CEO PERSPECTIVE: We Must Look at Challenges as Opportunities

Written by Ian Jefferies, President and CEO, Association of American Railroads

Ian Jefferies, President and CEO, Association of American Railroads

As part of a special series in Railway Age’s April 2023 issue, 13 chief executives of leading North American companies answer the single-most critical question: What is the biggest challenge facing the North American rail industry? Ian Jefferies of the Association of American Railroads is the tenth to share his perspective.

United States freight railroads, particularly when viewed through the lens I confront in Washington, face three primary challenges that should more aptly be considered opportunities: furthering safety advancement, improving employee relations and providing strong service. As railroaders know, these issues are inextricably linked.

First, while safety has always been the industry’s top priority—a point I recently emphasized in Congress when noting that 2022 marked the best year ever for incidents involving hazardous materials and for main line derailments—the need to make progress in the march to zero is ever present.

Already, railroads have announced a set of actions they are taking in the near term to deploy the tools available today, with a keen focus on detectors. Railroads are installing approximately 1,000 additional wayside hotbox detectors on the national network, standardizing critical alert thresholds for these systems, and analyzing and adopting new industry standards for trending analysis protocols to preempt potential problems.

At the same time, railroads are taking a more scrupulous look at infrastructure and equipment, such as cars. This is why AAR recently took new cars prone to derailment-causing loose wheelsets out of service for repair and forbid interchange until those wheelsets are replaced. Quietly yet continually, railroads will continue to invest in modern technologies and equipment—such as autonomous track inspection—implement safety protocols and prioritize safety training for their employees.

The industry does not need any additional incentive to be safe—it is core to all that we do—yet an opportunity exists in the months ahead to outline our track record and our vision for zero incidents. We will lead with actions.

Notably, employees play a critical role in maintaining safe operations and should be commended. Coming off a round of collective bargaining that ended differently than anyone would prefer, however, management and unions have work to do to restore greater trust needed to ultimately grow the business in ways that benefit everyone. Beyond pay and healthcare that rank in the top 10% of all industries, I hear from AAR members about their efforts to build stronger relationships with employees, seeking to create a more positive work environment, increase job satisfaction, and reduce turnover rates in the process. This will ultimately lead to a more efficient and productive workforce and benefit both the employees and
the company.

We are seeing this payoff as railroads continue to announce progress with unions on quality-of-life issues like more predictable work schedules and additional sick leave, momentum that seems to be compounding. Additionally, the rail employee base is currently the highest it’s been in more than three years, including among train and engine workers where growth is more than 11% this year.

Bargaining is an evolutionary process that builds on itself over time, and further progress is a clear opportunity.

Last, supported not only by safe operations and employees but also investments that will again top $20 billion, railroads have an opportunity to build on recent service improvements this year and beyond. Recent STB reports show railroads are meeting six-month targets for service improvement, with key performance indicators trending in a positive direction—including velocity, terminal dwell, operating inventory and trip plan compliance. Average train speed in the fourth quarter of 2022 improved across much of the network.

To date this year, while intermodal is down due to depressed imports, carload traffic continues to show some bright spots. Boosting visibility into network shipments, as we are seeing with new software solutions, while also maintaining greater resiliency in the system, will only help deliver the reliable and efficient transportation services customers expect and deserve.

As leaders in our industry, after several years of disruption, we must look at challenges as opportunities. Alongside our customers and supply chain partners, railroads have confronted a mix of supply chain disruptions, labor challenges, extreme weather events and changing consumer demands. Nonetheless, railroads have proven robust. Railroads will continue to play a vital role in supporting economic growth one opportunity at a time.