That recipe over time has generated above-rail inflation pricing for many, many quarters now. We’re confident that it will in the future. Okay, it’s a very unusual truck market right now. We know that. But on our merchandise business in particular, we recognize our mid-single-digit pricing in this quarter and again, we’re positive for price here today.
Operator: Our next question is from the line of Justin Long from Stephens. Please proceed with your question.
Justin Long: Thanks and good morning. Last quarter, you talked about $175 million to $200 million of lost revenue from the operational disruptions associated with East Palestine. Any updated thoughts on the timing of when this revenue can be recovered? I’m curious if that’s something that could be driving some of the improvement in volumes and then on the two tech outages, any way you can quantify the impact you’ve seen from those thus far?
Alan Shaw: Ed, why don’t you talk about revenue outlook and the cadence?
Ed Elkins: Sure. As service improves, and it is improving both sequentially and year-over-year. Our customers are very encouraged by that, and they’re telling us that. That improvement in service is going to bring freight back to Norfolk Southern. We know our customers are very sophisticated supply chain managers and purchasers and when we’re not on plan, they have to make other plans to keep their factories running. Some of our customers are going to see that value faster and as we cycle equipment faster, they’re immediately going to be able to load more revenue onto Norfolk Southern. I think of markets like metals, like automotive, even though there is a strike right now, I think of that in the construction market and the aggregates market and some of the more flexible freight markets, we have to demonstrate persistent value in the form of reliable, sustainable service over a longer period of time, but we’re making sure that our customers are well aware of our progress.
Alan Shaw: Yeah, with respect to the tech outages, really, the revenue impact was largely inconsequential. It was more of a service issue and a cost issue associated with the slower network and the recruits. Really, what it does for us is it reaffirms the importance in investing in the resiliency of our network so we can weather anything that comes at us.
Operator: Our next question is from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.
Jonathan Chappell: Thank you. Ed, Alan pointed out you’ve had four weeks now of volumes that have been back to the 2Q ’22 levels, but it seems like you still have a lot of red traffic lights or yellow traffic lights on the freight category that you laid out in your slides. How much can we see acceleration if some of those traffic lights turn in your favor? This run rate that you’ve had the last four weeks seems to be kind of a catch-up and service-related, but if you get a macro tailwind behind you, what can those levels go to with the service operating at the levels that it is today?
Alan Shaw: I’m going to try to be very tight with this answer. Number one, we’re really glad to see a peak season happen this year, and we’re encouraged by that. Our services allow us to deliver that. This network is built for a lot more freight than we’re handling right now and as our customers recognize and are able to deliver that value to their customers, we’re going to be able to handle a lot more freight. I’m confident in that. The fact is, and this is the last thing I’ll say on it, economic uncertainty and geopolitical uncertainty are very high right now and I think we see that in the headlines every single day and it’s just something that we have to keep in mind. That’s probably why some of those lights are colored the way they are right now.
Operator: Our next question is from the line of Allison Poliniak with Wells Fargo. Please proceed with your question.
Allison Poliniak: Hi, good morning. I just want to go back to Intermodal and I would say the share recapture there. I know you talked about service and you talked about sort of that time to sort of regain that confidence. Is that something you’re starting to see now or hear now from your customers where we could see that start to accelerate in the next few months despite what’s going on in the overall macro Intermodal market? Just any thoughts there on your opportunities set for that?
Alan Shaw: Well, you’re right. We are seeing volume come back and I can’t say enough about the quality of the customers that we have in our portfolio. We’re very lucky to have our customers. They are certainly best in class. They’re out on the street everyday converting freight from the highway to Norfolk Southern and it’s because we’re able to offer value that they can demonstrate to those customers. So, yes, I think that we have the opportunity here to deliver additional value to our shareholders in the form of more volume, more revenue, particularly from the Intermodal market. We have a network that’s really built for that.
Operator: Our next question comes from the line of Brandon Oglenski with Barclays. Please proceed with your question.
Brandon Oglenski: Hey, good morning and thanks for taking the question. Alan, I think in response to a question earlier, you talked about standardizing operating practices across the network as you look into next year. Maybe I’m mischaracterizing what you said, but I guess can you put that in context for us? I thought the op plan had been set. You guys had learned the changes from the train makeup rules, but maybe there’s more to come.
Alan Shaw: Yeah, that’s been an ongoing effort by Paul and his team to standardize the operating practices within our terminals, which allows us to drive further productivity and further capacity improvements and further service improvements. And that’s just part of, you know, the PSR principles.
Operator: Our next question is from the line of Jordan Alliger with Goldman Sachs. Please proceed with your question.
Jordan Alliger: Yeah, hi. Just a follow-up, with Velocity and Dwell recovering so well of late, is there a way to assess, how much of that comes from the better operations, the changes you’ve made there versus adding the headcount to get it closer to where you need to be? And do we think about headcount sort of flatlining from here on out, roughly? Thanks.
Alan Shaw: Yeah, Jordan, we’ve always said that service is a function of leadership, plan and resources. We’ve refreshed our leadership within operations. We’ve implemented a new plan and we’re driving a high degree of compliance to the plan. And we’re investing in resources, whether that’s additional T and E employees, cross-training conductors to become engineers or investing in quality of life issues. Those are all generating results for us, and you can see that with the service metrics. You can see that with the volume metrics as well. Mark, you want to talk about overall headcount?
Mark George: Yeah, the headcount certainly helps. We’ve augmented in a lot of our critical locations, the staffing in order to improve our fluidity there. So that’s a big driver. We’ve invested money in locomotives, so we have more locomotives available as well. And frankly, Paul, why don’t you talk a little bit about the process changes that we’re making in the terminals, which really are sticky and fundamental drivers for running a scheduled railroad?
Paul Duncan: Well, you’re spot on. We are seeing results from refreshing our operating leadership, resourcing up, and executing the plan in both volume train speed, and terminal dwell and as Alan highlighted, matched to our premise of running as a scheduled railroad, it’s a focus on running the plan; right car, right train, right day, enforcing a high degree of compliance to the plan. Again, that is a fundamental tenant of running a scheduled railroad. It’s driving that accountability. We expect to see further consistency as the year progresses. Certainly expect to see dwell continue to improve, train speed continue to improve and as we have seen these metrics quarter our velocity improve, we’re going to layer on productivity initiatives as we talked, and that’s going to be the focus of us in 2024. Running reliable service and layering on productivity.
