Some Class I railways are bullish on volume growth and hiring initiatives.

According to top executives’ remarks at a recent investor conference, US Class I railways are hopeful that staffing initiatives and operational adjustments will result in enhanced service for the rest of the year and into 2023.

“We’re in really good shape for the rest of the autumn, and I expect ongoing improvement in terms of increasing car velocity, improving crew utilization, and improving car-per-carload metrics,” said Union Pacific (NYSE: UNP) President and CEO Lance Fritz at a recent Cowen conference.

According to Fritz, the UP’s recrew rate, or the rate at which the railroad requires more than one crew to move a train over a single crew district, has declined from plus-11% in April to between 7% and 7.5% today. UP also expects to graduate 1,400 new crew members before the end of the year.

Norfolk Southern (NYSE: NSC) has also had personnel shortages in the last year, but “we’ve attacked it with unrivaled intensity,” with over 900 conductor trainees in the pipeline, according to Alan Shaw, president, and CEO of NS.

“There’s a lot of optimism about our outlook,” Shaw added. “There is a lot of excitement about our service recovery.” And I can feel it when I’m out in the field speaking with our craft employees and operations managers. I can see it in the facility, and I can feel it when I speak with our customers.”

Shaw said improvements to the company’s leadership, an expedited crew hiring schedule and NS’ new operating plan for its intermodal division are among the reasons contributing to improving performance.

According to Shaw, ensuring that the number of trains and locomotives arriving at terminals is almost equal to the number of trains and locomotives departing has given NS a significant boost in its service metrics in the first half of July.

“What we truly aimed for… was more simplicity and balance in our network,” Shaw added.

Meanwhile, CSX is getting closer to its goal of 7,000 people in 2019, according to President and CEO Jim Foote. The railroad currently employs about 6,800 people.

“We’re gradually increasing our service metrics,” added Foote. “Velocity demonstrates it. Dwell exemplifies this. The on-time performance demonstrates this. It’s a slog. It’s been extremely difficult, but we’re making progress.”

CSX is witnessing increased business via East Coast ports, as importers attempt to transfer greater volumes there from the West Coast due to labor uncertainty and congestion, notably in California.

“Those folks at the Port of Savannah did a great job of positioning themselves to be there to help,” Foote added. “As trade continues to make the East Coast ports more accessible… it just becomes more conducive for more inland freight” to flow via CSX through Atlanta, Chattanooga [Tennessee], our new CCX terminal [northeast of Raleigh, North Carolina], New York, and New Jersey.

According to the executives, as service metrics improve, opportunities to grow volumes on the US rail network improve.

“To date, the third-quarter volume looks fairly solid,” Fritz added. “Actions we took to restore network flexibility impacted volumes across all three business teams [representing UP’s bulk, industrial, and premium segments] in the second and early third quarters.” However, those effects are diminishing by the day, as evidenced by volume growth. Most of our commodities are seeing robust demand [such as metals and minerals, industrial chemicals, automotive vehicles and components, grain, and coal].”

While macroeconomic worries may dampen consumer activity, railroad executives expect volume increase since there is still underlying demand for rail service.

“Consumers are clearly under pressure,” Fritz remarked. “We can see that in consumer sentiment polls, which are at all-time lows.” [However], they are still sitting on a lot of powder. In terms of personal balance sheets, they are still in good shape on average. And then, on the bright side, we’ve had some relatively easy comps year over year, and we’ve done a fantastic job of business development to secure and win new business across the board.”

“You just have to read the headlines every day about… what’s going on [inventory-wise] with Walmart, Target, Amazon… They’re all talking about slower growth,” said Foote. But, once again, we expect a relatively solid end to the year, with consumers sitting on how many trillions of dollars in cash. … Things are slowing, but disposable income remains pretty high. Gas prices are coming down.”

As railroads consider future employment initiatives, the earlier “furlough model,” in which specific categories of workers are allowed a seasonal leave of absence, may no longer be applicable, given the emphasis on developing work-life balance for a larger number of employees.

According to Shaw, NS intends to use the current pandemic-related shifts in labor dynamics as a chance to assess how it handles volume downturns. This includes determining how the implementation of technology and automation, as well as the use-of-work rules that govern operations, affect workers’ responsibilities and crew availability.