Letter From Jack Koraleski

October 11, 2004

To Our Customers:

As the peak season brought all-time record volume to the railroad in the month of September, we were able to handle the surge without a significant loss in train speed. Our average train speed was 22.3 miles per hour for the month. In fact, this is a nearly one-mile per hour increase over August. Our key terminal dwell was down slightly at 34.1 hours for the period.

Crew and power-related delays continue to improve:

The number of hours we are holding trains for crews continues to decline as our hiring and training programs continue to produce additional employees. During the third quarter, we hired 1,325 train service employees while graduating 1,200 into service. In addition, 590 conductors began engineer training during the quarter and 274 new engineers graduated. Our critical manpower constraint remains locomotive engineers, and we are continuing to add training resources to alleviate this issue. We received 47 new locomotives in September, and we expect an additional 52 new units in October.

There are some improvements on the network:

  • The South Texas rock network, where we reduced the number of railcars on line in order to increase throughput, had seven-day carloads 18% higher than the May-June baseline. The total tonnage moved continues to increase.
  • While we still have a ways to go, we are making good progress in Houston where velocity, industry switching and terminal dwell are all showing sustained improvement.
  • Our allocation system to protect our terminals from overload has been used only a few times, as our terminal throughput has held steady.
  • Despite several stories in the media to the contrary, we have been current with loading at both the Port of Los Angeles and the Port of Long Beach for over a month.
  • Our connections with the railroads in the East are getting back to normal as they recover from the damage brought by the hurricane season.

Some challenges remain:

Several recent service interruptions combined with heavy volume will likely slow, somewhat, the recovery that is underway, but we believe we are seeing sustainable progress. The response time to service interruptions is decreasing, and while there will be occasional setbacks, they should be fewer, more isolated, and have less effect on our operations.

We appreciate your cooperation and flexibility as we work to improve our service. The demands on our system make close coordination with all of you very important, and we will continue to work with you to keep our service improving. Our sales organization is always available to you, and we will continue to provide additional information on our Web site as the situation demands.