Western Railroad Discussion > Addition to "BNSF 2025 Earnings" Post of 02/28/26

From the annual letter of Greg Abel, CEO of Berkshire Hathaway, Page 12:

"Safe operations, reliable service, and a competitive cost structure ultimately determine a railroad’s success – and accordingly how we assess management’s performance. BNSF has focused on improving each of these. Safety remains the top priority, and BNSF has been the industry leader for the past decade. In 2025, shipments spent less time idling at terminals and moved through the network faster than in nearly any year in the company’s history.

"These gains matter, but they are not enough; more progress is needed to translate operational improvements into stronger financial results. We view operating margin (the inverse of the industry’s operating ratio) as the best measure of performance. In 2025, BNSF’s operating margin improved to 34.5% from 32.0% in 2024. It remained only modestly above its five-year average.

"The gap to the industry’s best remains too wide and closing it will require continued improvements in efficiency and service. Each one-percentage-point improvement in operating margin generates approximately $230 million of incremental operating cash flow for our owners. The team recognizes the significance of this opportunity, and we will be disappointed if we do not deliver a substantial improvement over the next few years.

"Alongside BNSF’s own improvements, there is also potential consolidation in the rail industry with the proposed Union Pacific–Norfolk Southern merger. Berkshire has been clear that it is not interested in acquiring one of the other Class I railroads, since the current economics would not work in our shareholders’ favor. BNSF’s focus on the proposed merger has been to ensure BNSF can continue to offer customers a compelling value proposition, including full and competitive access to Eastern rail markets."

Translation. Layoffs are coming.along with closures. Bill Webb

Interlocker Wrote:
-------------------------------------------------------
>
> "The gap to the industry’s best remains too wide
> and closing it will require continued improvements
> in efficiency and service. Each
> one-percentage-point improvement in operating
> margin generates approximately $230 million of
> incremental operating cash flow for our owners.
> The team recognizes the significance of this
> opportunity, and we will be disappointed if we do
> not deliver a substantial improvement over the
> next few years.

Translation - Uncle Warren is out of the picture now...as Katie Farmer better hit the accelerator on PSR or she's gone. Expect longer trains, reduced carload traffic, and layoffs.

>
> "Alongside BNSF’s own improvements, there is
> also potential consolidation in the rail industry
> with the proposed Union Pacific–Norfolk Southern
> merger. Berkshire has been clear that it is not
> interested in acquiring one of the other Class I
> railroads, since the current economics would not
> work in our shareholders’ favor. BNSF’s focus
> on the proposed merger has been to ensure BNSF can
> continue to offer customers a compelling value
> proposition, including full and competitive access
> to Eastern rail markets."

Translation - Berkshire will not be aquiring another class 1 rail as they'd rather see what merger condititions they could inherit. In contrast, if the price is right to where it benefits Berkshire shareholders, BNSF is available for purchase...in whole or by selling off components to the highest bidder. Not sure Greg Abel has any interest with remaining in the rail business.



Edited 1 time(s). Last edit at 03/01/26 13:48 by AaronJ.

What is coming is the farming out of the first and last mile service of carload traffic to shortline style operators. Class 1's don't want to run the local service anymore as it drags down the operating ratio margin. UP's experiment in farming out the local service in Eugene and Springfield, OR was the test to see if they could get away with it without a strike. Now that they have, expect it to happen everywhere. The shortlines can handle all the marketing and service requests of the carload customers, and the class 1s will handle the long distance transportation and earn the bulk of the revenue. The scary part for employees is that a class 1 railroad can tell a shortline operator that such and such employee is no longer allowed on their property for any or no reason, and there is nothing the shortline operator, employee or any union can do about it.

Ted Curphey
Ontario, OR



Edited 1 time(s). Last edit at 03/01/26 18:28 by funnelfan.

And yet.......just last year BNSF made a big statement about "improving and growing its carload services" by seeking more loads and customers.  They know there is better money in carload, more so than intermodal.

coach Wrote:
-------------------------------------------------------
> And yet.......just last year BNSF made a big
> statement about "improving and growing its carload
> services" by seeking more loads and customers.
>  They know there is better money in carload, more
> so than intermodal.

I love flip-flops and contradictions. (sarcasm) Theories presented above by AaronJ and funnelfan are interesting in a good way for discussions, not necessarily good for railroading.

If "carload services" claim is true, then what Greg Abel said recently can be ignored. I don't fall for his "depropaganda" of operating margin vs. Operating Ratio. Lame attempt at trying to "divorce" from PSR, but they are basically the same thing.

There are economic cycles at play, so there will be furloughs and layoffs, as there are strong signs of business downturns. Almost all the trains I've caught in SoCal in the past 2 months seem shorter, and I'm not comparing them against holiday traffic from late September to November.

If BNSF is managed correctly, they should be preparing for the current economic cycle and go for the long game - priority on market share instead of operating margins.

BNSF generates lots of cash for Berkshire Hathaway already, so greedily squeezing droplets of blood out of the railroad to the point of self-destruction is not smart. If BNSF wants to follow UP's "lead" in divesting themselves of local traffic as funnelfan theorizes, go right ahead. For now, I'm not too worried. BNSF "brought back" MRL into their fold, took back the operation of Escondido Branch from Pacific Sun Railroad, and I'm sure others can cite more examples. BNSF's actions seem to agree with going after carloads.

Besides furloughs and layoffs, upcoming business downturn might be a great way to blame executive management before they can come with excuses to keep their jobs. So AaronJ's comments about Katie Farmer is interesting. I speculate that she might get pushed out, using PSR as an excuse. 

I just wonder who he thinks that he’s lying to?

Texican65 Wrote:
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> I just wonder who he thinks that he’s lying to?

Execs think everybody else is a clueless idiot, from employees to customers to local communities...

JG

jgilmore Wrote:
-------------------------------------------------------
> Texican65 Wrote:
> --------------------------------------------------
> -----
> > I just wonder who he thinks that he’s lying
> to?
>
> Execs think everybody else is a clueless idiot,
> from employees to customers to local
> communities...
>
> JG

This X 1000.

Posted from iPhone

Drknow Wrote:
-------------------------------------------------------
> jgilmore Wrote:
> --------------------------------------------------
> -----
> > Texican65 Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > I just wonder who he thinks that he’s lying
> > to?
> >
> > Execs think everybody else is a clueless idiot,
> > from employees to customers to local
> > communities...
> >
> > JG
>
> This X 1000.
>
> Posted from iPhone

It does get crazy.  In Florida, you can be fined and risk jail time for "defaming an animal, vegetable or fruit". Describing it as unsafe, etc. The billionaires who control much of Florida's big ag were unpleasantly surprised when videos of chemicals being used on food, sewage in the fields, etc went public.  So they directed the legislature to pass a law, and made the governor sign it.  Big money gets results

The current law is https://www.flsenate.gov/laws/statutes/2025/865.065

Emboldened, the big ag folks directed that any unauthorized videos of farming and slaughterhouse practices, working conditions, or criticism of vegetables, etc be added to the law.  After much laughter from late night talk shows, and opposition from food safety people, the legislature withdrew the proposal. For now. It may always make a return in the omnibus, kitchen sink bill they pass going out on recess at end of term.