STRATEGY: JACKSONVILLE’S SHORTLINE RAILROADS WORK TO PROVIDE STABILITY DURING A TIME OF UNCERTAINTY
By Ellen Schneider – Reporter, Jacksonville Business Journal
Florida East Coast Railway’s track runs from South Florida to Jacksonville, connecting PortMiami, Port Everglades and Port of Palm Beach to markets beyond Florida.
When the Covid-19 pandemic hit, demand for its service fell off the edge of a cliff, CEO Nathan Asplund said.
“Boy, that dropped like a rock,” Asplund said. “So, we had a tremendous contraction in our business, but we did keep the supply chain open for our customers that needed to use us.”
Despite the abrupt declines, Asplund’s focus was on ensuring that service remained reliable amid so much uncertainty. The last thing people need during a pandemic, Asplund said, is late deliveries or added confusion.
John Fenton, CEO of Patriot Rail, echoed that sentiment: While demand was decreasing as the market softened, the company had to focus on keeping things moving on its 12 shortline railroads in 14 states across while putting new procedures in place to keep employees and customers safe.
As the regulations used to mitigate the spread of Covid-19 have been loosened, some transportation companies have seen a larger initial increase in volumes than expected.
Jacksonville’s shortline railways — those that move goods out of ports to connect with national carriers — have been staying in close contact with customers, not only to jump on increases in volumes but to understand what the market will look like going forward. The freight market is still plagued with uncertainty, but mid-sized railroads are trying to offer stable service amid the pandemic.
Both companies instituted work-from-home policies in late March. However, both companies require significant man power on the ground to keep things running. A lot of attention was dedicated in the beginning of the pandemic to acquiring personal protective equipment and hand sanitizer, and even in some cases making their own.
“It’s not something I recommend using because it smells bad,” Asplund said. “But we’ve done that and set up sanitizing stations at all our locations and just put out advisories to our customers and to our employees and temperature checks at all our facilities.”
Despite difficulty in the beginning, Asplund said that things have been slowly and steadily increasing. Things really started to pick up in June and now volumes are almost where they were a year ago.
There are however, some areas that continue to lag behind, dragging demand down with it. International traffic, specifically with apparel manufactured in Central America, saw steep declines as factories shuttered and demand in the U.S. is still straggling.
“So, still some challenges from a commercial perspective, but we’re working hard to get through it and keep everybody on time,” Asplund said.
Fenton said the company was isolated from some of the steeper declines experienced by other railroad and transportation companies because they don’t have exposure in commodities, like apparel, that were significantly impacted by the virus. However, their business with Jaxport is still soft, as international trade continues to lag and the automobile market ramps up slowly. And Fenton doesn’t believe that the supply chain has been fully restored even yet, as some grocery store shelves still sit empty.
“I don’t think even today the stores are fully stocked, like they were pre-Covid,” Fenton said. “There’s definitely been an impact on our volumes, but again, in spite of all those things that are hanging out with softening volumes, we’ve been able to keep our focus and keep things moving in the right direction.”
Even as both Asplund and Fenton hold onto positive outlooks for the rest of 2020, the year is still plagued with variability. It’s hard to know whether another surge in positive Covid-19 cases, more shutdowns or a stay-at-home order make still be on the horizon; rendering it difficult to discern an outlook for volumes and demand.
“I have to say, in my career, I think running a company or running an organization in today’s environment is probably as challenging as it ever gets,” Fenton said.
The market is uncharted territory, Fenton said, with little historical precedence to help guide him. The future of the market is anyone’s guess, so instead of taking a gamble Fenton is focused on his finger on the pulse of things, staying in close communication with customers and senior leadership and remaining flexible as things unfold.
In addition to the lack of information that Fenton can count on, managing receivables as some companies struggle is another stress point. One saving grace has been that so far, 2020 hasn’t experienced the liquidity crisis that vexed 2008.
Even so, as the country works to address the pandemic, Fenton said he isn’t sure what will happen next.
“So, you know, you’re just trying to manage for those surprises,” Fenton said. “Everyday, it’s not just us we’re worried about. We’re worried about the overall economy. What’s going to happen to people as stimulus money runs out? There’s a myriad of things that you’re trying to stay close to.”
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