CSX Corporation (CSX) Q1 2021 Earnings Call Transcript

CSX Corporation (NASDAQ: CSX) Q1 2021 earnings call dated Apr. 20, 2021. 

Corporate Participants:

Bill Slater — Head of Investor Relations

James M. Foote — President and Chief Executive Officer

Kevin Boone — Executive Vice President and Chief Financial Officer

Jamie Boychuk — Executive Vice President of Operations

Analysts:

Ken Hoexter — Bank of America — Analyst

Allison Landry — Credit Suisse — Analyst

Justin Long — Stephens — Analyst

Tom Wadewitz — UBS — Analyst

Brandon Oglenski — Barclays Capital — Analyst

Scott Group — Wolfe Research — Analyst

Chris Wetherbee — Citi — Analyst

Amit Mehrotra — Deutsche Bank — Analyst

Fadi Chamoun — BMO Capital Markets — Analyst

Brian Ossenbeck — JPMorgan — Analyst

Bascome Majors — Susquehanna — Analyst

Jonathan Chappell — Evercore ISI — Analyst

David Vernon — Sanford Bernstein — Analyst

Jordan Alliger — Goldman Sachs — Analyst

Ravi Shanker — Morgan Stanley — Analyst

Walter Spracklin — RBC Capital — Analyst

Jason Seidl — Cowen and Company — Analyst

Jeff Kauffman — Vertical Research — Analyst

Presentation:

Operator

Good day, and thank you for standing by and welcome to the Q1 2021 CSX Corporation Earnings Conference Call. [Operator Instructions] After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]

I’d now like to hand the conference over to your speaker today, Bill Slater, Head of Investor Relations. Please go ahead.

Bill Slater — Head of Investor Relations

Thank you and good afternoon, everyone. Joining me on today’s call are Jim Foote, President and Chief Executive Officer; Kevin Boone, Chief Financial Officer; and Jamie Boychuk, Executive Vice President of Operations.

On Slide 2 is our forward-looking disclosure followed by our non-GAAP disclosure on Slide 3.

With that, it is my pleasure to introduce, President and Chief Executive Officer, Jim Foote.

James M. Foote — President and Chief Executive Officer

Great. Thanks so much, Bill and welcome to everyone joining us on today’s call. I want to begin by thanking all of CSX’s railroaders for the hardwork and the exceptional efforts they made to keep they’v’e yards open and the terminals open to serve our customers throughout the severe weather we experienced this quarter, an amazing job. We entered this year cautiously optimistic about the potential for an improving economic environment. And I’m pleased to see momentum steadily building over the last few months. Throughout the quarter, we remained focused on laying the foundations to prepare for growth and I’m excited about our prospects for the rest of the year. It’s nice to finally have an economic tailwind at our backs.

Let’s begin with Slide 5 of the presentation for an overview of our first quarter financial results. Earnings per share decreased 7% to $0.93 and the first quarter operating ratio increased to 60.9%, reflecting a spike in COVID cases early in the quarter, winter storm impacts and fuel surcharge timing lag.

Turning to Slide 6. Revenue declined 1%, on 1% volume growth. As intermodal and other revenue growth was more than offset by merchandise, coal and fuel surcharge revenue declines. Merchandise revenue declined 6% and led by declines in automotive and energy-related shipments within the chemicals and minerals segments. These declines were partially offset by growth in the metals and fertilizers businesses.

Intermodal revenue grew 11% reaching new first quarter record levels. This growth was driven by strong demand for transportation services due to continued inventory replenishments and growth from East Coast ports. Coal revenue decreased 5%. Domestic coal revenue increased due to growth in utility coal shipments. This growth was more than offset by declines in export coal, primarily from reduced international shipments of thermal coal. Other revenue increased 42%. The largest driver of this increase was higher revenue from storage at intermodal facilities.

Turning to Slide 7. We remain committed for being the safest railroad. With fewer recent COVID cases across the network, we are able to increase the number of in-person interactions and training sessions. We resumed hosting safety summits across the network and are even expanding these summits to cover additional crafts beyond our T&E workforce. Our top concern is eliminating life changing events and through increased engagement on critical rules compliance, we have seen a reduction in injury severity to start the year.

Continued education and training will allow us to further reduce the total number of injuries by working with both managers and frontline employees on how to identify, and eliminate unsafe behavior across the railroad. Additionally, we’re finding new ways to improve safety through the increased use of technology. We are increasing drone usage to help ensure the safe movement of trains throughout our yards and are already seeing the benefits of this program in the positive train accident trends. We will look to expand these programs going forward as part of our ongoing efforts to identify and implement new tools to help us operate as safely as possible.

On Slide 8, let’s review our operating performance for the quarter. Despite challenging conditions the team did a good job of maintaining network fluidity throughout the quarter. Going forward, we are focused on driving velocity and dwell back to pre-pandemic records, and we expect to see improvement in both metrics throughout the year. We also remained focused on driving additional efficiencies across the network. We set a new record for distributed powertrains averaging over 100 trains a day for the first-time. Labor productivity also reached a new record. Even though we are adding headcount in the second quarter in preparation for the expected volume growth, we still plan to realize incremental labor productivity this year.

Turning to Slide 9. I wanted to take the opportunity to frame these recent operating metrics against where we started this transformation. Over this period, we have increased velocity more than 30% by reducing both line of road congestion and creating excess capacity within yards to limit how long fluid train sit idle. While dwell has also improved over this period, we view this metric as an area of opportunity. Even though CSX is currently has the lowest dwell in the industry pushing this number back towards previous record levels will enable us to further reduce cars online and improve asset utilization.

It is most important to note that this increased fluidity was enabled by redesigning the train plan to operate as a more balanced and efficient network. We are doing the same amount of work today with 1,500 fewer locomotives and dramatically improved locomotive utilization. These efforts have also driven significant improvements in fuel efficiency. Not only are we more fuel efficient, but we have retired older, less efficient locomotives and increased the use of distributed power and trip optimizer technologies to further expand the emission savings we offer our customers.

Our train plant also greatly improves our crew productivity. One measure of this productivity is the total number of dead heads or the times we have — or the times where we have to reposition crews using taxes or other vehicles because there isn’t a return locomotive. The balanced plan reduced the number of dead heads almost 60% by better matching crews and locomotives in both directions. We have also increased the number of cars processed per hour worked by over 30%. This higher throughput is due to both a reduction in yard congestion as well as more strategic upstream blocking of cars. Anyway, you look at the data, we have dramatically transformed how CSX operates, which has created the capacity to absorb significant growth for years to come. We remain focused on driving the network back to record performance levels as well as realizing the incremental efficiency benefits this will provide.

Turning to Slide 10. I want to be clear that we are not done improving our network. The opportunities identified during the early stages of the pandemic last year continued to drive sustained efficiency improvements and the more streamlined network is well positioned for growth. While this quarter’s trip plan performance was negatively impacted by the winter storms and COVID-related absences. Intermodal trip plan performance will still improve — was still improved for the quarter and is currently running nearly 90%. We expect to see similar improvement trends for the carload business going forward. We are committed to providing our customers with an industry leading service product and are proactively adding headcount and prepositioning locomotives across the network to ensure, we are prepared to provide high-quality service, while handling incremental volumes.

And I’ll now let Kevin take us through the financials.

Kevin Boone — Executive Vice President and Chief Financial Officer

Thank you, Jim and good afternoon, everyone. The team is encouraged by the positive economic momentum. Underlying demand is growing, truckload capacity is tight, and inventory levels are low. We are preparing the network for growth and focused on driving positive operating leverage. As Jim noted, we faced a challenging environment in the first quarter with winter storms and supply chain disruptions creating headwinds both operationally and commercially.

Looking at the first quarter income statement on Slide 11. Revenue was down 1%, despite a 1% increase in carloads. Double-digit gains in our intermodal business were offset by lower fuel recovery and declines across several merchandise markets. Other revenue was also up significantly, primarily reflecting increased intermodal storage fees. For the year, we expect other revenue of approximately $500 million, this assumes intermodal storage fees returned to more normalized levels.

Total expenses increased 2% in the quarter. Walking down the expense line items, labor and fringe was up 2%, driven by higher incentive compensation as well as inflation and other costs. The year-over-year increase in incentive compensation was largely due to our annual bonus program accrual as we lap the impact of the pandemic. Our long-term incentive comp costs also increased year-over-year as our growth outlook has continued to improve.

Sequentially, we expect incentive comp in the second quarter to remain relatively flat based on our current outlook. Partially offsetting these headwinds, efficiency gains remain strong, as T&E employee productivity was up nearly 10% and train length increased 13% to a first quarter record. Total headcount was down 7%, reflecting structural improvements made over the last year. On a sequential basis, headcount was roughly flat, as increased T&E hiring was offset by improved labor productivity.

Consolidation in our train plan has enabled a 23% reduction in locomotive maintenance headcount versus the prior year. We’ve also continued to drive efficiencies and yard support headcount, both through ongoing consolidation as well as technology. As you know, we are highly focused on ensuring we have adequate resources positioned to serve customer demand in a rebounding economy. We are actively recruiting and running important conductor training classes and as a result, headcount should increase slightly going forward.

MS&O expense increased 2% or $15 million in the first quarter, driven by $15 million headwind from lower real estate gains while efficiency gains were offset by inflation and other items. As we run a tighter trading plan, asset related efficiency gains continue to headline MS&O savings. Despite weather related headwinds and some proactive actions to pull assets out of storage in anticipation of higher demand locomotive and terminal productivity levels continue to achieve record highs.

Real estate gains were minimal in the first quarter. However, as you likely saw, last week, we announced the closing of an agreement with Virginia to sell certain interest in CSX owned line segments. This project will generate meaningful value for CSX and enhance the safety and reliability of both passenger and freight railroad service in the DC and Virginia area. The transaction will result in a significant gain of approximately $350 million in the second quarter this year. Cash proceeds of $525 million will be realized over time, with approximately $400 million expected in 2021.

Turning now to fuel expense, which was $2 million favorable year-over-year. Record first quarter efficiency helped to offset the impact of 4% increase in the per gallon price. We continue to invest in technologies that will deliver further improvement in fuel efficiency. Widening the advantage that rails hold over truck and demonstrating our continued commitment to sustainability.

Looking at other expenses. Depreciation increased $1 million in the quarter due to a larger asset base, partially offset by the 2020 road and track depreciation study. Reflecting these effects going forward, we expect full year depreciation expense to increase approximately $20 million. Equipment rent expense increased $7 million or 9% as the network fluidity impacted car cycle times in the quarter.

Turning below the line, interest expense improved $3 million or 2% due to a lower weighted average coupon. Other income decreased $2 million or 9% as favorable pension impacts were offset by lower interest on cash. Income tax expense decreased $12 million or 5% due to lower pre-tax income. The average tax rate increased slightly to 24.7% due to an unfavorable state legislative change. Closing out the income statement, CSX delivered operating income of $1.1 billion and a 60.9% operating ratio.

Turning to the cash flow Slide on 13. On the first quarter, free cash flow before dividends was $934 million, up 15% when compared to the first quarter of 2020. Free cash flow conversion on net income exceeded 100%. Finally, as you can see from the chart on the right, shareholder distributions rebounded in the quarter. Share repurchase activity returned to prior year levels and the recent dividend increase is also reflected. We expect to continue to be opportunistic in our buyback approach going forward and we remain committed to returning cash to shareholders.

With that, let me turn it back to Jim for his closing remarks.

James M. Foote — President and Chief Executive Officer

Great, Kevin. Thanks a lot. Concluding with Slide 15, we entered the year projecting volume growth in excess of GDP and still expect to achieve this target. We will continue to attract demand throughout the year and based on the combination of the strengthening economic outlook and our focus on converting additional volumes off the highway. We now expect to achieve double-digit full year revenue growth.

We will drive incremental operating leverage by efficiently absorbing this growth and we will diligently monitor our train plan to address resources as needed to provide our customers with high-quality service. Our entire company is aligned to capture this growth opportunity and as always our focus is first and foremost on our customers and finding creative ways to help customers meet their own growth targets this year.

Now is the time to capitalize all the work we have done to transform our network. Thank you. And now I’ll turn it back to Bill for questions and as you may have noted Mark is unable to join the call again today. He continues to deal with a non-COVID personal health issue, but remains engaged in the business. The rest of the team will do the best to answer any marketing questions you may have.

Bill Slater — Head of Investor Relations

Thank you, Jim. In the interest of time, I would ask everyone to please limit themselves to only one question. With that, we will now take questions.

Questions and Answers:

Operator

[Operator Instructions] We have our first question coming from the line of Ken Hoexter with Bank of America. Your line is open.

Ken Hoexter — Bank of America — Analyst

Hey, great. Good afternoon. Jim, can you talk about the pace of growth and the employee ramp up as you need, you talked about the hiring in advance and maybe the pace of expenses, we should expect as we see that ramp up versus the revenue recognition as we move through the second half in the second quarter?

James M. Foote — President and Chief Executive Officer

Great, Ken. Good question and I’ll ask Jamie or Kevin to add a little clarity as well. But generally and you well know, how long it takes for us to hire. So we’ve been at this since the beginning of the year and have been running people through their classes, which we couldn’t do before because of the social distancing issues. And so we’ve been running people through the classes and now getting them out into the field and they’re starting to come out and while we’re reasonably well positioned. Our numbers clearly have been impacted in the — were impacted in the first quarter because we were struggling in certain areas across the railroad because of crew challenges. These people are becoming — are coming on now and will be coming on — throughout the second quarter at regular intervals as we again expect to see a volume growth continue to increase now into the second and third quarter.

Jamie, you want to give some more detail?

Jamie Boychuk — Executive Vice President of Operations

Yeah. No, absolutely. Ken, we are — what we’re seeing right now is every week as it stands about 10 or 12 employees on the network that are qualifying as conductors, but what we’ve really bumped up our classes as Jim has mentioned just over the past couple of months, we’re training anywhere from 60 to 90 new conductors depending on the month every two weeks there is a new course. Making sure that we follow all the protocol with the — with those required within this COVID environment and really, we’re positioning the employees in areas where we need them.

We still have furloughed employees around the company that aren’t willing to a lead locations where they’re at. And in our industry, when we hire somebody, you hire them for a certain location. You offer transfers, moves temporary or permanent, but it’s up to the employee to make those decisions. So we will continue to hire, as we said last quarter, 400, 500 folks here throughout the year, but really we’re going to hit that, I would say, as we enter into the second half and we’ll continue to hire if we see the business levels come to the point that we think they will. And we’ll just keep adding those resources. So we’ve got a great position that really puts us in that spot where we’re looking at growth.

Kevin Boone — Executive Vice President and Chief Financial Officer

Hey, Ken. The only other thing I would add is, while we’re going to add some employees that we saw over time at a quite high level in the first quarter and we would expect that number to come down over time as the hiring, so largely offsetting some of the incremental costs there.

Ken Hoexter — Bank of America — Analyst

So offsetting some of the incremental cost per employee or is that incentive comp, okay.

Kevin Boone — Executive Vice President and Chief Financial Officer

That’s right. You’ll probably see the highest quarter in terms of cost per employee this quarter.

Ken Hoexter — Bank of America — Analyst

Okay. Appreciate the insights on those.

Jamie Boychuk — Executive Vice President of Operations

Some of that is definitely related towards winter weather though on this quarter, it was a very difficult quarter as Jim had mentioned here with the polar vortex and the rest of it. So you’re going to see those numbers come down.

Ken Hoexter — Bank of America — Analyst

Great. Thanks for the insight guys. Appreciate it.

Operator

We have our next question coming from the line of Allison Landry with Credit Suisse. Your line is open.

Allison Landry — Credit Suisse — Analyst

Thanks. I just wanted to ask about the service metrics. I mean obviously, you had the challenges of weather in Q1 and supply chains are quite clearly still in disarray. But, Jim, you mentioned in your prepared remarks, you’re expecting to get back to pre-COVID levels and record levels. How long do you think it will be before you guys can start to see some second derivative improvement at least in the velocity numbers and dwell? And do you think that with demand increasing and strengthening that it’s going to take a few quarters? Just to help us think through that? Thank you.

James M. Foote — President and Chief Executive Officer

In the intermodal area, as I said, we are back to our best industry leading performance I think in terms of intermodal, in terms of our velocity is already up, but again what we look at very closely is this trip plan compliance number, which takes everything into consideration. It doesn’t do any good if you get the train across at a super high-speed and then it sits at the terminal and can’t get yard and you can’t get the box off and the customer doesn’t get it when he needs it. So everything has to come together and that’s what’s reflected in this trip plan number and in intermodal there is zero cushion.

It’s not like, yeah, we met the trip plan, but give or take a couple of hours. In intermodal, it’s zero a time. So we’re back into the 90, 90 plus on-time performance in our trip plans in intermodal today which is — we were doing a little bit better than that a year ago in January, late the year before. And I expect that number to continue to creep up quickly in the second quarter, if we catch a break and don’t have some other kind of crazy weather events or something else. And then, in the carload business where again — where our numbers are in this kind of mid-60% on time the trip plan performance range and that relates to about 30% a couple of years ago.

And we want to get that number back into the mid-80 range where it was and you know, my challenge there is to Jamie, is to get it done sooner than later. I’d like to see our velocity and dwell numbers get back to where they were, kind of, by the end of the second quarter if possible. And then the trip plan numbers will start to come together as the year progresses. That puts the operating guys under a lot of pressure and but again, we’re just getting back to where we are because once we’re back to where we were, we’re going to get better from there.

Allison Landry — Credit Suisse — Analyst

Okay. Thank you. That’s helpful.

Operator

We have our next question coming from the line of Justin Long with Stephens. Your line is open.

Justin Long — Stephens — Analyst

Thanks and good afternoon. So I wanted to ask about the OR. In the first quarter, I think intra-quarter you talked about 100 basis point worse kind of year-over-year. What’s your expectation late in the quarter. Just curious what changed if anything in March relative to the reported number. And then going forward, the revenue guidance is very helpful, but anything you’d be willing to share on incremental margin targets as we look out over the rest of the year?

Kevin Boone — Executive Vice President and Chief Financial Officer

Yeah. In terms of the quarter, late in the quarter, we probably experienced a little bit more fuel surcharge lag than we were expecting late in the quarter, also probably a little bit of after effects of the weather, kind of, creeped into the last couple of weeks of March as well. And then finally, as we saw the prospects for additional volume acceleration in the back half, and even into the second quarter, Jamie was proactive in pulling out assets to get ready for that volume.

So we saw probably a little bit extra costs there, which we thought was the right thing to do. Given everything we’re seeing out there. So, that’s probably the difference between what Jim talked about at the conference and what we ultimately saw this quarter. A lot of moving parts this quarter obviously with the impacts of the winter storms and then the revenue quite frankly, after January, we are looking at a very, very good quarter and then obviously February hit us hard and March was digging ourselves out of it.

In terms of our incremental margins, look, as we’ve said last quarter and the previous quarters, as we get volume growth and revenue growth, we anticipate dropping that through at a positive incremental margin. So it will matter the pace of growth that we see and if we continue to beat our expectations. I would expect OR to continue to beat our current estimates as well. So it’s somewhat dependent on the strength of the revenue growth this year, which we obviously expect some strong performance. And if it continues to get better, you’ll see the leverage in the model as well.

Justin Long — Stephens — Analyst

Okay. Great. I appreciate the time.

Operator

We have our next question coming from the line of Tom Wadewitz with UBS. Your line is open.

Tom Wadewitz — UBS — Analyst

Yeah. Good afternoon. Jim, I wanted to see if you could offer some thoughts on perhaps your first quarter earnings is compelling, but there was another topic earlier today, you probably noticed. What might be the impact to you guys from a Canadian railroad buying KSU? Is it — does that matter much? I mean, I don’t think you’ve interchange a lot of traffic with KSU, but how would we think about that? And I don’t know if you have any broader thoughts on whether that potentially could be a catalyst for a greater focus in the industry on bigger consolidation? Thank you.

James M. Foote — President and Chief Executive Officer

Well, we’ve certainly looked at — thanks, Tom. We certainly had an opportunity now over the, like I said, it’s the last month or whatever it’s been to have a understanding of the CP proposal. We’ve had a manner of hours to absorb the CN proposal. And other than what we’ve, kind of, filed with the regulator concern — expressing our thoughts on the — so far, just on the procedural aspects of the CP transaction. I’m going to have to reserve comment about what I think in particular to either one of those transactions, until I’ve had a time to see what they put forth and see what we think the impacts of whatever they put forth to the regulator in terms of why they think their transaction is a good deal. You’ve known me for a long time, Tom, I’ve been around this industry forever now.

It seems like and started out in the days when the industry was, some would say, collapsed, if not near bankruptcy facing the prospects of nationalization. And over that period of time, since deregulation, the industry has transformed itself back into a strong vibrant industry, and most of that would be associated or attributed to the consolidations that have happened and the efficiencies that have come from that and the dramatic reinvestment and service improvement that has come to the industry as a result of those consolidations, all of which were approved by regulators to make sure that they were in the public interest and good for the customers.

So, I have a view of what I think is — if it’s good for the customer, if it improves the quality of service for the customer, and it’s in the public interest, I’m clearly say, hey, let’s take a look at it and figure out what it all means. But in all circumstances, the devil is in the details of any transaction. And so until I get an opportunity to review any proposals, but I just have to reserve comment on the transactions themselves.

Tom Wadewitz — UBS — Analyst

Okay. But it sounds like you think it can be a constructive thing for the industry just in terms of being open to consolidation.

James M. Foote — President and Chief Executive Officer

Yeah. As I said, I think it’s been a tremendous benefit to the shipping community, what’s taken place to transform the North American rail network.

Tom Wadewitz — UBS — Analyst

Great. Okay. Thank you, Jim. Appreciate it.

Operator

We have our next question coming from the line of Brandon Oglenski with Barclays Capital. Your line is open.

Brandon Oglenski — Barclays Capital — Analyst

Yeah. Thank you for taking my question. I guess, Jim, I want to stay on that subject. I mean, strategically, I guess we’ve heard a lot of negativity, though, about the next wave of “class one mergers” if there ever is to be on ex-KSU, but thinking more about potential transcontinental tie-ups. I mean we’ve heard a lot of the negative input from certain groups when other deals have been tried unsuccessfully. But I guess we haven’t talked about a lot of the potential benefits. I mean do you view strategically as that is the path forward for the industry looking out 10 or 15 years?

Jamie Boychuk — Executive Vice President of Operations

No, I can’t speculate on what’s going to happen in 10 or 15 years. I’m trying to figure out what happened 10 or 15 hours ago. So, as I said, there’s been — I think that, in my opinion, it has been the transformation of the North American rail network into what it is today has been a positive for the shipping community. And I think that’s the key thing that the regulators look at, and I’m sure the regulators are going to do another thorough review of this transaction and see what happens.

Brandon Oglenski — Barclays Capital — Analyst

All right. Thank you.

Operator

We have our next question coming from the line of Scott Group with Wolfe Research. Your line is open.

Scott Group — Wolfe Research — Analyst

Hey, thanks. Afternoon, guys. So, a couple of small ones for — Kevin, can you just — yields have been negative the last few quarters. How should we think about the direction of yields and pricing going forward? And then you guys have $3 billion of cash, another $400 million coming in and generating cash flow. Is there a potential for accelerated buyback or do you think this is the right pace going forward.

Kevin Boone — Executive Vice President and Chief Financial Officer

Yes. As I mentioned on the buyback specifically, we will definitely be opportunistic if there’s opportunities to accelerate that. And you could expect, given the visibility going forward that we’ll be much more aggressive in that area, given the opportunity. So we have some flexibility in that. Clearly, as I’ve said, $3 billion of cash is not something that we’re looking long term to keep on the balance sheet, and we’ll move away from that. Second part of that question was, again?

Scott Group — Wolfe Research — Analyst

Just the pricing momentum and yields have been negative, when you think we get to positive, how should we think about that?

Kevin Boone — Executive Vice President and Chief Financial Officer

Yeah. We’re going to lap — on the fuel surcharge, we’ll lap that headwind this quarter. So we’ll start — we’ll see that, kind of, tick away starting in the second quarter. We’ll see some positive RPU growth, as you guys look at it, starting second quarter. Coal will be more favorable as we lap easier comps from last year, really across the group. I will say, we were looking at this yesterday, is pricing renewals are above our average price. So we are seeing some acceleration there, which is good and would be expected in a tight trucking environment. And we’re really looking ahead to more inflation potentially. So those are discussions that we’ll continue to have with the customer. But I would expect the pricing environment to improve.

Scott Group — Wolfe Research — Analyst

Thank you.

Operator

We have our next question coming from the line of Chris Wetherbee with Citi. Your line is open.

Chris Wetherbee — Citi — Analyst

Yes. Hey, thanks. Good afternoon. Maybe kind of sticking on the revenue opportunity for a moment. When you think about volume for this year, I guess, I’m trying to hoping maybe you can get a little bit more specific when you’re thinking about — I know you pegged the, sort of, GDP plus. But if you could give us maybe some parameters, after we’ve seen sort of the toughest comp quarter out of the way? Obviously, we’ve gotten through the weather. We know, so the run rate of opportunity is now. It sounds like maybe there’s upside from a revenue standpoint coming from both volume and price, but I don’t know if you can kind of break those two apart for us a little bit and give us a little bit of sense of what you really see for the volume opportunity for you guys for the full year.

Kevin Boone — Executive Vice President and Chief Financial Officer

Well, we gave a revenue number. I don’t know if we’re going to parse it down into specific volume. I think you can assume that both, when we move into the back half of the year, will be — start to be positive and more positive, certainly, in the second half of the year when you think about RPUs, just based on some of the comps that we’re lapping from prior year. So, clearly, second quarter volume will accelerate significantly, given the COVID impact. Third quarter, you’re kind of lapping some COVID impact as well. In fourth quarter, we started to see some recovery, particularly in the intermodal business. So from a pace, I would expect, obviously, second quarter to be the highest growth quarter. Third quarter probably follows that and then fourth quarter, it’s probably a little bit more up in the air. We’ll see how much the economy continues to accelerate from here. But the easiest comp in the second quarter, second easiest is probably third quarter. And — but we still expect second half growth to be pretty robust from where we see it today.

Chris Wetherbee — Citi — Analyst

And just maybe one point of clarification, since the last time we spoke three months ago, sort of the incremental upside, do you feel like it’s coming a little bit more from volume or price, or a little bit of both? I guess, that’s kind of what I was getting at.

Kevin Boone — Executive Vice President and Chief Financial Officer

I mean, clearly, volume will be, just based on what we saw last year, will be the bigger component of our revenue growth for the year, this year.

Chris Wetherbee — Citi — Analyst

Okay. Thanks.

Operator

We have our next question coming from the line of Amit Mehrotra with Deutsche Bank. Your line is open.

Amit Mehrotra — Deutsche Bank — Analyst

Thanks, operator. Hi, everybody. Kevin, I wanted to follow up on the incremental margin question. I certainly, hope incremental margins will be positive as revenue turns positive — revenue growth turns positive. But we’re talking about — you guys are talking about feeling better about volumes. You just said pricing is better than kind of typical renewals. So you’ve been pretty specific in the past in terms of giving specific OR targets? I think, I’m not asking you to do that, but if you just look at the way your cost structure has evolved, excuse me, it would imply 60% to 70% incremental margins, just all else equal, just based on the variable and fixed nature of your costs and pricing is getting better. So unless, I’m missing something, like why shouldn’t incremental margins be 60%, 70% or better than that in the context of revenue growth, volume growth and pricing growth?

Kevin Boone — Executive Vice President and Chief Financial Officer

Yeah. I mean, first of all, as I was explaining before, I think the magnitude of the revenue growth is a factor here, right? The more revenue growth that we potentially project here, the better the incremental margins. That’s just basic math on that side. So we are very positive on the outlook. Well, as the network improves, that will drop through. And I don’t think anything has changed from what we saw in the first quarter, what we said for the full year in terms of our ability to convert revenue into margin — into operating income. We’re not going to probably get in the game of getting a point target because things are still fluid from a revenue perspective, another point or two in revenue growth above and beyond what we have expect today. We’ll see more benefit to where we ultimately land on the OR, so…

Amit Mehrotra — Deutsche Bank — Analyst

Right. And maybe a better way to ask that question then, Kevin, if I could. I think you’re talking about just the fact that you have regular weight inflation that doesn’t make incremental margins linear as revenues come on, if I’m interpreting your comments correctly? So, is the right way to think about regular weight inflation kind of 2%, 3% off of your current opex base? And as revenue grows in excess of that, that will do much more significantly drop to the bottom line? Just help us think through the philosophy around what you’re seeing.

Kevin Boone — Executive Vice President and Chief Financial Officer

Yeah. That’s exactly right. There’s fixed cost inflation that you have to offset every year, particularly on the labor side. And then we’re probably seeing — although, inflation remains low on the material side, seeing some signs of that ticking up as well. So, once you offset all of the inflation with further growth, then you’ll see a more meaningful impact of the next point of growth above and beyond that…

Amit Mehrotra — Deutsche Bank — Analyst

And is that $200 million to $300 million a year as kind of that threshold point or is it less or more than that?

Kevin Boone — Executive Vice President and Chief Financial Officer

We’re looking at about 3% overall inflation across our cost structure.

Amit Mehrotra — Deutsche Bank — Analyst

Got it. Okay. That’s very helpful. Thank you so much. Appreciate it.

Operator

We have our next question coming from the line of Fadi Chamoun with BMO Capital Markets. Your line is open.

Fadi Chamoun — BMO Capital Markets — Analyst

Good. Thank you. Jim, I just want to kind of circle back on the M&A topic a little bit. So I mean, we’re kind of seeing the merits of kind of end-to-end mergers being outlined out there, like from a shipper’s perspective, improving the capacity, improving the service, potentially improving the cost for the carrier as well. Why wouldn’t that kind of scenario apply to East West merger? It feels like when it comes to TransCon mergers, there’s always this idea that they’re anti-competitive mergers. And I’m just trying to reconcile, why would that be the case, within the supply kind of the same logic, if we put aside all dwell’s new rules and all that kind of debate aside? Wouldn’t, technically speaking, these end-to-end merger provide the same kind of benefit that we would see in these other proposed transactions?

James M. Foote — President and Chief Executive Officer

Well, certainly, there’s an ongoing dialogue right now about the merits of end-to-end transactions. And historically speaking, railroad consolidations that were viewed as end-to-end and didn’t reduce competition, or did not reduce optionality to the shipping community were viewed as — viewed favorably. And I don’t know that there has been any change in philosophy on that point. So like I said, we’ll all see how this begins to play out. We’re in the early stages as everyone keeps being reminded of a long process, in some cases, maybe a month, and in some cases hours. So we’ll see how it unfolds. But again, the overreaching, overriding principles, I think, are applicable today.

Fadi Chamoun — BMO Capital Markets — Analyst

Okay. Thank you.

Operator

We have our next question coming from the line of Brian Ossenbeck with JPMorgan. Your line is open.

Brian Ossenbeck — JPMorgan — Analyst

Hey, good evening. Thanks for taking the question. I wanted to come back to truckload conversion. Jim, you mentioned your 90% plus compliance with the intermodal trip plan with basically zero cushion. It sounds like that’s pretty truck like service. Are you seeing a material impact of the service on conversions? If not, what’s left to really get more shippers over the line? And then when we think about making this longer term conversions. How are you trying to make these stickier rather than someone looking for capacity in a tight market? How do you make these conversions really longer term and beneficial for both parties?

James M. Foote — President and Chief Executive Officer

Well, yes, in the intermodal business, yeah, I mean we’re setting records in terms of our volumes. And this is — that’s after a couple of years earlier of reengineering the intermodal network, and which positioned us to be a bigger participant in this transformation to the e-commerce business model that so many people are adopting. So because we fixed the railroad, because we improved the service and because we’ve done all these things, we’re able to participate in this where I don’t think we would have been able to do that so effectively in the past and it shows in our numbers. And I don’t see that changing. If people want to move more boxes and buy more things online, we want to be more and more and more involved in that supply chain. And we’ll continue to work in that area to the best that we can.

The other area where we’re constantly focusing on truck conversions is in the merchandise side of the business. And that’s taking metals and plastics and steel and cardboard and you name it, that today, we move in a boxcar, and the same shipper and the same plant in many circumstances is load and truck out the other side of their production facility. And that just takes us more and more time of getting involved, working with the customer. And we continue to see — we continue to win business in those areas.

And again, that’s because our service reliability, not speed but reliability is equivalent to what they’re getting in a truck. And so we have to get back to where we were in terms of — and that’s reliability is trip plan compliance. We have to get back to where we were and then get even better. And the better we get in that area and the more focused we are and that will continue to grow that — those conversion opportunities as well.

Brian Ossenbeck — JPMorgan — Analyst

And just to clarify, has the sales cycle sped up on this? Are you finding shippers and customers more agreeable to have these conversations to the extent you can separate that from service improvements versus just being tied on capacity across the freight network in general?

James M. Foote — President and Chief Executive Officer

Conversations in those areas are, yes. We’re becoming more and more relevant in the supply chain. We’re becoming recognized as being more reliable. And a lot of other factors are aligning as well is bigger — our bigger customers want to do more and more things to become more environmentally friendly, we can help them with the reduction in our carbon footprint, so ESG plays in our favor, fuel efficiency plays in our favor. All of this — our willingness to do things differently than the way we’ve done it in the past are — we’re showing good results.

Brian Ossenbeck — JPMorgan — Analyst

All right. Thank you, Jim.

Operator

We have our next question coming from the line of Bascome Majors with Susquehanna. Your line is open.

Bascome Majors — Susquehanna — Analyst

Thanks for taking my question. Jim, I understand your reluctance to comment on transactions that happen to be been filed for approval yet. But you did mention that you have commented publicly on the procedural issue at stake here with the SDB. And I thought it was notable that CSX was the only class one rail that suggested the waiver of the 2001 rules does stand up for KSU or ask that it did. Can you give us a little more information or context on that and why you look at that differently than, say, your competitors?

James M. Foote — President and Chief Executive Officer

Well, maybe to one — in one — it started with the proposed CN/BN merger. And I just happen to be sitting in the room when it was put on hold and a moratorium was put in place and all these rules fell into place. So, I have some sort of knowledge about how and why those rules were changed. And at that point in time, the ruling body felt that the — an acquisition of the KCS didn’t merit some speculative array of new ideas before they would approve it. And the regulatory body has had 20 some years to change the rules that they wanted to change the rules and they didn’t. So along comes a transaction and I kind of view the law is the law and that’s what we said. We don’t see any circumstances that would merit a change from what was decided back in the day for the reasons it was decided.

Bascome Majors — Susquehanna — Analyst

Thank you.

Operator

We have our next question coming from the line of Jonathan Chappell. Your line is open.

Jonathan Chappell — Evercore ISI — Analyst

Thank you. Good afternoon. Jamie, maybe a question for you. You guys have spoken pre-pandemic through the pandemic about having spare capacity to take more business as your performance continues to improve. Obviously, the people’s a different story altogether. But Kevin also noted taking some locomotives out of storage. So, how do we think about new capacity coming online as you do see this economic ramp and the favorable volume backdrop and what does that mean for costs? And I guess the part B to that is, how do you balance the super strength in intermodal today with your desire to expand with better mix and merchandise?

Jamie Boychuk — Executive Vice President of Operations

Look, on our capacity side out there in the network, I still feel confident that there’s many sections of our network where we can continue to absorb 20%, 30% business. In some sections that as we work close with Mark and his team, where we are reaching out to customers and understanding where that flow is going to come from, which will require a few more train starts. We have — and, of course, I’m basing this off of us just over, let’s say, three quarters ago when we were looking in the midst of a pandemic, and we were winding things down and record low numbers with respect to all of our assets. That’s what we’re basing this off of when we start talking about what we’re going to need to pull out.

So, yeah, we’re getting ready with locomotives, still going to be less than where we were a year ago or two years ago, with where the volume was at, we’ll still see record levels with respect to productivity out of our locomotives and our people. So it comes down to the mix of business that we’re going to see. We’re making sure that we’re able to provide that service that brings the customers to us. So that’s something that we’re really working on. And when we think about assets of people, attrition was a higher rate that we — than we really expected throughout the pandemic.

Those people, I think, it’s just like the trucking industry, those who decided they may have thought they were going to hold on and not retire for a while. Well, they retired, and they packed it in, and it was a little too much for them. So, yes, we’re going to see some of these assets come back. They’re not going to be at the same levels that we had seen before. So, I think, as Kevin had mentioned, we’re still going to see some good returns on all of this business that continues to come back in. And, I’m sorry, the second part, I think you mentioned was on the intermodal side. It was — what was that question?

Jonathan Chappell — Evercore ISI — Analyst

It was just balancing the equipment as intermodal’s been incredibly strong, but you obviously have this desire to kind of improve the mix through merchandise growth.

Jamie Boychuk — Executive Vice President of Operations

Yeah. I mean, look, we — where we can, we’ll run intermodal with freight together and then in other areas where intermodal continues to grow. I still have room on the tail end of intermodal trains. Very few of my intermodal trains, as it stands, are sold out. We have cars and storage that we’re able to pull out, and we continue to pull out as we see the need. Growth has been very strong, as Jim has mentioned. And our terminals are in fantastic shape. Scott Marsh and his team that take care of the intermodal side of the business, have done an incredible job turning the assets when they arrive. And we continue — fully expect to continue to see that productivity get better as we move forward.

Jonathan Chappell — Evercore ISI — Analyst

Great. Thank you, Jamie.

Jamie Boychuk — Executive Vice President of Operations

Yeah.

Operator

We have our next question coming from the line of David Vernon with Sanford Bernstein. Your line is open.

David Vernon — Sanford Bernstein — Analyst

Hey, guys. Good afternoon, Jim. I appreciate you taking the time to share with us your sort of perspective on the historical sort of industry approach to consolidation. I wanted to ask you a question in a slightly different way. As you think about this opportunity to drive highway conversions on the CSX property. How would you think that an end-to-end merger might accelerate your ability to drive further highway conversions, whether it’s carload or intermodal? And how is the Board thinking right now about the pros and cons of pursuing some sort of consolidation to help accelerate the highway conversion plan?

James M. Foote — President and Chief Executive Officer

Well, yeah, you can answer the question in a different way, but you’re going to get the same answer. As I said to the extent that the rail networks work together and however, you go about that and creating a better product for the customer. And then mergers eliminate the bottleneck in between that it speeds things up and makes the service product a lot better and more truck like. But that’s not my job, that’s my opinion. It’s not my job to rule upon the merits of any transaction based upon the facts, and I’m sure the regulator will do a very thorough analysis and determine, again, as I said before, whether or not — it’s not anticompetitive and it’s in the public interest.

David Vernon — Sanford Bernstein — Analyst

So — but in your view, the industrial logic of that end-to-end merger would help you to drive highway conversions. That’s kind of what I’m trying to get at?

James M. Foote — President and Chief Executive Officer

Yeah. Normally, one person in — one person who is managing the supply chain the conveyor belt is better than having a one conveyor belt and having somebody take it off the conveyor belt and put the box onto the next conveyor belt for somebody else to run it. Normally, that seamlessness results in a smoother supply chain. And again, like I said, that’s my opinion. But then somebody else has to look at it and say, Dave, I think it’s a good idea.

David Vernon — Sanford Bernstein — Analyst

All right. Thanks for taking the question.

Operator

We have our next question coming from the line of Jordan Alliger with Goldman Sachs. Your line is open.

Jordan Alliger — Goldman Sachs — Analyst

Yeah. You mentioned in the slides increased visibility onto the positive economic momentum. I was wondering if you could perhaps pinpoint some thoughts around that. Is it still focus primarily on the intermodal recovery, you’re actually anticipating and seeing or expect the industrial side to — is that the biggest part of the higher visibility, the insight into the industrial versus intermodal? Thanks.

James M. Foote — President and Chief Executive Officer

Well, I think it’s a number of factors. Again, in January, when we were trying to take a view out for the next 12 months, I said that it was difficult to predict. And that my crystal ball was a little fuzzy, trying to determine about at that point in time, COVID cases were out of control. At that point in time, there was just a speculation about what was going to happen with the chip shortages. And so then — and a number of people were forecasting GDP growth of X, Y and Z. Was there going to be a stimulus package? Was there not going to be a stimulus package? Was there going to be an infrastructure bill? Was there not going to be an infrastructure bill?

And then you added into my crystal ball effect that it turned into more of a snow globe in February. Well, some of that smoke has cleared and people have taken their — most people have taken their forecasts for growth this year up. And we’re starting to now see it, feel it, have conversations with real life customers about what they think is going to happen for the second half of the year. So that’s what I mean by having more clarity in terms of trying to me tell the management team here at CSX, how to plan forecast and how we’re going to run the business for the rest of the year.

Jordan Alliger — Goldman Sachs — Analyst

Thank you.

Operator

We have our next question coming from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Ravi Shanker — Morgan Stanley — Analyst

Thanks. Good afternoon, everyone. Jim, if I can just follow-up on the topic of highway conversions. I mean, when you look at the last three years, we’ve had two of the tightest truck markets in history. So this should be the time when you guys have more volumes that you can possibly handle on the intermodal side and yet kind of look over the last several years, kind of, intermodal volumes haven’t really kind of materially gone up. So I’m just trying to understand kind of what’s that hold up there? Is it just more resources and capacity on the rail side? And if that’s the case kind of why don’t you guys just put in billions of dollars into increasing capacity of the volumes are there or if not, does there need to be a material change in the service product to actually close that volume gap and drive material highway conversion to rail?

James M. Foote — President and Chief Executive Officer

Well, again, let’s focus on the intermodal side of the business. In ’17, we took off — we de-marketed about 8% of the intermodal business. In 2018, we de-marketed about another 8% of the intermodal business. We then went into kind of industrial recession in a global pandemic. And throughout all of that, we’re now producing phenomenal record volume levels for CSX. So not sure what you missed.

On the merchandise side of the business, we’re doing a really good job there. As I said, we’re starting to convert business from the highway, which involves really no financial investment. It involves an investment on our part to make a commitment to the customer that we’re going to provide them with truck-like reliable service, which we’re now doing and we’re converting this. So I’m very, obviously, I’d like to turn around 50 years of decline in the railroad industry in a couple of weeks and spending a couple of billion dollars, but I don’t think that’s possible.

Ravi Shanker — Morgan Stanley — Analyst

Okay. Understood. And I’m sorry if I missed this in your prepared remarks, but what’s the current kind of percentage of the workforce that’s kind of impacted by the pandemic and kind of maybe kind of on leave right now pending either vaccination or kind of quarantine? I think in the past, you’ve said that in some locations up to 20% of your workforce was out of commission, kind of what’s the updated number now?

James M. Foote — President and Chief Executive Officer

Well, 20% would have been kind of like on a terminal specific basis, really on the western side of the railroad where we had kind of a cluster. Clearly, we don’t have 20% of our workforce off sick. I think the number of employees who have contracted the virus is so far — is around 13%. I think that’s the right number. Yes, around 3%. Clearly, we had a spike. We had a peak just like everybody sells in the US coming out of Christmas. They gradually declined. Kind of going into March, the numbers were really, really low. I was feeling really, really optimistic. Everybody here in Jacksonville got their shots. And now the cases are spiking back up just like they are every place else.

So, we’re watching it. But again it’s a much — in total of the workforce, it’s kind of around the national average. We’re a good indicator of — we’re at or slightly below the average — national average for infection rates, which I think is fantastic when you think that all of our employees are out there and have been out there since the very beginning of all of this, ended January 2020 working — going to work every single day. And we have less than the national average of infection rate, that’s phenomenal work by our employees of taking care of themselves and their coworkers.

Ravi Shanker — Morgan Stanley — Analyst

Understood. Thank you.

Operator

We have our next question coming from the line of Walter Spracklin with RBC Capital. Your line is open.

Walter Spracklin — RBC Capital — Analyst

Thanks very much. I guess my question, Jim, is on the potential impact of a further reacceleration in demand, should we get a kind of a surge here in demand conditions? I know railroads haven’t always like surges, surges or a big decline study as kind of a better situation to be in. But what’s different now would you say and maybe Jamie chimes in here, but what’s different about how your network, your organization is set up to be able to handle surges? And are we able — can you do that without major sort of disruption and the customers feeling the effect of those surges as kind of we did when the weather was a little inclement there? Just curious in that direction?

James M. Foote — President and Chief Executive Officer

Well, I think that what’s different, first of all, is a mindset, a common focus amongst all the railroads in North America in terms of wanting to move our customers’ products more efficiently, effectively and then adjusting your workforce, so that it thinks differently, is more nimble, it’s responsive to customer needs and wants to grow the business. So, I think, we have changed to a large degree, one positive that comes out of adopting a different business model is a completely different mindset amongst your workforce. We’ve got a long ways to go there. But — and we’re not afraid to how do we make sure that we don’t get ourselves in a situation where we can’t handle peaks in shipping volume.

We were talking about at the end of last year, four months ago about hiring, because we want to make sure we’re in a position to run our — move our customers’ freight in June, July and August. Nobody — no other railroad guy would even talk like that before. They would, oh, God, we’re not going to hire. We’ve got to lay off people. Things are bad. We got to lay off more people. We got to cut the workforce. We’ve got to do — we’ve got a furlough. We’ve got to park locomotives. Well, then the business would have surged back, and you wouldn’t have been able to handle it. So, I think, we do a better job now as an industry of trying to look out in the future to make sure that we’re in a position to be able to handle the peaks and valleys.

I mean think about what we went through in the last year. Just take the auto business as an example. Forecasted car sales are going to be very, very strong. We’re going into January. Three months later, I looked on the morning report about how much auto traffic we were moving in, it was zero. And then we thought, well, this will never start back up. This is going to be a very slow startup. How are we going to handle this?

And the next thing we know, we get a call saying all the manufacturers are going back to restart their plants three shifts a day. We were able to move, respond and be able to serve that customer segment in a manner that had very, very little disruption. We all geared up into January of this year figuring, all right, it’s going to be another great year. And then guess what? All the plants are shut down again, because they can’t get a computer chip. So throughout the peaks and valleys, we’ve been able to move and be nimble and take care of that very, very important customer base for us.

And it’s no different than take one of our very, very important intermodal customers that ship in boxes for the peak season. Well, the peak season started about three months earlier than peak season and then never stopped. So we’ve been there. Our terminals have been open now 24 hours a day, seven days a week, moving as much as we can, record volumes. And so, we think differently and we respond differently.

Walter Spracklin — RBC Capital — Analyst

That’s great. I appreciate it. Thanks.

Operator

We have our next question coming from the line of Jason Seidl with Cowen and Company. Your line is open.

Jason Seidl — Cowen and Company — Analyst

Thank you, operator. Gentlemen, good afternoon. Wanted to talk a little bit about the intermodal side again, clearly, you’re taking business off the highway and that seems to be working. Where do you think you stand competitively with your Eastern partner? Do you think you’re taking market share there? And just in general, growing the intermodal business. You mentioned you have room on the back of the trains. Is there anything out there in the marketplace right now, limiting your ability to grow? Is it drivers for the drayage side? Is it actual physical boxes? Is there anything standing in your way of growing even more than you are now?

James M. Foote — President and Chief Executive Officer

Well, that’s a very good question. In terms of what it is that CSX has controlled over, I would say very little. We have train capacity. We have a very good service product. Our terminals are fluid. We can handle more volume and we can do that. In terms of the environment in which we’re trying to be able to do all these things, there’s not an area that I can look at. It’s not in disruption or is a mess, whether it’s steamships backed up at the ports, West Coast, East Coast, sideways and the Suez, whether there’s driver shortages, whether there’s chassis shortages, whether there’s box shortages. The entire global supply chain is stressed that I think everybody in the industry in all of the railroad at all of our major channel partners are doing an amazing job of trying to keep up with things and meet the needs of the consuming public when you’re seeing these big changes in buying and shipping habits.

Jason Seidl — Cowen and Company — Analyst

And in terms of your market share on the rail side?

James M. Foote — President and Chief Executive Officer

I think, again, I think we’re doing — I think we’re doing a really good job. I think that the industry on a whole is clearly up, and that’s despite, as I said, all of the supply chain being really under a lot of pressure in some absolutely horrible weather conditions across the continent in the middle of a pandemic.

Jamie Boychuk — Executive Vice President of Operations

Just one thing to add on that is, I think we’re really proud of the team with respect to what Jim had mentioned. We stayed open 24/7 through the polar vortex and everything else that happened out there. We were one of the only rails that never shut any gates. We were there for our customers. We supplied the service that we said we would and we expect to be able to do that as we continue to move forward.

Jason Seidl — Cowen and Company — Analyst

And that’s what we are hearing in the marketplace too. I appreciate your time guys.

James M. Foote — President and Chief Executive Officer

Hello?

Operator

We have our last question coming from the line of Jeff Kauffman with Vertical Research. Your line is open.

Jeff Kauffman — Vertical Research — Analyst

Thank you very much and thanking for taking my question. Jim, it’s been a long call, but you mentioned something about the steamship backup, so they’re still going on in the delays. I just wanted to ask you, all these inefficiencies, is it getting better on the East Coast ports for you? And can your system handle when these backups start to clear up and those volumes come to highway? How much business do you think you could be doing maybe not right now because of some of these inefficiencies that you are referring to in Jason’s question?

James M. Foote — President and Chief Executive Officer

Well, again, we’re part — we’re part of a chain. We’re a link in the chain. And it’s easier to move. It’s easier to move the chain when it’s not kinked and there’s no problems in it and everything is working smooth. So I think that all of us would be — could move more. Listen, the port guys don’t want to — they don’t want to put boxes on the ground, because they don’t have a chassis, because they don’t have a truck to dray it, because they can’t — the railroads are backed up, because the railroads don’t want to deal with somebody putting the box on the ground because of this. We all would like things to be smoother, and we would all benefit from this.

And I think that right now, if you added up all the pluses and minuses, rail versus truck, I think the rail comes out on top. People want to — people will talk — people start talking about autonomous trucks and that’s the solution and how do we do this and how do we run more and how do we become more energy efficient and how do we do — I say put it on the rail.

We’ll just take 200 of those trucks, and we’ll take it across country with a crew of two, and save you 75% in terms of your emissions and your fuel spend. So we’re there. We’re ready. We’re growing, like I said, we’re setting records. And hopefully, we can get in the position where we just continue to set record after record after record after record. But it all takes — we got the capacity. We have the ability. We just got to keep getting in there and fighting every single day to get as much freight as we possibly can.

Jamie Boychuk — Executive Vice President of Operations

And when you take a look at the driver shortage that’s out there, a lot of the driver shortage is coming on the long-haul truckers. A lot of those truckers that like the long haul and wanted to move across the country, less and less of those are available. And when you look at drayage, when we bring it into town and we have someone who can dray it across town and go to bed every single night and be with their families, that seems to be the trend of what the new truck driver is out there, which again gives rail that advantage.

Operator

And there are no further question at this time. This concludes today’s conference…

James M. Foote — President and Chief Executive Officer

Thank you, everyone, for calling in today. I really appreciate your good questions and look forward to talking to you all soon. Thank you. Bye, bye.

Operator

[Operator Closing Remarks]