Schneider National executives said on Tuesday that gaining a new West Coast rail partner is a necessary step to meet the airline’s goal of doubling its intermodal business by 2030.
The end of the contract with BNSF at the end of the year opened the door for the Wisconsin-based intermodal and logistics service provider to a new contract with Union Pacific. The contract with Schneider was one of several new agreements Union Pacific entered into with other carriers in late 2021.
The decision to end the 30-year relationship with BNSF wasn’t easy, Schneider president and CEO Mark Rourke said during the Stephens Investment Conference on Nov. 15. Schneider’s intermodal sector and rivals compete.
“We want to put ourselves in the best competitive position to capitalize on what we believe are real advantages that we are bringing to market with our own container chassis and corporate dray model,” he said. “And so with this model we wanted to differentiate ourselves as much as possible from our main competitor in the West.”
JB Hunt is also focused on expanding intermodal transport and Schneider’s departure from BNSF is expected to free up capacity for its competitor. Shelley Simpson, President of JB Hunt, said at the same investor conference that “one of the biggest growth opportunities (for us) since the last great recession has been in intermodal”.
Still, JB Hunt isn’t necessarily looking to absorb the capacity that Schneider’s impending departure has opened up for BNSF, with Simpson saying the airline is already competitive within its highway services.
“There are a lot of deals on the highway where we can achieve savings of almost 29.5% on average, so there’s a lot of opportunity right on the highway side to talk to our customers,” she said during the Stephens Investment Conference. “So if (customers) do business with Schneider today, I expect (they will continue to do so), but if they want to have a conversation, we will certainly engage.”
Rourke said Schneider spent the year speaking to current and potential customers about what the new partnership with Union Pacific has to offer. He added that the company has gained more access to trains in particular.
“We have more steel wheel connections with our CSX partner, which is doing really, really well in the East,” he said. “So now we will not be using human resources for rubber trading in these important gateways because we have more connections which means better customer experience, better cost position and faster transits if we can do that.”
Rourke added that Union Pacific would give his company more access to trains.
“We have a railroad that has a lot more starts, six to seven day trains as opposed to what we currently enjoy,” he said. “So we’re going to be able to improve transit and coverage through a number of our key lanes by having more train starts, and you put all of that together in our uniqueness of this asset model between the UP and the CSX that comes out of it.” has become a compelling story for us to make the change.”
Rourke also said that Union Pacific’s partnership will allow Schneider to expand intermodally on the West Coast, where “we felt we weren’t realizing our potential.”
“So again, we think we have the best execution map and model because that’s what we’re focusing on,” Rourke said. “And we’re no longer in second place behind a competitor on the other tracks.”