Letter From Jack Koraleski
January 11, 2005
To Our Customers:
This is the first customer report in 2005 and the 11th in a series since we began providing these updates in 2004. Our intention is to provide you with information on the steps we are taking to improve the operations of the railroad and to report on important developments at Union Pacific.
The Severe Weather in the West will significantly hurt our Operations:
The series of storms that hit California this week is having significant impact on our operations to and from the Los Angeles Basin, through the Sierra Nevada, and the rest of California and we have issued an embargo for several locations as a result. Washed out tracks, mud and rockslides over the tracks, and flooding have closed five of our main routes in that area. There is also signal damage along some of these routes. Recovery will be slow and will depend on weather as crews work in very difficult conditions. Snowfall of over 14 feet in some passes has slowed mountain operations as we fight to remove record amounts of snow. Our employees in this region take great pride in their ability to keep our tracks open, but they have been sorely tested by these repeated challenges.
2004 was a very difficult year:
For most of the year, we had fewer conductors and locomotive engineers than we needed to meet the very heavy and growing demand for train service. We took decisive action to address the issue. By year-end we had hired 5,192 new train service people, and 4,979 completed training and became active employees. In 2004, 1,839 new locomotive engineers began training, and at year-end, 744 had completed their training. We are very pleased with the enthusiasm and skills of these new employees as they gain experience and are able to increase their productivity.
Throughout the year, our system velocity remained several miles per hour below where we wanted it to be, and our hours of terminal dwell were, for the most part, too high. The improvement in both that we saw in September slipped away as the fall peak season and strong demand slowed our progress. The average system train speed for the last week of the year was 18.8 mph, the slowest for the year. This number was somewhat affected by the impact of reduced train operations over the holidays.
December was the 16th consecutive month in which we set monthly records for carloadings. So while we did not handle the demand well, we did handle more volume than in any previous December. We are hopeful that off-peak levels will reduce demand somewhat and allow us to increase our system velocity and complete some needed maintenance work.
The Sunset Route remains our most congested area:
Traffic on the Sunset Route between Los Angeles and El Paso remains strong, and we are continuing to work on ways to handle this demand. An additional 10 miles of double track west of El Paso will be put into service next week. Alternate routes, improved incident response times, uniform train speed, and increasing horsepower on trains are key steps that are underway to improve the velocity on the Sunset. A special operations team is coordinating the many projects that are now underway on this critical route.
Looking ahead to the first quarter of 2005 and beyond:
Our expanded hiring and training programs are continuing into the new year. Our hiring plans call for more than 700 new employees to be hired in the first half of the year. In addition, more than 800 engineers will start training in the first half of the year. With the new engineers already in training, at least 2,000 new engineers will complete their training in 2005. While several areas on our network remain short of engineers at this time, the increase in trained personnel will bring the number of engineers to levels that are intended to cover planned retirements and give us the capability to handle surges to the system.
In early 2005, we must replace worn-out rail on part of the Sunset route and must reduce train counts to create maintenance windows. Once we complete this work, we are targeting a maximum volume of 44 trains per day on this route and 30 trains per day on the South Central route between Los Angeles and Salt Lake City. This reduction will have an effect on some customers and we will be meeting with them to address alternatives.
We expect that the demand for the movement of freight in this country will continue to exceed the capacity of the railroads and the highway system in some key corridors and many urban centers. While we are continuing to invest in our network to eliminate bottlenecks and improve throughput, the need for revenue sufficient to justify reinvestment in our infrastructure has led us to increase rates in a number of markets. We recognize that increasing our rates while our service is inadequate is very unpopular. However, our ability to respond to the unprecedented demands on our system is limited only by the need to ensure that the financial returns are adequate to support the required investment.
We sincerely appreciate the willingness of our customers to work with us on these difficult problems and will continue to keep you apprised of our progress.
