The most important change I see in the railroad industry in 2015 and in the next decade is significant growth in the key markets we already serve. On our network specifically, we see continued growth in the U.S. and in Mexico. We also expect strong growth in the crude oil business and continued strength in Mexico’s automotive “ecosystem.”
On our network, the key market segments driving revenue and traffic growth are:
1. Crude oil: U.S. destinations in the Gulf are accepting more Canadian heavy crude.
2. Automotive: New auto plants in Mexico are expected to ramp up production.
3. Intermodal: More U.S.-Mexico cross-border traffic is converting from truck to rail.
4. Chemical and petroleum: The outlook is positive because of opportunities in the U.S. and Mexico.
The railroad industry’s task will be to capitalize on the growth opportunities, while maintaining strong operational metrics and continued margin improvement. This will most likely be done by scaling costs below volume and revenue growth projections and using the capacity in the network to absorb new growth and continue our investment in capacity expansion.
At the same time, we must continue to work together to optimize the use of North America’s current rail network capacity and assets, while expanding our overall network capacity to efficiently handle the expansive business growth projected for the rest of this decade. To that end, we must also focus on driving operating ratio improvements through revenue growth, system efficiency and cost controls.
David L. Starling, President and CEO, Kansas City Southern