(BRK.A), (BRK.B)
BNSF Railway will dramatically cut crew costs on certain routes under a new agreement with SMART, the Transportation Division of the Sheet Metal, Air, Rail, and Transportation Union.
The newly announced agreement will allow BNSF to employ one-person crews over roughly 60-percent of its routes, instead of the standard two-person crews, provided that a remote-site-based Master Conductor is using monitoring technology known as Positive Train Control (PTC).
The trains would have a locomotive engineer but no other onboard crew.
The Coming of Positive Train Control
Over the last several years, the Federal Railroad Administration has been reviewing PTC plans from 41 railroads, covering both passenger and freight railroads. The FRA approved 24 plans without conditions. Additional plans were approved provisionally, and two were denied without prejudice.
The Rail Safety Improvement Act of 2008 (RSIA) mandated that Positive Train Control (PTC) be implemented by the Nation’s railroads by December 31, 2015. Railroads requiring PTC are the Class I railroad main lines, which are the rail lines that transport 5 million or more gross tons annually.
As detailed by the Federal Railroad Administration, “PTC refers to communication-based/processor-based train control technology that provides a system capable of reliably and functionally preventing train-to-train collisions, overspeed derailments, incursions into established work zone limits, and the movement of a train through a main line switch in the improper position. PTC systems are required, as applicable, to perform other additional specified functions. PTC systems vary widely in complexity and sophistication based on the level of automation and functionality they implement, the system architecture used, the wayside system upon which they are based (e.g., non-signaled, block signal, cab signal, etc.), and the degree of train control they are capable of assuming.”
BNSF’s approved PTC systems include ETMS (Electronic Train Management System), which is a GPS- and communications-based system.
Cost Savings for BNSF
Crew costs have been steadily dropping over the past four decades. As recently as the 1970s, various states mandated as many as six employees per train.
Compensation and benefits are the railroad’s number one operating expense, just edging out fuel costs. Currently BNSF has 43,500 total employees, with roughly 19,000 of those working on train crews. Total labor costs were $4.65 billion in 2012. The average annual salary of a BNSF conductor is over $68,000, and BNSF operates 1,500 trains daily.
In moving to trains staffed with only a single locomotive engineer for a large portion of these trains, significant cost savings will be achieved, as the remote-site Master Conductor has the ability to monitor multiple trains at the same time.
However, off-setting at least a portion of that savings is an agreement with SMART to increase the pay of conductors and ground service workers.
Changes Needed to Union Agreements
In addition, future hiring procedures will need to be renegotiated, as BNSF’s current union agreements state that only promoted BNSF conductors can become locomotive engineers.
The new agreement between BNSF and SMART is subject to a union ratification vote that will begin in mid-August, with the final results announced in September.
© 2014 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.