Railways frustrate customers, turn profits

How do Canadian shippers really feel about rail service in Canada?

According to a recent survey conducted by NRG Research Group for Transport Canada’s Rail Freight Service Review, they’re none too pleased.

When asked to use a scale of one to seven to rate their satisfaction (with seven being very satisfied), only 17 percent of the 262 shippers polled by the agency answered in the six-to-seven range. A total of 35 percent gave dissatisfied scores of three or lower.

Furthermore, 45 percent of respondents said their satisfaction levels had decreased over the past three years, and a whopping 62 percent reported suffering serious financial consequences because of poor rail freight service.

Most of the dissatisfaction reported by shippers was linked to problems with on-time pick-up and delivery of cars, reliability of car supply, consistent transit times and the responsiveness of railways to problems.

A perceived lack of accountability is to blame for much of the frustration as well. More than half of the shippers interviewed said they feel there are no or very few measures in place to hold railways responsible for customer service.

Shipper perceptions

Of Canada’s two Class 1 railways, CN was seen as being better at tracking shipments, moving traffic quickly and achieving consistent travel times. By contrast, CP was considered better at employing professional and knowledgeable staff, responding when problems arise and offering frequent service.

Researchers found that while shippers saw CN as the more efficient railway, the feel it needs to focus more on customer service. Proving this is the fact that twice as many shippers using both railways are more satisfied with CP’s service than CN’s.

The survey also revealed that when shippers were presented with more rail options, their satisfaction improved. A total of 23 percent of shippers with multiple rail options were very satisfied with the service they received. Compare that to 14 percent for shippers with access to only one rail line, and 11 percent for “captive” companies with access to only one rail line and no other shipping options.

Despite the undercurrent of frustration, the report wasn’t all negative. Survey respondents came up with numerous suggestions for the railways to improve service, including implementing better communications, providing more consistent travel times and improving infrastructure, among other measures.

Railways remain profitable

The release of the NRG survey coincided with year-end earnings announcements by both CN and CP, and the numbers show that neither party is hurting from the lack of customer satisfaction.

CN did see revenues decrease by 13 percent to $7,367 million.

Operating expenses were down 11 percent, but it wasn’t enough to prevent the company’s net income from dropping two percent from 2008 to end the year at $1,854 million.

“CN overcame a number of challenges during the fourth quarter, ranging from weather and operational disruptions in western Canada to a five-day strike by locomotive engineers in Canada. In addition, the stronger Canadian dollar adversely affected our earnings,” explained Claude Mongeau, CN’s president and CEO. 

“Despite these challenges, the final quarter of 2009 saw continued sequential improvement in CN’s traffic levels and an easing in year-over-year volume comparisons.”

Mongeau added that he expects a gradual economic recovery in 2010.

Revenues at CP were $4.3 billion in 2009, down 18 percent from the previous year. Like CN, operating expenses were down. In total, the railway generated a net income of $612 million, up from $607 million in 2008.

“We have come through an extraordinary year of economic challenges and we met these with focused productivity initiatives that have delivered sustainable improvements,” said Fred Green, president and CEO of the railway.