(The following story by Dan Piller appeared on the Fort Worth Star-Telegram website on July 28.)
FORT WORTH, Texas — Burlington Northern Santa Fe Corp. avoided the service congestion that has dogged its main rival to post second-quarter profit of $249 million, or 67 cents per share.
A year ago, BNSF earned $200 million, or 54 cents per share. Traffic, led by big increases in coal and grain shipments, rose 11 percent in the 2004 quarter.
Union Pacific this week reported a 42 percent drop in second-quarter earnings because of costs associated with service problems related to congestion of its lines. The company has blamed shortages of train crews and locomotives.
BNSF has benefited through coal deliveries as utilities shift from expensive natural gas to generate electricity. It has also gotten merchandise traffic shifted away from trucks as diesel prices made the more fuel-efficient railroads more economical.
Imports have also played a role. BNSF and UP have seen traffic from Asia into West Coast ports rise more than 30 percent this year.
BNSF Marketing Director John Lanigan said the carrier benefited from a 2 percent price increase. That helped overcome diesel fuel prices that averaged $1.25 per gallon.
Favorable world export conditions helped BNSF enjoy a 70 percent increase in its grain shipments to Gulf of Mexico ports at Houston, the company said.
Lanigan and BNSF Chief Executive Matthew Rose said that very little of the traffic increase was falloff from dissatisfied Union Pacific customers.
Analyst James Valentine of Morgan Stanley pressed Rose and Lanigan about the possibility of diverted traffic from its troubled rival.
“These numbers this year look very good,” Valentine said.
“But we don’t want to see you come back next year and report that this quarter represented new business that went away.”
Rose said “the increases are mostly coming from existing customers. We’re not taking on new business unless we feel it is long-term and can add to our profitability.”
Rose said BNSF will have added about 2,000 train crew members by the end of the year, up from its original projection of 1,200.
BNSF and UP have scrambled to add crew members and locomotives as traffic shipments have shown unexpected growth.