NORFOLK SOUTHERN CORP — Call Transcript 2026

All right. Afternoon, everyone. We're gonna get going with the next session. We've got transports the rest of the day. By the way, I'm Scott Group, the transport and airline analyst here at Wolfe. For our next session, we've got Norfolk Southern. I know it says Jason Zampi, CFO, to my far left, but also Mark George, CEO from the company, is here as well. Jason, Mark, thank you guys for being here. Glad to be here, Scott. Thank you. Thanks for having us. We're gonna jump right into questions. I've got a few that I wanna get to, and then if you have additional questions, raise your hand. I guess we'll start on the merger. Let's get an update. You guys, you and UP resubmitted the application late April. Yep. I guess we should expect to hear from the Surface Transportation Board probably end of next week if they deem the application complete. Maybe just take a minute or two. You know, where are we in the process? What, in your mind, were the key enhancements you guys made to the application, and any sort of expectations that you have for next week? Yeah. Where we are in the process is kind of like you laid out. We had resubmitted the application, like you mentioned. I think, we expect to hear next week. I mean, the deadline would be technically the 29th, but it could be before that we learn what the STB does, which is we expect a full acceptance. Then, you know, there's a whole procedural schedule that they follow with hearings and then environmental reviews. Then that gets them to the point of final decision, where they have 90 days after they close the docket to publish their final decision. When you add it all together, you know, we've said publicly first half of 2027. I think let's be real, this is not gonna happen in the first quarter of 2027. It's sometime in the latter part of the first half, which means probably the summer months, that we, that we learn. You know, it could be May, it could be June, but ultimately it's up to the STB, how long they take. The good news is that, when we get acceptance of the application, the STB is gonna publish their schedule, so we'll get a sense of how long this is gonna take to play out. We can stop speculating at that point, and we'll have something to work off of. Okay. Obviously, a lot of comments. You asked about completeness. Yes. We think this is really complete. We think this is more fortified than the original application. Let me explain why. Not only did we answer the three things that the STB wanted, we responded to those fully, and we believe in full satisfaction of their request. We chose deliberately to almost redo the math using traffic data that was provided by the railroads. We're the first merger application who's ever taken the full data set from all the railroads to project the future, as opposed to the sample data, which is the way everyone has done applications in the past and the way we did it initially to project the impacts. That's a big deal. That's a big deal because the good news is it kind of validated where we were coming out. It actually, you know, we actually got more, we think more conversion doing the math that way. We maybe lost a little bit of the merchandise conversions, actually got more intermodal conversions in the second submission. The data is irrefutable now. That took a little bit longer. I mean, we had to run all of this data through, just like we did the first time, through all of our modeling. It added a little bit more time to the resubmission, which is why it took us till April. We feel as though we're taking away any potential argument that the other roads might say about the, you know, well, I know this is sample data they use, this isn't really accurate data. This is their data. This is the full data set. We feel as though it's a much stronger application, more defendable with the data. You know, we went into even more articulation of the public benefits and enhanced competition. Go ahead. A lot of comments from all the other rails, right? Maybe none of them surprising that, you know, they're saying it's incomplete still. Anything, any of the public comments from rails or other stakeholders that give you some pause of, 'Hey, maybe we missed this,' or, 'Maybe we missed that'? Then, you know, I'm sure you love hypotheticals, in the hypothetical world where we learn next week they've deemed for the second time it's incomplete, like, where do we go from there? Is that sort of put an end to this or not? No, I'm not gonna get into hypotheticals. We think they're gonna accept it. I don't know if they ask for more information, you know, if for some reason that scenario played out, we'll deal with it at that point. What was the first part of the question? Was any of the comments Yeah. Concerning you in any way or surprising you? No, we responded to that. You know, we think that people are somewhat grasping at straws right now. They're reopening things and arguments they made the first time that the STB ignored, essentially. They're opening it up again. We're not too concerned, nor are we surprised. I think, you know, the other roads that are in opposition to this would love to just stretch this out and drag it along. They'll use whatever tactic they can. Right. You know, I was just thinking, 'cause last May, we were sort of at our conference, we were dancing around the M&A conversation a little bit without really able to get into specifics. At our conference, at least maybe first, you know, opportunity for you to talk about it from this standpoint, right? There are, at its core, two key requirements for a merger. One it has to be in the public interest, and two, now under the new rules, it has to enhance competition. Maybe just if you could just touch on those two pieces. Why is it in the public interest? How does this enhance competition? Yeah, that's, it's easy. I mean, on the public interest side, I mean, what we're doing is massive in terms of trying to convert freight from the highway back onto the railroad where it belongs, frankly. Heavy freight belongs on the rail infrastructure. There's reasons over decades after the Interstate Highway System was built out why freight has migrated. It's just convenience. As passenger vehicles have filled up the highways, it's becoming less and less comfortable and more and more risky. What we do is if we can take, like we've projected, 3.8 billion mi of truck traffic off of the highway system, we're talking about reducing accidents by about 1,750 per year on the highway system. We're talking about reducing fatalities on the highway system by about 65 per year. That's a public interest. I think there's also an affordability angle here, right? The truck is more expensive than the rail network. We're going to save consumers money by shifting traffic back onto the highways. It'll be cheaper. It'll be more convenient as well. You know, the public interest stuff that we've laid out is absolutely real, and I think, you know, in terms of enhancing competition, as soon as we announced this, you saw how the other railroads started to work together. The competition is already enhanced. In fact, we've lost business because they've decided to compete differently. I mean, let's face it, this industry, the rail industry, has been a little bit lazy. Since I've joined six years ago, I kinda had the realization, "Oh, my God, I joined a utility." You know? There wasn't a lot of spryness to try to compete aggressively and to perform at levels that your customers expect. We're seeing a spryness now in the industry just by the fact that we've announced this merger. I think, frankly, this is, the enhanced competition is taking many forms. Another thing, just by coming together, we're gonna now offer single line rail service compared to interline. That is huge. When you look at the facts, where single line rail service exists versus interline, there's a 44% higher market share for rail on the merchandise side, okay? That's 144% on the intermodal side. When there's single line traffic compared to interline, the share is 144% larger than single line than interline alone. The competition benefits are significant, and ultimately, at the end of the day, we're trying to do this for customers. I know people have been out there saying, "Customers didn't ask for this. This is all about Wall Street." You guys didn't even know I was having these conversations. This wasn't for you. This is for the customers because of those stats I just laid out. The customers are demanding better transport service. They've been moving away from rail to the highway. The only way to reverse that trend and to give customers what they want is to get together and work on single line options for them. Just to follow up, like, obviously people can disagree. I think the public interest case you're making seems pretty clear, right? I think on the enhancing competition relative to truck, I think pretty clear. I think where there's probably more debate is on the enhancing rail to rail competition, right? I understand you made your point. Hey, look, you've seen competitive response from the other rails, and that's sort of by definition, we're enhancing competition. Do you have a sense, is the Board looking at broad competition, including truck competition, when we have to enhance competition? Or is the Board going to sort of look more singularly at intramodal rail to rail competition with that enhanced competition? Is it clear to you which way they are going to look at this? Well, I think when you go back to. Right. I know there's a lot of people that are saying, "No, no. The Board intended back then, 25 years ago, that this was intramodal, that this is really just focused on enhanced competition within the rail space." Okay? The reality is the Board, whatever they were thinking at the time, they deliberately decided not to define it, okay? I think it was the wisdom of the Board back then to not define it, to know that when something comes up, it gives them the flexibility, depending upon the market dynamics at the time, to interpret it appropriately. Here we are, 25 years later. 25 years later, the markets have changed dramatically. Rail has been pummeled by truck, and now this Board gets to decide how to define enhanced competition. I think that they're smart. I think that they're wise. I think that they're gonna be progressive looking enough to see that we have to look at the broader ecosystem, and it's not just intramodal. That said, even within rail, we believe we are enhancing competition because, again, look at the responses. They think they can compete, and God bless them with partnerships. They're taking share from us. Rail to rail share movements. We're gonna try to compete with single line, and there is rail to rail conversion from single line. Absolutely. The Committed Gateway Pricing is another enhanced competition feature. We believe we're responding to it both ways. Okay. That all makes sense. Yeah. You know, I remember reading in the board ruling about the CPKC merger. You know, our job is not to protect one rail relative to another, right? Yeah. You know, maybe other rails complaining, maybe that doesn't matter so much. I think maybe what shippers have to say, what unions, other stakeholders have to say. Sure. Maybe just touch on that. What are you hearing from those other stakeholders positively? What are the negatives you hear from other stakeholders outside of the other rails? Yeah, I think, you know, we do a lot of talking with customers. Yeah. We do a lot of talking with other constituents as well. I would tell you, let's break it down. You talk to our intermodal partners and those shippers, the beneficial cargo owners, they're all excited. They see the benefit for this. They see the fact that they can go into single line versus interline. It's all really good. I think when you get down to some of the merchandise shippers, they're hearing the noise from the others, they wanna talk about that with us. When we have the dialogue and we open their eyes to what the prospects are, that whether it's a grain shipper in Ohio who now sees, "Hey, I can move uninterrupted into Texas on single line service." That's a new market that I don't serve today. Someone in the Midwest who wants to ship feed to chickens in the Southeast that would've had to go through watershed, so therefore they don't even bother competing in the Southeast. You know, steel customers who now we can tell them, you can serve markets in the West on single line service, their eyes open up and they understand, and they see the potential, and they get really excited. It's a slog. We have to go through and explain it one by one, which we're doing. When we do, there's a lot of enthusiasm about it. Yeah. Makes sense. Then as part of the merger process. I think the board needs to consider downstream effects. One thing that just wasn't clear to me when you guys laid out like the synergy targets, is there an inherent assumption that this is the only merger, or is there an assumption that there's two? If there are two, like how would that change the merger synergy assumptions that you guys have laid out? Yeah. I think the other rails have basically kind of made their case, right? We kinda know what their intent is. There's one in particular who's not publicly traded. Right. Therefore, they've come out and said that they're gonna behave in a certain way, which is to not do a merger. I think you could probably assume that what we've gone out there with is assuming that there is no follow on. Otherwise, I can't really speculate. They're all on the record individually. If they were all publicly traded, I might have my own prognostication, but they're not. Right. I think too, just to put a finer point, the revenue synergies are really, you know, we feel confident with or without a follow on merger that, you know, those are attainable. You think about the portion of that that's coming from the truck market and how large that truck market is compared to the, you know, to the rail. I mean, there's plenty of a business there. Yeah for conversion. Not offering up specific concessions, is that a realistic outcome in your mind then, Mark or Jason? What do you mean? We've offered up all sorts of concessions. You're talking about the gateway pricing and all that. Yeah. Committed Gateway Pricing. We've offered jobs for life guarantees. Yeah. Open gateways. You know, we've put concessions out there and, you know, we'll see how this whole process evolves over the next year or so. It's not like we haven't put concessions out there. Okay. Fair. Maybe we'll, unless if there are other merger questions, we can get you involved. Maybe let's turn to just the business. Yeah Today. Maybe Jason, I'll let you take a, you know, take a few here. Just volume's up about 3% quarter-to-date. What's doing better than you thought? What, if anything, is worse than you thought? Just give a little bit of a demand update. Yeah, sure. You know, first quarter, I would say, was kind of bumpy from a volume perspective, right? January started off pretty good. February was kind of really impacted by a lot of the winter weather storms, and then March really picked up. We've sustained that momentum here into April and May. We're around 140,000 units a week, and this is now, I think, the 11th week in a row that we've been at that level. We're seeing some pretty good volume momentum there, and that's translating to the 3% you mentioned on a quarter to date perspective. I think a couple areas that are probably better than we expected, I put chemicals in that bucket. You know, really kind of those energy markets, whether it's NGLs, frac sand, petroleum products, those are coming in better than we thought. I think coal is better than where we expected it to be. The third one, and there's, you know, puts and takes in all these, but the third is domestic intermodal. International is still pretty weak, domestic has come in better than we were expecting. I think there's a lot of positive things out there. I think, you know, as a whole, I kind of categorize it as cautiously optimistic. You know, things that we thought might've been better, you look at the housing market. I think we were hoping maybe for some rate cuts and for the housing market to kind of take off. That has a big impact on our business. We're obviously not seeing that's probably not gonna you know, change here in the near future. You know, something to watch out there. I think the last piece is just the, you know, what happens with fuel prices. You know, do we reach a point that at some point that starts degrading demand out there? We're not there yet, but that's something we're keeping an eye on. Definitely some puts and takes, but there's some favorable things we're seeing in the business for sure. Okay. That strength in domestic intermodal is in the face of losing some of the share that we did from the announcement of the merger. Yeah. It's a pretty good story. I think, you know, we've been all tracking everybody in this room a little bit of what's going on with IPI and some of these manufacturing leading indices, and maybe that is starting to show up a little bit on the production and manufacturing side. We're cautiously optimistic, as Jason said. You just mentioned the domestic intermodal strength. It seems to me, if I just take a step back, we've got this environment right now of rising truck rates, high fuel, right. Rail service levels generally pretty stable. Yeah. This, you know, feels like it should be a very good backdrop for certainly intermodal, but maybe the broad sort of rail market. Do you think we're starting to see evidence of this, in terms of share gain from truck? We've been talking about it for so long and feels like we haven't had it. I mean, what is it? A four-year freight recession- Right unprecedented in history may be coming to an end. Whether that's a function of the evacuation of excess supply of trucks finally, or if it's temporary because of what's happened with fuel pricing, hard to say. We are in an unusual spot with this war and with what's happened with fuel prices. Right now it feels good. If the war ends in, you know, the next couple of weeks and fuel prices start going back down over the next couple few months, does that dynamic still persist or does it reverse back to where it was? Hard to say. Right. I think the key there, you know, to just add on what Mark said there is, you know, really can you retain those customers? That's through, you pointed out service, right? That, that's kind of the linchpin to that whole thing. However these, you know, shippers are attracted to us in the first place, we're ready to serve it, but it's, you know, that good service levels that'll maintain it and keep them on rail for the longer term. Jason, just a quick, near term margin question for you. You guys talked about 200 basis points, sequential margin improvement, Q1-Q2. How are we trending relative to that, given the volumes? Could it be even better? I don't know. Yeah. Any thoughts? Yeah, I'd say, you know, we talk about that historical seasonality, 200 basis points. You know, first quarter has some higher costs from comp and ben and incentive comp, payroll taxes, things like that. Normally we do see an uptick in volume moving from first to second quarter. That is happening. That's good to see. I think, you know, we've got a lot of productivity initiatives underway that are really, you know, have taken hold over $500 million in the last two years, and another $150 planned this year. That's all baked into that. The real wild card here is fuel. You know, I talked about on the quarter end call, I think the price we were paying at the pump in March was up over 40%. In April, it was up 80% year-over-year. That is a really significant headwind. We don't see that coming down, you know, anytime soon here at least. You know, we're halfway through the quarter now. That is a significant headwind. Even with all that, we still feel good about the 200 basis points of OR improvement. Okay. This wouldn't do anything to change like the cosmetic impact of fuel. I asked this to one of the other rails on earnings, I'll ask you too, like, I don't really understand why rails still have two-month lags on fuel surcharges. Truckers are one week, FedEx, UPS are one week. Why are we still doing two-month lags? Well, with intermodal we're on like a two-week lag. Okay. Okay. I think it's really the other commodity groups. Right. That's a legacy. A lot of those are individually negotiated, and it tends to average out at about two months, right? That's right. You wanna talk about that? Yeah, no, you're absolutely right. You know, 60% of our fuel surcharge revenue is based off our intermodal volumes. Like Mark said, that's only that's a two-week lag, and that's, you know, really due to the fact that it is competitive with trucking and we're matching what they're seeing there from a price perspective. The customer can really choose, you know, which mode makes the most sense given all those economics. The rest of our business, merchandise and coal, that's more on a two-month lag. You know, it's really based on what the customer needs. You know, at this point, we think that that's sufficient to address, you know, the market and the lead time for a lot of these customers. At the end of the day, it all evens out. Right. Right. Sure. Right? Right. If, Jason, if fuel sort of stays here, what's the OR headwind to the year from fuel? Just to be clear, it's just cosmetic OR headwind. The earnings impact is immaterial. Right. Right. I think the way we're thinking about it, you know, is it was a pretty significant OR headwind in first quarter, will continue to be a headwind in second quarter. As we move through third and fourth, you know, again, assuming that fuel stays at this, based on this forward curve, should switch to a tailwind in the third and fourth quarter. You know, overall, you know, bit of a headwind for full year. When you add it all up, is there a path to full year margin improvement, you think, in 2026? Yeah. I think, you know, a couple of things to factor in here, you know, when we think about what we're facing this year. We've talked about pretty significant inflation this year. We've got, you know, wage rates going up another 3.75%, starting July 1. You know, on the back of 4% last year. We had significant wage inflation, health and welfare rates are really high, insurance premiums, all those things. We had some pretty significant land sales last year that we're not planning on this year. Those are some headwinds we've got going against us. On the good side, we've got productivity. I talked about what we've already achieved. We've got another $150 million of productivity. I'd classify that as structural productivity, you know, not volume dependent. Those are all good. Now, on top of that, you throw in fuel, I think that again, you know, you've used that term, it's a big wild card, and we'll see how that plays out. I think what we're super focused on, you've heard us talk about, you know, safety, service, and this cost discipline, we're really you know, kinda showing how we're, how we're achieving that. The cost envelope that we've laid out, we feel like, you know, we are gonna control what we can control. Fuel price is something that, you know, it's a bit out of our hands. What we can control from a fuel perspective is fuel efficiency. Really proud of what, you know, the team, the ops team has been able to do there. You know, 5% improvement last year on top of 3% the year before that, hit a record in first quarter. You know, really building on that momentum from a fuel efficiency perspective, and there's no better time to have it at, you know, fuel prices like this. Long story, you know, lots of puts and takes, but, you know, we see a path there. Okay, great. There's one question in the back. Maybe while the mic's going there, I'll ask one more. I wanna talk about pricing. If I look in Q1, and I get there's mix involved here, but yields ex fuel up 1% in total, merchandise yields ex fuel flat. You know, I feel like for so long, like pricing was sort of the constant in this industry, and I really feel like, you know, since the pandemic, the amount of price relative cost has been underwhelming to me in rail. Like, can we get back to a sort of 3%-4% type or maybe even more? I don't know. Can we get back to that kind of yield growth again? What needs to happen? I don't know, it just, it feels like. The volumes are positive. The labor productivity you're talking about has been good. Like, it feels like price has been sort of the missing link, the missing piece. Yeah. I mean, when you go back to the pandemic, Scott, you're also talking about going back to where the catalyst of where the truck recession started as well. Yeah. You really have to break our business down. Intermodal pricing is highly competitive with truck. That is the governor ultimately on intermodal price, is what's happening in the truck market. That was going down for a while, and then it's flat lined for maybe the past year plus, but there hasn't been any traction. Now, finally, we're starting to see that come up, and I think you would acknowledge you saw a little bit of that show up in the fourth quarter and now again a little bit more in the first quarter. You gotta look at that. You gotta look at, the coal business, which- Sure. Yeah. You know, those are index driven. You know, during the pandemic or leading up to and during the pandemic, we had very significant gross up in energy prices that we all enjoyed. Since then, met coal pricing in particular has been coming down at a steady decline. That's just, that's just math. We think we've probably lapped that now and we've stabilized, and maybe there's a path up on coal pricing, especially not just on the export side, but even on the utility side. In time, you know, with all this utility coal demand, as contracts reprice, there's probably upside there. That leaves you with the balance, which is merchandise. That's the one thing that hasn't changed, to your point. We continue to get very good core pricing in merchandise. There's been no change in that trend line going back a decade. We get solid core pricing in our entire merchandise book of business. It gets dwarfed sometimes in certain years by mix within merchandise. That's why when you look at RPU changes, even within merchandise, it may look flat, but it's because core pricing might have been up 3%, but mix ate it all away. I think the thesis looking forward is a little bit better on the overall book. Mix is always a player, and at some time mix is gonna be helpful as well. Like right now, I think we're seeing some favorable mix. I don't like to talk about price in one thing. You really gotta break it down into those three components and then recognize even within a commodity group, mix can play a role. It sounds like. Is truck rates going up? That clearly should be good for intermodal. Correct. Right. Coal has bottomed and maybe hopefully gonna start to see a little bit of upside from here. We'll have to see what the indexes are. Yep. Merchandise, you're saying you're getting good price? We are. There's mixed fluctuations. Right. Maybe it was a headwind, but maybe going forward it's a positive. Maybe. Okay. There was one in the back and we're getting tight on time, but please. Yeah. I was just gonna ask if there's like a rule of thumb or a level that you think about with diesel prices or with fuel surcharges where like the phone starts really ringing off the hook, like if there's like a, I don't know, just sort of a disaggregation line where intermodal really cuts towards your product? I would kinda say when oil's at $80 a barrel, $85 a barrel, you're in a sweet spot where I think, usually the highway prices are a little bit more supportive of getting back onto rail, yet not so high where it's starting to destruct demand for the consumers. When you start with oil getting closer to $100 a barrel, obviously it's an even better compare for us, highway versus rail, but you have to get worried about what's the broader impact on the consumer. That's why where we are today, we're in a little bit of a shaky spot with oil where it is. If it stays here for a prolonged period of time, we have to be worried about demand destruction. We like where it is in terms of intermodal conversion, but long term, we have to keep our eyes out. I kinda say that $80-$90 a barrel range has kinda been the sweet spot historically. Thank you. All right. I think we do have to wrap it up. Thank you. Mark, Jason, thanks so much. This was great. Thank you.

Speaker 3: All right. Afternoon, everyone. We're gonna get going with the next session. We've got transports the rest of the day. By the way, I'm Scott Group, the transport and airline analyst here at Wolfe. For our next session, we've got Norfolk Southern. I know it says Jason Zampi, CFO, to my far left, but also Mark George, CEO from the company, is here as well. Jason, Mark, thank you guys for being here. All right. all right Afternoon, everyone. afternoon everyone We're gonna get going with the next session. we're gonna get going with the next session We've got transports the rest of the day. we've got transports the rest of the day By the way, I'm Scott Group, the transport and airline analyst here at Wolfe. by the way i'm scott group the transport and airline analyst here at wolfe For our next session, we've got Norfolk Southern. for our next session we've got norfolk southern I know it says Jason Zampi, CFO, to my far left, but also Mark George, CEO from the company, is here as well. i know it says jason zampi cfo to my far left but also mark george ceo from the company is here as well Jason, Mark, thank you guys for being here. jason mark thank you guys for being here

Speaker 2: Glad to be here, Scott. Thank you. Glad to be here, Scott. glad to be here scott Thank you. thank you

Speaker 1: Thanks for having us. Thanks for having us. thanks for having us

Speaker 3: We're gonna jump right into questions. I've got a few that I wanna get to, and then if you have additional questions, raise your hand. I guess we'll start on the merger. Let's get an update. You guys, you and UP resubmitted the application late April. We're gonna jump right into questions. we're gonna jump right into questions I've got a few that I wanna get to, and then if you have additional questions, raise your hand. i've got a few that i wanna get to and then if you have additional questions raise your hand I guess we'll start on the merger. i guess we'll start on the merger Let's get an update. let's get an update You guys, you and UP resubmitted the application late April. you guys you and up resubmitted the application late april

Speaker 2: Yep. Yep. yep

Speaker 3: I guess we should expect to hear from the Surface Transportation Board probably end of next week if they deem the application complete. Maybe just take a minute or two. You know, where are we in the process? What, in your mind, were the key enhancements you guys made to the application, and any sort of expectations that you have for next week? I guess we should expect to hear from the Surface Transportation Board probably end of next week if they deem the application complete. i guess we should expect to hear from the surface transportation board probably end of next week if they deem the application complete Maybe just take a minute or two. maybe just take a minute or two You know, where are we in the process? you know where are we in the process What, in your mind, were the key enhancements you guys made to the application, and any sort of expectations that you have for next week? what in your mind were the key enhancements you guys made to the application and any sort of expectations that you have for next week

Speaker 2: Yeah. Where we are in the process is kind of like you laid out. We had resubmitted the application, like you mentioned. I think, we expect to hear next week. I mean, the deadline would be technically the 29th, but it could be before that we learn what the STB does, which is we expect a full acceptance. Then, you know, there's a whole procedural schedule that they follow with hearings and then environmental reviews. Then that gets them to the point of final decision, where they have 90 days after they close the docket to publish their final decision. When you add it all together, you know, we've said publicly first half of 2027. Yeah. yeah Where we are in the process is kind of like you laid out. where we are in the process is kind of like you laid out We had resubmitted the application, like you mentioned. we had resubmitted the application like you mentioned I think, we expect to hear next week. i think we expect to hear next week I mean, the deadline would be technically the 29th, but it could be before that we learn what the STB does, which is we expect a full acceptance. i mean the deadline would be technically the 29th but it could be before that we learn what the stb does which is we expect a full acceptance Then, you know, there's a whole procedural schedule that they follow with hearings and then environmental reviews. then you know there's a whole procedural schedule that they follow with hearings and then environmental reviews Then that gets them to the point of final decision, where they have 90 days after they close the docket to publish their final decision. then that gets them to the point of final decision where they have 90 days after they close the docket to publish their final decision When you add it all together, you know, we've said publicly first half of 2027. when you add it all together you know we've said publicly first half of 2027 I think let's be real, this is not gonna happen in the first quarter of 2027. It's sometime in the latter part of the first half, which means probably the summer months, that we, that we learn. You know, it could be May, it could be June, but ultimately it's up to the STB, how long they take. The good news is that, when we get acceptance of the application, the STB is gonna publish their schedule, so we'll get a sense of how long this is gonna take to play out. We can stop speculating at that point, and we'll have something to work off of. I think let's be real, this is not gonna happen in the first quarter of 2027. i think let's be real this is not gonna happen in the first quarter of 2027 It's sometime in the latter part of the first half, which means probably the summer months, that we, that we learn. it's sometime in the latter part of the first half which means probably the summer months that we that we learn You know, it could be May, it could be June, but ultimately it's up to the STB, how long they take. you know it could be may it could be june but ultimately it's up to the stb how long they take The good news is that, when we get acceptance of the application, the STB is gonna publish their schedule, so we'll get a sense of how long this is gonna take to play out. the good news is that when we get acceptance of the application the stb is gonna publish their schedule so we'll get a sense of how long this is gonna take to play out We can stop speculating at that point, and we'll have something to work off of. we can stop speculating at that point and we'll have something to work off of

Speaker 3: Okay. Obviously, a lot of comments. Okay. okay Obviously, a lot of comments. obviously a lot of comments

Speaker 2: You asked about completeness. You asked about completeness. you asked about completeness

Speaker 3: Yes. Yes. yes

Speaker 2: We think this is really complete. We think this is more fortified than the original application. Let me explain why. Not only did we answer the three things that the STB wanted, we responded to those fully, and we believe in full satisfaction of their request. We chose deliberately to almost redo the math using traffic data that was provided by the railroads. We're the first merger application who's ever taken the full data set from all the railroads to project the future, as opposed to the sample data, which is the way everyone has done applications in the past and the way we did it initially to project the impacts. That's a big deal. That's a big deal because the good news is it kind of validated where we were coming out. We think this is really complete. we think this is really complete We think this is more fortified than the original application. we think this is more fortified than the original application Let me explain why. let me explain why Not only did we answer the three things that the STB wanted, we responded to those fully, and we believe in full satisfaction of their request. not only did we answer the three things that the stb wanted we responded to those fully and we believe in full satisfaction of their request We chose deliberately to almost redo the math using traffic data that was provided by the railroads. we chose deliberately to almost redo the math using traffic data that was provided by the railroads We're the first merger application who's ever taken the full data set from all the railroads to project the future, as opposed to the sample data, which is the way everyone has done applications in the past and the way we did it initially to project the impacts. we're the first merger application who's ever taken the full data set from all the railroads to project the future as opposed to the sample data which is the way everyone has done applications in the past and the way we did it initially to project the impacts That's a big deal. that's a big deal That's a big deal because the good news is it kind of validated where we were coming out. that's a big deal because the good news is it kind of validated where we were coming out It actually, you know, we actually got more, we think more conversion doing the math that way. We maybe lost a little bit of the merchandise conversions, actually got more intermodal conversions in the second submission. The data is irrefutable now. That took a little bit longer. I mean, we had to run all of this data through, just like we did the first time, through all of our modeling. It added a little bit more time to the resubmission, which is why it took us till April. We feel as though we're taking away any potential argument that the other roads might say about the, you know, well, I know this is sample data they use, this isn't really accurate data. This is their data. This is the full data set. It actually, you know, we actually got more, we think more conversion doing the math that way. it actually you know we actually got more we think more conversion doing the math that way We maybe lost a little bit of the merchandise conversions, actually got more intermodal conversions in the second submission. we maybe lost a little bit of the merchandise conversions actually got more intermodal conversions in the second submission The data is irrefutable now. the data is irrefutable now That took a little bit longer. that took a little bit longer I mean, we had to run all of this data through, just like we did the first time, through all of our modeling. i mean we had to run all of this data through just like we did the first time through all of our modeling It added a little bit more time to the resubmission, which is why it took us till April. it added a little bit more time to the resubmission which is why it took us till april We feel as though we're taking away any potential argument that the other roads might say about the, you know, well, I know this is sample data they use, this isn't really accurate data. we feel as though we're taking away any potential argument that the other roads might say about the you know well i know this is sample data they use this isn't really accurate data This is their data. this is their data This is the full data set. this is the full data set We feel as though it's a much stronger application, more defendable with the data. You know, we went into even more articulation of the public benefits and enhanced competition. Go ahead. We feel as though it's a much stronger application, more defendable with the data. we feel as though it's a much stronger application more defendable with the data You know, we went into even more articulation of the public benefits and enhanced competition. you know we went into even more articulation of the public benefits and enhanced competition Go ahead. go ahead

Speaker 3: A lot of comments from all the other rails, right? Maybe none of them surprising that, you know, they're saying it's incomplete still. Anything, any of the public comments from rails or other stakeholders that give you some pause of, 'Hey, maybe we missed this,' or, 'Maybe we missed that'? Then, you know, I'm sure you love hypotheticals, in the hypothetical world where we learn next week they've deemed for the second time it's incomplete, like, where do we go from there? Is that sort of put an end to this or not? A lot of comments from all the other rails, right? a lot of comments from all the other rails right Maybe none of them surprising that, you know, they're saying it's incomplete still. maybe none of them surprising that you know they're saying it's incomplete still Anything, any of the public comments from rails or other stakeholders that give you some pause of, 'Hey, maybe we missed this,' or, 'Maybe we missed that'? anything any of the public comments from rails or other stakeholders that give you some pause of 'hey maybe we missed this,' or 'maybe we missed that' Then, you know, I'm sure you love hypotheticals, in the hypothetical world where we learn next week they've deemed for the second time it's incomplete, like, where do we go from there? then you know i'm sure you love hypotheticals in the hypothetical world where we learn next week they've deemed for the second time it's incomplete like where do we go from there Is that sort of put an end to this or not? is that sort of put an end to this or not

Speaker 2: No, I'm not gonna get into hypotheticals. We think they're gonna accept it. I don't know if they ask for more information, you know, if for some reason that scenario played out, we'll deal with it at that point. What was the first part of the question? No, I'm not gonna get into hypotheticals. no i'm not gonna get into hypotheticals We think they're gonna accept it. we think they're gonna accept it I don't know if they ask for more information, you know, if for some reason that scenario played out, we'll deal with it at that point. i don't know if they ask for more information you know if for some reason that scenario played out we'll deal with it at that point What was the first part of the question? what was the first part of the question

Speaker 3: Was any of the comments Was any of the comments was any of the comments

Speaker 2: Yeah. Yeah. yeah

Speaker 3: Concerning you in any way or surprising you? Concerning you in any way or surprising you? concerning you in any way or surprising you

Speaker 2: No, we responded to that. You know, we think that people are somewhat grasping at straws right now. They're reopening things and arguments they made the first time that the STB ignored, essentially. They're opening it up again. We're not too concerned, nor are we surprised. I think, you know, the other roads that are in opposition to this would love to just stretch this out and drag it along. They'll use whatever tactic they can. No, we responded to that. no we responded to that You know, we think that people are somewhat grasping at straws right now. you know we think that people are somewhat grasping at straws right now They're reopening things and arguments they made the first time that the STB ignored, essentially. they're reopening things and arguments they made the first time that the stb ignored essentially They're opening it up again. they're opening it up again We're not too concerned, nor are we surprised. we're not too concerned nor are we surprised I think, you know, the other roads that are in opposition to this would love to just stretch this out and drag it along. i think you know the other roads that are in opposition to this would love to just stretch this out and drag it along They'll use whatever tactic they can. they'll use whatever tactic they can

Speaker 3: Right. You know, I was just thinking, 'cause last May, we were sort of at our conference, we were dancing around the M&A conversation a little bit without really able to get into specifics. At our conference, at least maybe first, you know, opportunity for you to talk about it from this standpoint, right? There are, at its core, two key requirements for a merger. One it has to be in the public interest, and two, now under the new rules, it has to enhance competition. Maybe just if you could just touch on those two pieces. Why is it in the public interest? How does this enhance competition? Right. right You know, I was just thinking, 'cause last May, we were sort of at our conference, we were dancing around the M&A conversation a little bit without really able to get into specifics. you know i was just thinking 'cause last may we were sort of at our conference we were dancing around the m&a conversation a little bit without really able to get into specifics At our conference, at least maybe first, you know, opportunity for you to talk about it from this standpoint, right? at our conference at least maybe first you know opportunity for you to talk about it from this standpoint right There are, at its core, two key requirements for a merger. One it has to be in the public interest, and two, now under the new rules, it has to enhance competition. there are at its core two key requirements for a merger. one it has to be in the public interest and two now under the new rules it has to enhance competition Maybe just if you could just touch on those two pieces. maybe just if you could just touch on those two pieces Why is it in the public interest? why is it in the public interest How does this enhance competition? how does this enhance competition

Speaker 2: Yeah, that's, it's easy. I mean, on the public interest side, I mean, what we're doing is massive in terms of trying to convert freight from the highway back onto the railroad where it belongs, frankly. Heavy freight belongs on the rail infrastructure. There's reasons over decades after the Interstate Highway System was built out why freight has migrated. It's just convenience. As passenger vehicles have filled up the highways, it's becoming less and less comfortable and more and more risky. What we do is if we can take, like we've projected, 3.8 billion mi of truck traffic off of the highway system, we're talking about reducing accidents by about 1,750 per year on the highway system. Yeah, that's, it's easy. yeah that's it's easy I mean, on the public interest side, I mean, what we're doing is massive in terms of trying to convert freight from the highway back onto the railroad where it belongs, frankly. i mean on the public interest side i mean what we're doing is massive in terms of trying to convert freight from the highway back onto the railroad where it belongs frankly Heavy freight belongs on the rail infrastructure. heavy freight belongs on the rail infrastructure There's reasons over decades after the Interstate Highway System was built out why freight has migrated. there's reasons over decades after the interstate highway system was built out why freight has migrated It's just convenience. it's just convenience As passenger vehicles have filled up the highways, it's becoming less and less comfortable and more and more risky. as passenger vehicles have filled up the highways it's becoming less and less comfortable and more and more risky What we do is if we can take, like we've projected, 3.8 billion mi of truck traffic off of the highway system, we're talking about reducing accidents by about 1,750 per year on the highway system. what we do is if we can take like we've projected 3.8 billion mi of truck traffic off of the highway system we're talking about reducing accidents by about 1,750 per year on the highway system We're talking about reducing fatalities on the highway system by about 65 per year. That's a public interest. I think there's also an affordability angle here, right? The truck is more expensive than the rail network. We're going to save consumers money by shifting traffic back onto the highways. It'll be cheaper. It'll be more convenient as well. You know, the public interest stuff that we've laid out is absolutely real, and I think, you know, in terms of enhancing competition, as soon as we announced this, you saw how the other railroads started to work together. The competition is already enhanced. In fact, we've lost business because they've decided to compete differently. We're talking about reducing fatalities on the highway system by about 65 per year. we're talking about reducing fatalities on the highway system by about 65 per year That's a public interest. that's a public interest I think there's also an affordability angle here, right? i think there's also an affordability angle here right The truck is more expensive than the rail network. the truck is more expensive than the rail network We're going to save consumers money by shifting traffic back onto the highways. we're going to save consumers money by shifting traffic back onto the highways It'll be cheaper. it'll be cheaper It'll be more convenient as well. it'll be more convenient as well You know, the public interest stuff that we've laid out is absolutely real, and I think, you know, in terms of enhancing competition, as soon as we announced this, you saw how the other railroads started to work together. you know the public interest stuff that we've laid out is absolutely real and i think you know in terms of enhancing competition as soon as we announced this you saw how the other railroads started to work together The competition is already enhanced. the competition is already enhanced In fact, we've lost business because they've decided to compete differently. in fact we've lost business because they've decided to compete differently I mean, let's face it, this industry, the rail industry, has been a little bit lazy. Since I've joined six years ago, I kinda had the realization, "Oh, my God, I joined a utility." You know? There wasn't a lot of spryness to try to compete aggressively and to perform at levels that your customers expect. We're seeing a spryness now in the industry just by the fact that we've announced this merger. I think, frankly, this is, the enhanced competition is taking many forms. Another thing, just by coming together, we're gonna now offer single line rail service compared to interline. That is huge. When you look at the facts, where single line rail service exists versus interline, there's a 44% higher market share for rail on the merchandise side, okay? I mean, let's face it, this industry, the rail industry, has been a little bit lazy. i mean let's face it this industry the rail industry has been a little bit lazy Since I've joined six years ago, I kinda had the realization, "Oh, my God, I joined a utility." You know? since i've joined six years ago i kinda had the realization "oh my god i joined a utility." you know There wasn't a lot of spryness to try to compete aggressively and to perform at levels that your customers expect. there wasn't a lot of spryness to try to compete aggressively and to perform at levels that your customers expect We're seeing a spryness now in the industry just by the fact that we've announced this merger. we're seeing a spryness now in the industry just by the fact that we've announced this merger I think, frankly, this is, the enhanced competition is taking many forms. i think frankly this is the enhanced competition is taking many forms Another thing, just by coming together, we're gonna now offer single line rail service compared to interline. another thing just by coming together we're gonna now offer single line rail service compared to interline That is huge. that is huge When you look at the facts, where single line rail service exists versus interline, there's a 44% higher market share for rail on the merchandise side, okay? when you look at the facts where single line rail service exists versus interline there's a 44% higher market share for rail on the merchandise side okay That's 144% on the intermodal side. When there's single line traffic compared to interline, the share is 144% larger than single line than interline alone. The competition benefits are significant, and ultimately, at the end of the day, we're trying to do this for customers. I know people have been out there saying, "Customers didn't ask for this. This is all about Wall Street." You guys didn't even know I was having these conversations. This wasn't for you. This is for the customers because of those stats I just laid out. The customers are demanding better transport service. They've been moving away from rail to the highway. The only way to reverse that trend and to give customers what they want is to get together and work on single line options for them. That's 144% on the intermodal side. that's 144% on the intermodal side When there's single line traffic compared to interline, the share is 144% larger than single line than interline alone. when there's single line traffic compared to interline the share is 144% larger than single line than interline alone The competition benefits are significant, and ultimately, at the end of the day, we're trying to do this for customers. the competition benefits are significant and ultimately at the end of the day we're trying to do this for customers I know people have been out there saying, "Customers didn't ask for this. i know people have been out there saying "customers didn't ask for this This is all about Wall Street." You guys didn't even know I was having these conversations. this is all about wall street." you guys didn't even know i was having these conversations This wasn't for you. this wasn't for you This is for the customers because of those stats I just laid out. this is for the customers because of those stats i just laid out The customers are demanding better transport service. the customers are demanding better transport service They've been moving away from rail to the highway. they've been moving away from rail to the highway The only way to reverse that trend and to give customers what they want is to get together and work on single line options for them. the only way to reverse that trend and to give customers what they want is to get together and work on single line options for them

Speaker 3: Just to follow up, like, obviously people can disagree. I think the public interest case you're making seems pretty clear, right? I think on the enhancing competition relative to truck, I think pretty clear. I think where there's probably more debate is on the enhancing rail to rail competition, right? I understand you made your point. Hey, look, you've seen competitive response from the other rails, and that's sort of by definition, we're enhancing competition. Do you have a sense, is the Board looking at broad competition, including truck competition, when we have to enhance competition? Or is the Board going to sort of look more singularly at intramodal rail to rail competition with that enhanced competition? Is it clear to you which way they are going to look at this? Just to follow up, like, obviously people can disagree. just to follow up like obviously people can disagree I think the public interest case you're making seems pretty clear, right? i think the public interest case you're making seems pretty clear right I think on the enhancing competition relative to truck, I think pretty clear. i think on the enhancing competition relative to truck i think pretty clear I think where there's probably more debate is on the enhancing rail to rail competition, right? i think where there's probably more debate is on the enhancing rail to rail competition right I understand you made your point. i understand you made your point Hey, look, you've seen competitive response from the other rails, and that's sort of by definition, we're enhancing competition. hey look you've seen competitive response from the other rails and that's sort of by definition we're enhancing competition Do you have a sense, is the Board looking at broad competition, including truck competition, when we have to enhance competition? do you have a sense is the board looking at broad competition including truck competition when we have to enhance competition Or is the Board going to sort of look more singularly at intramodal rail to rail competition with that enhanced competition? or is the board going to sort of look more singularly at intramodal rail to rail competition with that enhanced competition Is it clear to you which way they are going to look at this? is it clear to you which way they are going to look at this

Speaker 2: Well, I think when you go back to. Well, I think when you go back to. well i think when you go back to

Speaker 3: Right. Right. right

Speaker 2: I know there's a lot of people that are saying, "No, no. The Board intended back then, 25 years ago, that this was intramodal, that this is really just focused on enhanced competition within the rail space." Okay? The reality is the Board, whatever they were thinking at the time, they deliberately decided not to define it, okay? I think it was the wisdom of the Board back then to not define it, to know that when something comes up, it gives them the flexibility, depending upon the market dynamics at the time, to interpret it appropriately. Here we are, 25 years later. 25 years later, the markets have changed dramatically. Rail has been pummeled by truck, and now this Board gets to decide how to define enhanced competition. I think that they're smart. I think that they're wise. I know there's a lot of people that are saying, "No, no. i know there's a lot of people that are saying "no no The Board intended back then, 25 years ago, that this was intramodal, that this is really just focused on enhanced competition within the rail space." Okay? the board intended back then 25 years ago that this was intramodal that this is really just focused on enhanced competition within the rail space." okay The reality is the Board, whatever they were thinking at the time, they deliberately decided not to define it, okay? the reality is the board whatever they were thinking at the time they deliberately decided not to define it okay I think it was the wisdom of the Board back then to not define it, to know that when something comes up, it gives them the flexibility, depending upon the market dynamics at the time, to interpret it appropriately. i think it was the wisdom of the board back then to not define it to know that when something comes up it gives them the flexibility depending upon the market dynamics at the time to interpret it appropriately Here we are, 25 years later. 25 years later, the markets have changed dramatically. here we are 25 years later 25 years later the markets have changed dramatically Rail has been pummeled by truck, and now this Board gets to decide how to define enhanced competition. rail has been pummeled by truck and now this board gets to decide how to define enhanced competition I think that they're smart. i think that they're smart I think that they're wise. i think that they're wise I think that they're gonna be progressive looking enough to see that we have to look at the broader ecosystem, and it's not just intramodal. That said, even within rail, we believe we are enhancing competition because, again, look at the responses. They think they can compete, and God bless them with partnerships. They're taking share from us. Rail to rail share movements. We're gonna try to compete with single line, and there is rail to rail conversion from single line. Absolutely. The Committed Gateway Pricing is another enhanced competition feature. We believe we're responding to it both ways. I think that they're gonna be progressive looking enough to see that we have to look at the broader ecosystem, and it's not just intramodal. i think that they're gonna be progressive looking enough to see that we have to look at the broader ecosystem and it's not just intramodal That said, even within rail, we believe we are enhancing competition because, again, look at the responses. that said even within rail we believe we are enhancing competition because again look at the responses They think they can compete, and God bless them with partnerships. they think they can compete and god bless them with partnerships They're taking share from us. Rail to rail share movements. they're taking share from us. rail to rail share movements We're gonna try to compete with single line, and there is rail to rail conversion from single line. we're gonna try to compete with single line and there is rail to rail conversion from single line Absolutely. absolutely The Committed Gateway Pricing is another enhanced competition feature. the committed gateway pricing is another enhanced competition feature We believe we're responding to it both ways. we believe we're responding to it both ways

Speaker 3: Okay. That all makes sense. Okay. okay That all makes sense. that all makes sense

Speaker 2: Yeah. Yeah. yeah

Speaker 3: You know, I remember reading in the board ruling about the CPKC merger. You know, our job is not to protect one rail relative to another, right? You know, I remember reading in the board ruling about the CPKC merger. you know i remember reading in the board ruling about the cpkc merger You know, our job is not to protect one rail relative to another, right? you know our job is not to protect one rail relative to another right

Speaker 2: Yeah. Yeah. yeah

Speaker 3: You know, maybe other rails complaining, maybe that doesn't matter so much. I think maybe what shippers have to say, what unions, other stakeholders have to say. You know, maybe other rails complaining, maybe that doesn't matter so much. you know maybe other rails complaining maybe that doesn't matter so much I think maybe what shippers have to say, what unions, other stakeholders have to say. i think maybe what shippers have to say what unions other stakeholders have to say

Speaker 2: Sure. Sure. sure

Speaker 3: Maybe just touch on that. What are you hearing from those other stakeholders positively? What are the negatives you hear from other stakeholders outside of the other rails? Maybe just touch on that. maybe just touch on that What are you hearing from those other stakeholders positively? what are you hearing from those other stakeholders positively What are the negatives you hear from other stakeholders outside of the other rails? what are the negatives you hear from other stakeholders outside of the other rails

Speaker 2: Yeah, I think, you know, we do a lot of talking with customers. Yeah, I think, you know, we do a lot of talking with customers. yeah i think you know we do a lot of talking with customers

Speaker 3: Yeah. Yeah. yeah

Speaker 2: We do a lot of talking with other constituents as well. I would tell you, let's break it down. You talk to our intermodal partners and those shippers, the beneficial cargo owners, they're all excited. They see the benefit for this. They see the fact that they can go into single line versus interline. It's all really good. I think when you get down to some of the merchandise shippers, they're hearing the noise from the others, they wanna talk about that with us. When we have the dialogue and we open their eyes to what the prospects are, that whether it's a grain shipper in Ohio who now sees, "Hey, I can move uninterrupted into Texas on single line service." That's a new market that I don't serve today. We do a lot of talking with other constituents as well. we do a lot of talking with other constituents as well I would tell you, let's break it down. i would tell you let's break it down You talk to our intermodal partners and those shippers, the beneficial cargo owners, they're all excited. you talk to our intermodal partners and those shippers the beneficial cargo owners they're all excited They see the benefit for this. they see the benefit for this They see the fact that they can go into single line versus interline. they see the fact that they can go into single line versus interline It's all really good. it's all really good I think when you get down to some of the merchandise shippers, they're hearing the noise from the others, they wanna talk about that with us. i think when you get down to some of the merchandise shippers they're hearing the noise from the others they wanna talk about that with us When we have the dialogue and we open their eyes to what the prospects are, that whether it's a grain shipper in Ohio who now sees, "Hey, I can move uninterrupted into Texas on single line service." That's a new market that I don't serve today. when we have the dialogue and we open their eyes to what the prospects are that whether it's a grain shipper in ohio who now sees "hey i can move uninterrupted into texas on single line service." that's a new market that i don't serve today Someone in the Midwest who wants to ship feed to chickens in the Southeast that would've had to go through watershed, so therefore they don't even bother competing in the Southeast. You know, steel customers who now we can tell them, you can serve markets in the West on single line service, their eyes open up and they understand, and they see the potential, and they get really excited. It's a slog. We have to go through and explain it one by one, which we're doing. When we do, there's a lot of enthusiasm about it. Someone in the Midwest who wants to ship feed to chickens in the Southeast that would've had to go through watershed, so therefore they don't even bother competing in the Southeast. someone in the midwest who wants to ship feed to chickens in the southeast that would've had to go through watershed so therefore they don't even bother competing in the southeast You know, steel customers who now we can tell them, you can serve markets in the West on single line service, their eyes open up and they understand, and they see the potential, and they get really excited. you know steel customers who now we can tell them you can serve markets in the west on single line service their eyes open up and they understand and they see the potential and they get really excited It's a slog. it's a slog We have to go through and explain it one by one, which we're doing. we have to go through and explain it one by one which we're doing When we do, there's a lot of enthusiasm about it. when we do there's a lot of enthusiasm about it

Speaker 3: Yeah. Makes sense. Then as part of the merger process. Yeah. yeah Makes sense. makes sense Then as part of the merger process. then as part of the merger process I think the board needs to consider downstream effects. One thing that just wasn't clear to me when you guys laid out like the synergy targets, is there an inherent assumption that this is the only merger, or is there an assumption that there's two? If there are two, like how would that change the merger synergy assumptions that you guys have laid out? I think the board needs to consider downstream effects. i think the board needs to consider downstream effects One thing that just wasn't clear to me when you guys laid out like the synergy targets, is there an inherent assumption that this is the only merger, or is there an assumption that there's two? one thing that just wasn't clear to me when you guys laid out like the synergy targets is there an inherent assumption that this is the only merger or is there an assumption that there's two If there are two, like how would that change the merger synergy assumptions that you guys have laid out? if there are two like how would that change the merger synergy assumptions that you guys have laid out

Speaker 2: Yeah. I think the other rails have basically kind of made their case, right? We kinda know what their intent is. There's one in particular who's not publicly traded. Yeah. yeah I think the other rails have basically kind of made their case, right? i think the other rails have basically kind of made their case right We kinda know what their intent is. we kinda know what their intent is There's one in particular who's not publicly traded. there's one in particular who's not publicly traded

Speaker 3: Right. Right. right

Speaker 2: Therefore, they've come out and said that they're gonna behave in a certain way, which is to not do a merger. I think you could probably assume that what we've gone out there with is assuming that there is no follow on. Otherwise, I can't really speculate. They're all on the record individually. If they were all publicly traded, I might have my own prognostication, but they're not. Therefore, they've come out and said that they're gonna behave in a certain way, which is to not do a merger. therefore they've come out and said that they're gonna behave in a certain way which is to not do a merger I think you could probably assume that what we've gone out there with is assuming that there is no follow on. i think you could probably assume that what we've gone out there with is assuming that there is no follow on Otherwise, I can't really speculate. otherwise i can't really speculate They're all on the record individually. they're all on the record individually If they were all publicly traded, I might have my own prognostication, but they're not. if they were all publicly traded i might have my own prognostication but they're not

Speaker 3: Right. Right. right

Speaker 1: I think too, just to put a finer point, the revenue synergies are really, you know, we feel confident with or without a follow on merger that, you know, those are attainable. You think about the portion of that that's coming from the truck market and how large that truck market is compared to the, you know, to the rail. I mean, there's plenty of a business there. I think too, just to put a finer point, the revenue synergies are really, you know, we feel confident with or without a follow on merger that, you know, those are attainable. i think too just to put a finer point the revenue synergies are really you know we feel confident with or without a follow on merger that you know those are attainable You think about the portion of that that's coming from the truck market and how large that truck market is compared to the, you know, to the rail. you think about the portion of that that's coming from the truck market and how large that truck market is compared to the you know to the rail I mean, there's plenty of a business there. i mean there's plenty of a business there

Speaker 3: Yeah Yeah yeah

Speaker 1: for conversion. for conversion. for conversion

Speaker 3: Not offering up specific concessions, is that a realistic outcome in your mind then, Mark or Jason? Not offering up specific concessions, is that a realistic outcome in your mind then, Mark or Jason? not offering up specific concessions is that a realistic outcome in your mind then mark or jason

Speaker 2: What do you mean? We've offered up all sorts of concessions. What do you mean? what do you mean We've offered up all sorts of concessions. we've offered up all sorts of concessions

Speaker 3: You're talking about the gateway pricing and all that. You're talking about the gateway pricing and all that. you're talking about the gateway pricing and all that

Speaker 2: Yeah. Committed Gateway Pricing. We've offered jobs for life guarantees. Yeah. yeah Committed Gateway Pricing. committed gateway pricing We've offered jobs for life guarantees. we've offered jobs for life guarantees

Speaker 3: Yeah. Yeah. yeah

Speaker 2: Open gateways. You know, we've put concessions out there and, you know, we'll see how this whole process evolves over the next year or so. It's not like we haven't put concessions out there. Open gateways. open gateways You know, we've put concessions out there and, you know, we'll see how this whole process evolves over the next year or so. you know we've put concessions out there and you know we'll see how this whole process evolves over the next year or so It's not like we haven't put concessions out there. it's not like we haven't put concessions out there

Speaker 3: Okay. Fair. Maybe we'll, unless if there are other merger questions, we can get you involved. Maybe let's turn to just the business. Okay. okay Fair. fair Maybe we'll, unless if there are other merger questions, we can get you involved. maybe we'll unless if there are other merger questions we can get you involved Maybe let's turn to just the business. maybe let's turn to just the business

Speaker 2: Yeah Yeah yeah

Speaker 3: Today. Maybe Jason, I'll let you take a, you know, take a few here. Just volume's up about 3% quarter-to-date. What's doing better than you thought? What, if anything, is worse than you thought? Just give a little bit of a demand update. Today. today Maybe Jason, I'll let you take a, you know, take a few here. maybe jason i'll let you take a you know take a few here Just volume's up about 3% quarter-to- date. just volume's up about 3% quarter-to- date What's doing better than you thought? what's doing better than you thought What, if anything, is worse than you thought? what if anything is worse than you thought Just give a little bit of a demand update. just give a little bit of a demand update

Speaker 1: Yeah, sure. You know, first quarter, I would say, was kind of bumpy from a volume perspective, right? January started off pretty good. February was kind of really impacted by a lot of the winter weather storms, and then March really picked up. We've sustained that momentum here into April and May. We're around 140,000 units a week, and this is now, I think, the 11th week in a row that we've been at that level. We're seeing some pretty good volume momentum there, and that's translating to the 3% you mentioned on a quarter to date perspective. I think a couple areas that are probably better than we expected, I put chemicals in that bucket. Yeah, sure. yeah sure You know, first quarter, I would say, was kind of bumpy from a volume perspective, right? you know first quarter i would say was kind of bumpy from a volume perspective right January started off pretty good. january started off pretty good February was kind of really impacted by a lot of the winter weather storms, and then March really picked up. february was kind of really impacted by a lot of the winter weather storms and then march really picked up We've sustained that momentum here into April and May. we've sustained that momentum here into april and may We're around 140,000 units a week, and this is now, I think, the 11th week in a row that we've been at that level. we're around 140,000 units a week and this is now i think the 11th week in a row that we've been at that level We're seeing some pretty good volume momentum there, and that's translating to the 3% you mentioned on a quarter to date perspective. we're seeing some pretty good volume momentum there and that's translating to the 3% you mentioned on a quarter to date perspective I think a couple areas that are probably better than we expected, I put chemicals in that bucket. i think a couple areas that are probably better than we expected i put chemicals in that bucket You know, really kind of those energy markets, whether it's NGLs, frac sand, petroleum products, those are coming in better than we thought. I think coal is better than where we expected it to be. The third one, and there's, you know, puts and takes in all these, but the third is domestic intermodal. International is still pretty weak, domestic has come in better than we were expecting. I think there's a lot of positive things out there. I think, you know, as a whole, I kind of categorize it as cautiously optimistic. You know, things that we thought might've been better, you look at the housing market. I think we were hoping maybe for some rate cuts and for the housing market to kind of take off. You know, really kind of those energy markets, whether it's NGLs, frac sand, petroleum products, those are coming in better than we thought. you know really kind of those energy markets whether it's ngls frac sand petroleum products those are coming in better than we thought I think coal is better than where we expected it to be. i think coal is better than where we expected it to be The third one, and there's, you know, puts and takes in all these, but the third is domestic intermodal. the third one and there's you know puts and takes in all these but the third is domestic intermodal International is still pretty weak, domestic has come in better than we were expecting. international is still pretty weak domestic has come in better than we were expecting I think there's a lot of positive things out there. i think there's a lot of positive things out there I think, you know, as a whole, I kind of categorize it as cautiously optimistic. i think you know as a whole i kind of categorize it as cautiously optimistic You know, things that we thought might've been better, you look at the housing market. you know things that we thought might've been better you look at the housing market I think we were hoping maybe for some rate cuts and for the housing market to kind of take off. i think we were hoping maybe for some rate cuts and for the housing market to kind of take off That has a big impact on our business. We're obviously not seeing that's probably not gonna you know, change here in the near future. You know, something to watch out there. I think the last piece is just the, you know, what happens with fuel prices. You know, do we reach a point that at some point that starts degrading demand out there? We're not there yet, but that's something we're keeping an eye on. Definitely some puts and takes, but there's some favorable things we're seeing in the business for sure. That has a big impact on our business. that has a big impact on our business We're obviously not seeing that's probably not gonna you know, change here in the near future. we're obviously not seeing that's probably not gonna you know change here in the near future You know, something to watch out there. you know something to watch out there I think the last piece is just the, you know, what happens with fuel prices. i think the last piece is just the you know what happens with fuel prices You know, do we reach a point that at some point that starts degrading demand out there? you know do we reach a point that at some point that starts degrading demand out there We're not there yet, but that's something we're keeping an eye on. we're not there yet but that's something we're keeping an eye on Definitely some puts and takes, but there's some favorable things we're seeing in the business for sure. definitely some puts and takes but there's some favorable things we're seeing in the business for sure

Speaker 3: Okay. Okay. okay

Speaker 2: That strength in domestic intermodal is in the face of losing some of the share that we did from the announcement of the merger. That strength in domestic intermodal is in the face of losing some of the share that we did from the announcement of the merger. that strength in domestic intermodal is in the face of losing some of the share that we did from the announcement of the merger

Speaker 3: Yeah. Yeah. yeah

Speaker 2: It's a pretty good story. I think, you know, we've been all tracking everybody in this room a little bit of what's going on with IPI and some of these manufacturing leading indices, and maybe that is starting to show up a little bit on the production and manufacturing side. We're cautiously optimistic, as Jason said. It's a pretty good story. it's a pretty good story I think, you know, we've been all tracking everybody in this room a little bit of what's going on with IPI and some of these manufacturing leading indices, and maybe that is starting to show up a little bit on the production and manufacturing side. i think you know we've been all tracking everybody in this room a little bit of what's going on with ipi and some of these manufacturing leading indices and maybe that is starting to show up a little bit on the production and manufacturing side We're cautiously optimistic, as Jason said. we're cautiously optimistic as jason said

Speaker 3: You just mentioned the domestic intermodal strength. It seems to me, if I just take a step back, we've got this environment right now of rising truck rates, high fuel, right. Rail service levels generally pretty stable. You just mentioned the domestic intermodal strength. you just mentioned the domestic intermodal strength It seems to me, if I just take a step back, we've got this environment right now of rising truck rates, high fuel, right. it seems to me if i just take a step back we've got this environment right now of rising truck rates high fuel right Rail service levels generally pretty stable. rail service levels generally pretty stable

Speaker 2: Yeah. Yeah. yeah

Speaker 3: This, you know, feels like it should be a very good backdrop for certainly intermodal, but maybe the broad sort of rail market. Do you think we're starting to see evidence of this, in terms of share gain from truck? We've been talking about it for so long and feels like we haven't had it. This, you know, feels like it should be a very good backdrop for certainly intermodal, but maybe the broad sort of rail market. this you know feels like it should be a very good backdrop for certainly intermodal but maybe the broad sort of rail market Do you think we're starting to see evidence of this, in terms of share gain from truck? do you think we're starting to see evidence of this in terms of share gain from truck We've been talking about it for so long and feels like we haven't had it. we've been talking about it for so long and feels like we haven't had it

Speaker 2: I mean, what is it? A four-year freight recession- I mean, what is it? i mean what is it A four-year freight recession- a four-year freight recession-

Speaker 3: Right Right right

Speaker 2: unprecedented in history may be coming to an end. Whether that's a function of the evacuation of excess supply of trucks finally, or if it's temporary because of what's happened with fuel pricing, hard to say. We are in an unusual spot with this war and with what's happened with fuel prices. Right now it feels good. If the war ends in, you know, the next couple of weeks and fuel prices start going back down over the next couple few months, does that dynamic still persist or does it reverse back to where it was? Hard to say. unprecedented in history may be coming to an end. unprecedented in history may be coming to an end Whether that's a function of the evacuation of excess supply of trucks finally, or if it's temporary because of what's happened with fuel pricing, hard to say. whether that's a function of the evacuation of excess supply of trucks finally or if it's temporary because of what's happened with fuel pricing hard to say We are in an unusual spot with this war and with what's happened with fuel prices. we are in an unusual spot with this war and with what's happened with fuel prices Right now it feels good. right now it feels good If the war ends in, you know, the next couple of weeks and fuel prices start going back down over the next couple few months, does that dynamic still persist or does it reverse back to where it was? if the war ends in you know the next couple of weeks and fuel prices start going back down over the next couple few months does that dynamic still persist or does it reverse back to where it was Hard to say. hard to say

Speaker 3: Right. Right. right

Speaker 1: I think the key there, you know, to just add on what Mark said there is, you know, really can you retain those customers? That's through, you pointed out service, right? That, that's kind of the linchpin to that whole thing. However these, you know, shippers are attracted to us in the first place, we're ready to serve it, but it's, you know, that good service levels that'll maintain it and keep them on rail for the longer term. I think the key there, you know, to just add on what Mark said there is, you know, really can you retain those customers? i think the key there you know to just add on what mark said there is you know really can you retain those customers That's through, you pointed out service, right? that's through you pointed out service right That, that's kind of the linchpin to that whole thing. that that's kind of the linchpin to that whole thing However these, you know, shippers are attracted to us in the first place, we're ready to serve it, but it's, you know, that good service levels that'll maintain it and keep them on rail for the longer term. however these you know shippers are attracted to us in the first place we're ready to serve it but it's you know that good service levels that'll maintain it and keep them on rail for the longer term

Speaker 3: Jason, just a quick, near term margin question for you. You guys talked about 200 basis points, sequential margin improvement, Q1-Q2. How are we trending relative to that, given the volumes? Could it be even better? I don't know. Jason, just a quick, near term margin question for you. jason just a quick near term margin question for you You guys talked about 200 basis points, sequential margin improvement, Q1- Q2. you guys talked about 200 basis points sequential margin improvement q1- q2 How are we trending relative to that, given the volumes? how are we trending relative to that given the volumes Could it be even better? could it be even better I don't know. i don't know

Speaker 1: Yeah. Yeah. yeah

Speaker 3: Any thoughts? Any thoughts? any thoughts

Speaker 1: Yeah, I'd say, you know, we talk about that historical seasonality, 200 basis points. You know, first quarter has some higher costs from comp and ben and incentive comp, payroll taxes, things like that. Normally we do see an uptick in volume moving from first to second quarter. That is happening. That's good to see. I think, you know, we've got a lot of productivity initiatives underway that are really, you know, have taken hold over $500 million in the last two years, and another $150 planned this year. That's all baked into that. The real wild card here is fuel. You know, I talked about on the quarter end call, I think the price we were paying at the pump in March was up over 40%. Yeah, I'd say, you know, we talk about that historical seasonality, 200 basis points. yeah i'd say you know we talk about that historical seasonality 200 basis points You know, first quarter has some higher costs from comp and ben and incentive comp, payroll taxes, things like that. you know first quarter has some higher costs from comp and ben and incentive comp payroll taxes things like that Normally we do see an uptick in volume moving from first to second quarter. normally we do see an uptick in volume moving from first to second quarter That is happening. that is happening That's good to see. that's good to see I think, you know, we've got a lot of productivity initiatives underway that are really, you know, have taken hold over $500 million in the last two years, and another $150 planned this year. i think you know we've got a lot of productivity initiatives underway that are really you know have taken hold over $500 million in the last two years and another $150 planned this year That's all baked into that. that's all baked into that The real wild card here is fuel. the real wild card here is fuel You know, I talked about on the quarter end call, I think the price we were paying at the pump in March was up over 40%. you know i talked about on the quarter end call i think the price we were paying at the pump in march was up over 40% In April, it was up 80% year-over-year. That is a really significant headwind. We don't see that coming down, you know, anytime soon here at least. You know, we're halfway through the quarter now. That is a significant headwind. Even with all that, we still feel good about the 200 basis points of OR improvement. In April, it was up 80% year-over-year. in april it was up 80% year-over-year That is a really significant headwind. that is a really significant headwind We don't see that coming down, you know, anytime soon here at least. we don't see that coming down you know anytime soon here at least You know, we're halfway through the quarter now. you know we're halfway through the quarter now That is a significant headwind. that is a significant headwind Even with all that, we still feel good about the 200 basis points of OR improvement. even with all that we still feel good about the 200 basis points of or improvement

Speaker 3: Okay. This wouldn't do anything to change like the cosmetic impact of fuel. I asked this to one of the other rails on earnings, I'll ask you too, like, I don't really understand why rails still have two-month lags on fuel surcharges. Truckers are one week, FedEx, UPS are one week. Why are we still doing two-month lags? Okay. okay This wouldn't do anything to change like the cosmetic impact of fuel. this wouldn't do anything to change like the cosmetic impact of fuel I asked this to one of the other rails on earnings, I'll ask you too, like, I don't really understand why rails still have two-month lags on fuel surcharges. i asked this to one of the other rails on earnings i'll ask you too like i don't really understand why rails still have two-month lags on fuel surcharges Truckers are one week, FedEx, UPS are one week. truckers are one week fedex ups are one week Why are we still doing two-month lags? why are we still doing two-month lags

Speaker 2: Well, with intermodal we're on like a two-week lag. Well, with intermodal we're on like a two-week lag. well with intermodal we're on like a two-week lag

Speaker 3: Okay. Okay. okay

Speaker 2: Okay. I think it's really the other commodity groups. Okay. okay I think it's really the other commodity groups. i think it's really the other commodity groups

Speaker 3: Right. Right. right

Speaker 2: That's a legacy. A lot of those are individually negotiated, and it tends to average out at about two months, right? That's a legacy. that's a legacy A lot of those are individually negotiated, and it tends to average out at about two months, right? a lot of those are individually negotiated and it tends to average out at about two months right

Speaker 1: That's right. That's right. that's right

Speaker 2: You wanna talk about that? You wanna talk about that? you wanna talk about that

Speaker 1: Yeah, no, you're absolutely right. You know, 60% of our fuel surcharge revenue is based off our intermodal volumes. Like Mark said, that's only that's a two-week lag, and that's, you know, really due to the fact that it is competitive with trucking and we're matching what they're seeing there from a price perspective. The customer can really choose, you know, which mode makes the most sense given all those economics. The rest of our business, merchandise and coal, that's more on a two-month lag. You know, it's really based on what the customer needs. You know, at this point, we think that that's sufficient to address, you know, the market and the lead time for a lot of these customers. Yeah, no, you're absolutely right. yeah no you're absolutely right You know, 60% of our fuel surcharge revenue is based off our intermodal volumes. you know 60% of our fuel surcharge revenue is based off our intermodal volumes Like Mark said, that's only that's a two-week lag, and that's, you know, really due to the fact that it is competitive with trucking and we're matching what they're seeing there from a price perspective. like mark said that's only that's a two-week lag and that's you know really due to the fact that it is competitive with trucking and we're matching what they're seeing there from a price perspective The customer can really choose, you know, which mode makes the most sense given all those economics. the customer can really choose you know which mode makes the most sense given all those economics The rest of our business, merchandise and coal, that's more on a two-month lag. the rest of our business merchandise and coal that's more on a two-month lag You know, it's really based on what the customer needs. you know it's really based on what the customer needs You know, at this point, we think that that's sufficient to address, you know, the market and the lead time for a lot of these customers. you know at this point we think that that's sufficient to address you know the market and the lead time for a lot of these customers

Speaker 2: At the end of the day, it all evens out. At the end of the day, it all evens out. at the end of the day it all evens out

Speaker 3: Right. Right. right

Speaker 1: Right. Right. right

Speaker 3: Sure. Sure. sure

Speaker 2: Right? Right? right

Speaker 3: Right. If, Jason, if fuel sort of stays here, what's the OR headwind to the year from fuel? Just to be clear, it's just cosmetic OR headwind. The earnings impact is immaterial. Right. right If, Jason, if fuel sort of stays here, what's the OR headwind to the year from fuel? if jason if fuel sort of stays here what's the or headwind to the year from fuel Just to be clear, it's just cosmetic OR headwind. just to be clear it's just cosmetic or headwind The earnings impact is immaterial. the earnings impact is immaterial

Speaker 1: Right. Right. I think the way we're thinking about it, you know, is it was a pretty significant OR headwind in first quarter, will continue to be a headwind in second quarter. As we move through third and fourth, you know, again, assuming that fuel stays at this, based on this forward curve, should switch to a tailwind in the third and fourth quarter. You know, overall, you know, bit of a headwind for full year. Right. right Right. right I think the way we're thinking about it, you know, is it was a pretty significant OR headwind in first quarter, will continue to be a headwind in second quarter. i think the way we're thinking about it you know is it was a pretty significant or headwind in first quarter will continue to be a headwind in second quarter As we move through third and fourth, you know, again, assuming that fuel stays at this, based on this forward curve, should switch to a tailwind in the third and fourth quarter. as we move through third and fourth you know again assuming that fuel stays at this based on this forward curve should switch to a tailwind in the third and fourth quarter You know, overall, you know, bit of a headwind for full year. you know overall you know bit of a headwind for full year

Speaker 3: When you add it all up, is there a path to full year margin improvement, you think, in 2026? When you add it all up, is there a path to full year margin improvement, you think, in 2026? when you add it all up is there a path to full year margin improvement you think in 2026

Speaker 1: Yeah. I think, you know, a couple of things to factor in here, you know, when we think about what we're facing this year. We've talked about pretty significant inflation this year. We've got, you know, wage rates going up another 3.75%, starting July 1. You know, on the back of 4% last year. We had significant wage inflation, health and welfare rates are really high, insurance premiums, all those things. We had some pretty significant land sales last year that we're not planning on this year. Those are some headwinds we've got going against us. On the good side, we've got productivity. I talked about what we've already achieved. We've got another $150 million of productivity. I'd classify that as structural productivity, you know, not volume dependent. Yeah. yeah I think, you know, a couple of things to factor in here, you know, when we think about what we're facing this year. i think you know a couple of things to factor in here you know when we think about what we're facing this year We've talked about pretty significant inflation this year. we've talked about pretty significant inflation this year We've got, you know, wage rates going up another 3.75%, starting July 1. You know, on the back of 4% last year. we've got you know wage rates going up another 3.75% starting july 1. you know on the back of 4% last year We had significant wage inflation, health and welfare rates are really high, insurance premiums, all those things. we had significant wage inflation health and welfare rates are really high insurance premiums all those things We had some pretty significant land sales last year that we're not planning on this year. we had some pretty significant land sales last year that we're not planning on this year Those are some headwinds we've got going against us. those are some headwinds we've got going against us On the good side, we've got productivity. on the good side we've got productivity I talked about what we've already achieved. i talked about what we've already achieved We've got another $150 million of productivity. we've got another $150 million of productivity I'd classify that as structural productivity, you know, not volume dependent. i'd classify that as structural productivity you know not volume dependent Those are all good. Now, on top of that, you throw in fuel, I think that again, you know, you've used that term, it's a big wild card, and we'll see how that plays out. I think what we're super focused on, you've heard us talk about, you know, safety, service, and this cost discipline, we're really you know, kinda showing how we're, how we're achieving that. The cost envelope that we've laid out, we feel like, you know, we are gonna control what we can control. Fuel price is something that, you know, it's a bit out of our hands. What we can control from a fuel perspective is fuel efficiency. Really proud of what, you know, the team, the ops team has been able to do there. Those are all good. those are all good Now, on top of that, you throw in fuel, I think that again, you know, you've used that term, it's a big wild card, and we'll see how that plays out. now on top of that you throw in fuel i think that again you know you've used that term it's a big wild card and we'll see how that plays out I think what we're super focused on, you've heard us talk about, you know, safety, service, and this cost discipline, we're really you know, kinda showing how we're, how we're achieving that. i think what we're super focused on you've heard us talk about you know safety service and this cost discipline we're really you know kinda showing how we're how we're achieving that The cost envelope that we've laid out, we feel like, you know, we are gonna control what we can control. the cost envelope that we've laid out we feel like you know we are gonna control what we can control Fuel price is something that, you know, it's a bit out of our hands. fuel price is something that you know it's a bit out of our hands What we can control from a fuel perspective is fuel efficiency. what we can control from a fuel perspective is fuel efficiency Really proud of what, you know, the team, the ops team has been able to do there. really proud of what you know the team the ops team has been able to do there You know, 5% improvement last year on top of 3% the year before that, hit a record in first quarter. You know, really building on that momentum from a fuel efficiency perspective, and there's no better time to have it at, you know, fuel prices like this. Long story, you know, lots of puts and takes, but, you know, we see a path there. You know, 5% improvement last year on top of 3% the year before that, hit a record in first quarter. you know 5% improvement last year on top of 3% the year before that hit a record in first quarter You know, really building on that momentum from a fuel efficiency perspective, and there's no better time to have it at, you know, fuel prices like this. you know really building on that momentum from a fuel efficiency perspective and there's no better time to have it at you know fuel prices like this Long story, you know, lots of puts and takes, but, you know, we see a path there. long story you know lots of puts and takes but you know we see a path there

Speaker 3: Okay, great. There's one question in the back. Maybe while the mic's going there, I'll ask one more. I wanna talk about pricing. If I look in Q1, and I get there's mix involved here, but yields ex fuel up 1% in total, merchandise yields ex fuel flat. You know, I feel like for so long, like pricing was sort of the constant in this industry, and I really feel like, you know, since the pandemic, the amount of price relative cost has been underwhelming to me in rail. Like, can we get back to a sort of 3%-4% type or maybe even more? I don't know. Can we get back to that kind of yield growth again? What needs to happen? Okay, great. okay great There's one question in the back. there's one question in the back Maybe while the mic's going there, I'll ask one more. maybe while the mic's going there i'll ask one more I wanna talk about pricing. i wanna talk about pricing If I look in Q1, and I get there's mix involved here, but yields ex fuel up 1% in total, merchandise yields ex fuel flat. if i look in q1 and i get there's mix involved here but yields ex fuel up 1% in total merchandise yields ex fuel flat You know, I feel like for so long, like pricing was sort of the constant in this industry, and I really feel like, you know, since the pandemic, the amount of price relative cost has been underwhelming to me in rail. you know i feel like for so long like pricing was sort of the constant in this industry and i really feel like you know since the pandemic the amount of price relative cost has been underwhelming to me in rail Like, can we get back to a sort of 3%-4% type or maybe even more? like can we get back to a sort of 3%-4% type or maybe even more I don't know. i don't know Can we get back to that kind of yield growth again? can we get back to that kind of yield growth again What needs to happen? what needs to happen I don't know, it just, it feels like. The volumes are positive. The labor productivity you're talking about has been good. Like, it feels like price has been sort of the missing link, the missing piece. I don't know, it just, it feels like. i don't know it just it feels like The volumes are positive. the volumes are positive The labor productivity you're talking about has been good. the labor productivity you're talking about has been good Like, it feels like price has been sort of the missing link, the missing piece. like it feels like price has been sort of the missing link the missing piece

Speaker 2: Yeah. I mean, when you go back to the pandemic, Scott, you're also talking about going back to where the catalyst of where the truck recession started as well. Yeah. yeah I mean, when you go back to the pandemic, Scott, you're also talking about going back to where the catalyst of where the truck recession started as well. i mean when you go back to the pandemic scott you're also talking about going back to where the catalyst of where the truck recession started as well

Speaker 3: Yeah. Yeah. yeah

Speaker 2: You really have to break our business down. Intermodal pricing is highly competitive with truck. That is the governor ultimately on intermodal price, is what's happening in the truck market. That was going down for a while, and then it's flat lined for maybe the past year plus, but there hasn't been any traction. Now, finally, we're starting to see that come up, and I think you would acknowledge you saw a little bit of that show up in the fourth quarter and now again a little bit more in the first quarter. You gotta look at that. You gotta look at, the coal business, which- You really have to break our business down. you really have to break our business down Intermodal pricing is highly competitive with truck. intermodal pricing is highly competitive with truck That is the governor ultimately on intermodal price, is what's happening in the truck market. that is the governor ultimately on intermodal price is what's happening in the truck market That was going down for a while, and then it's flat lined for maybe the past year plus, but there hasn't been any traction. that was going down for a while and then it's flat lined for maybe the past year plus but there hasn't been any traction Now, finally, we're starting to see that come up, and I think you would acknowledge you saw a little bit of that show up in the fourth quarter and now again a little bit more in the first quarter. now finally we're starting to see that come up and i think you would acknowledge you saw a little bit of that show up in the fourth quarter and now again a little bit more in the first quarter You gotta look at that. you gotta look at that You gotta look at, the coal business, which- you gotta look at the coal business which-

Speaker 3: Sure. Yeah. Sure. sure Yeah. yeah

Speaker 2: You know, those are index driven. You know, during the pandemic or leading up to and during the pandemic, we had very significant gross up in energy prices that we all enjoyed. Since then, met coal pricing in particular has been coming down at a steady decline. That's just, that's just math. We think we've probably lapped that now and we've stabilized, and maybe there's a path up on coal pricing, especially not just on the export side, but even on the utility side. In time, you know, with all this utility coal demand, as contracts reprice, there's probably upside there. That leaves you with the balance, which is merchandise. That's the one thing that hasn't changed, to your point. We continue to get very good core pricing in merchandise. You know, those are index driven. you know those are index driven You know, during the pandemic or leading up to and during the pandemic, we had very significant gross up in energy prices that we all enjoyed. you know during the pandemic or leading up to and during the pandemic we had very significant gross up in energy prices that we all enjoyed Since then, met coal pricing in particular has been coming down at a steady decline. since then met coal pricing in particular has been coming down at a steady decline That's just, that's just math. that's just that's just math We think we've probably lapped that now and we've stabilized, and maybe there's a path up on coal pricing, especially not just on the export side, but even on the utility side. we think we've probably lapped that now and we've stabilized and maybe there's a path up on coal pricing especially not just on the export side but even on the utility side In time, you know, with all this utility coal demand, as contracts reprice, there's probably upside there. in time you know with all this utility coal demand as contracts reprice there's probably upside there That leaves you with the balance, which is merchandise. that leaves you with the balance which is merchandise That's the one thing that hasn't changed, to your point. that's the one thing that hasn't changed to your point We continue to get very good core pricing in merchandise. we continue to get very good core pricing in merchandise There's been no change in that trend line going back a decade. We get solid core pricing in our entire merchandise book of business. It gets dwarfed sometimes in certain years by mix within merchandise. That's why when you look at RPU changes, even within merchandise, it may look flat, but it's because core pricing might have been up 3%, but mix ate it all away. I think the thesis looking forward is a little bit better on the overall book. Mix is always a player, and at some time mix is gonna be helpful as well. Like right now, I think we're seeing some favorable mix. I don't like to talk about price in one thing. There's been no change in that trend line going back a decade. there's been no change in that trend line going back a decade We get solid core pricing in our entire merchandise book of business. we get solid core pricing in our entire merchandise book of business It gets dwarfed sometimes in certain years by mix within merchandise. it gets dwarfed sometimes in certain years by mix within merchandise That's why when you look at RPU changes, even within merchandise, it may look flat, but it's because core pricing might have been up 3%, but mix ate it all away. that's why when you look at rpu changes even within merchandise it may look flat but it's because core pricing might have been up 3% but mix ate it all away I think the thesis looking forward is a little bit better on the overall book. i think the thesis looking forward is a little bit better on the overall book Mix is always a player, and at some time mix is gonna be helpful as well. mix is always a player and at some time mix is gonna be helpful as well Like right now, I think we're seeing some favorable mix. like right now i think we're seeing some favorable mix I don't like to talk about price in one thing. i don't like to talk about price in one thing You really gotta break it down into those three components and then recognize even within a commodity group, mix can play a role. You really gotta break it down into those three components and then recognize even within a commodity group, mix can play a role. you really gotta break it down into those three components and then recognize even within a commodity group mix can play a role

Speaker 3: It sounds like. Is truck rates going up? That clearly should be good for intermodal. It sounds like. it sounds like Is truck rates going up? is truck rates going up That clearly should be good for intermodal. that clearly should be good for intermodal

Speaker 2: Correct. Correct. correct

Speaker 3: Right. Coal has bottomed and maybe hopefully gonna start to see a little bit of upside from here. We'll have to see what the indexes are. Right. right Coal has bottomed and maybe hopefully gonna start to see a little bit of upside from here. coal has bottomed and maybe hopefully gonna start to see a little bit of upside from here We'll have to see what the indexes are. we'll have to see what the indexes are

Speaker 2: Yep. Yep. yep

Speaker 3: Merchandise, you're saying you're getting good price? Merchandise, you're saying you're getting good price? merchandise you're saying you're getting good price

Speaker 2: We are. We are. we are

Speaker 3: There's mixed fluctuations. There's mixed fluctuations. there's mixed fluctuations

Speaker 2: Right. Right. right

Speaker 3: Maybe it was a headwind, but maybe going forward it's a positive. Maybe it was a headwind, but maybe going forward it's a positive. maybe it was a headwind but maybe going forward it's a positive

Speaker 2: Maybe. Maybe. maybe

Speaker 3: Okay. There was one in the back and we're getting tight on time, but please. Okay. okay There was one in the back and we're getting tight on time, but please. there was one in the back and we're getting tight on time but please

Speaker 4: Yeah. I was just gonna ask if there's like a rule of thumb or a level that you think about with diesel prices or with fuel surcharges where like the phone starts really ringing off the hook, like if there's like a, I don't know, just sort of a disaggregation line where intermodal really cuts towards your product? Yeah. yeah I was just gonna ask if there's like a rule of thumb or a level that you think about with diesel prices or with fuel surcharges where like the phone starts really ringing off the hook, like if there's like a, I don't know, just sort of a disaggregation line where intermodal really cuts towards your product? i was just gonna ask if there's like a rule of thumb or a level that you think about with diesel prices or with fuel surcharges where like the phone starts really ringing off the hook like if there's like a i don't know just sort of a disaggregation line where intermodal really cuts towards your product

Speaker 2: I would kinda say when oil's at $80 a barrel, $85 a barrel, you're in a sweet spot where I think, usually the highway prices are a little bit more supportive of getting back onto rail, yet not so high where it's starting to destruct demand for the consumers. When you start with oil getting closer to $100 a barrel, obviously it's an even better compare for us, highway versus rail, but you have to get worried about what's the broader impact on the consumer. That's why where we are today, we're in a little bit of a shaky spot with oil where it is. If it stays here for a prolonged period of time, we have to be worried about demand destruction. I would kinda say when oil's at $80 a barrel, $85 a barrel, you're in a sweet spot where I think, usually the highway prices are a little bit more supportive of getting back onto rail, yet not so high where it's starting to destruct demand for the consumers. i would kinda say when oil's at $80 a barrel $85 a barrel you're in a sweet spot where i think usually the highway prices are a little bit more supportive of getting back onto rail yet not so high where it's starting to destruct demand for the consumers When you start with oil getting closer to $100 a barrel, obviously it's an even better compare for us, highway versus rail, but you have to get worried about what's the broader impact on the consumer. when you start with oil getting closer to $100 a barrel obviously it's an even better compare for us highway versus rail but you have to get worried about what's the broader impact on the consumer That's why where we are today, we're in a little bit of a shaky spot with oil where it is. that's why where we are today we're in a little bit of a shaky spot with oil where it is If it stays here for a prolonged period of time, we have to be worried about demand destruction. if it stays here for a prolonged period of time we have to be worried about demand destruction We like where it is in terms of intermodal conversion, but long term, we have to keep our eyes out. I kinda say that $80-$90 a barrel range has kinda been the sweet spot historically. Thank you. We like where it is in terms of intermodal conversion, but long term, we have to keep our eyes out. we like where it is in terms of intermodal conversion but long term we have to keep our eyes out I kinda say that $80-$90 a barrel range has kinda been the sweet spot historically. i kinda say that $80-$90 a barrel range has kinda been the sweet spot historically Thank you. thank you

Speaker 3: All right. I think we do have to wrap it up. All right. all right I think we do have to wrap it up. i think we do have to wrap it up

Speaker 2: Thank you. Thank you. thank you

Speaker 3: Mark, Jason, thanks so much. This was great. Mark, Jason, thanks so much. mark jason thanks so much This was great. this was great

Speaker 1: Thank you. Thank you. thank you