement in on-time performance into the 85 percent range during May and June. In March, that figure was below 50 percent systemwide.

Better on-time performance and cost controls tied to improved operating performance have been leveraged into rate and profitability improvements, Mr. Grinstein said.

Costs also will be reduced by $50 million annually next year, because management ranks are being trimmed by 500 persons. The company announced a $100 million charge to third-quarter earnings Monday to cover the cost of those separations.

While saying that the volume and sales outlook was strong, Mr. Grinstein said there were start-up problems with 350 new locomotives powered by alternating current. Those locomotives are replacing lower-horsepower units with direct-current propulsion systems.

Although the company continues to believe the new units will reduce the number of locomotives required to handle heavy trains, Mr. Grinstein characterized the units as "a little bit crotchety."

Problems have surfaced with gears, braking and fuel-injection systems, but Don Henderson, vice president of network operations, said, "We're still bullish on AC technology."