Union Pacific Corporation (NYSE:UNP) Q4 2022 Earnings Call Transcript

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Lance Fritz: Yeah. I think the other part of Fadi’s question is a structural question, like, did something structurally change. And on the five critical resources, nothing structurally changed on line of road and terminal, how you achieve freight car utilization, how you achieve locomotive utilization. We probably look at crews differently going forward than we did historically. That means a little bit more on Board so that we are not staffed at the tight end. We are staffed a bit looser, that’s hundreds, it’s not thousands and then also making sure that we have a watch back in place to the extent that we have got counterparties that want to negotiate that. So that’s probably the only thing, and I think that’s probably an at risk as opposed to a major headline.

Jennifer Hamann: And helps to reduce more volume ultimately.

Lance Fritz: In that. That’s right. It supports us for growth.

Fadi Chamoun: Thank you.

Operator: Our next question comes from the line of Justin Long, Stephens. Please proceed with your question.

Justin Long: Thanks and good morning. I guess to follow up on that last question. If I just run the quick math, it seems like there was around 120 basis points of headwind to the OR last year from congestion. So as you think about kind of recapturing what I will call lost productivity, do you need to see volume growth in order to get that back or can you see improvement in the absence of volume growth? And I guess, on the cadence of the OR, Jennifer, is it reasonable to say that first half OR probably doesn’t improve year-over-year, so this is more back half weighted?

Lance Fritz: Yeah. Jennifer, why don’t I start with, can you get — can you recover productivity without volume growth? The answer is, yes. And we anticipate volume growth as well, which is a tailwind.

Jennifer Hamann: Yeah. So the only thing I’d say in terms of cadence there is, really pointing out to the fuel piece of it and where you saw fuel was a bigger headwind to us in the earlier part of the year than the latter part of the year. You saw some of the inflation pick up in the latter part of the year. So there’s some trade-offs there either way that I would just ask you to look at your models pretty closely there, because there are differences first half, second half in 2022 that you need to be thinking through there.

Justin Long: Okay. Thank you.

Lance Fritz: Yeah. Thank you, Justin.

Operator: The next question is from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question.

Walter Spracklin: Yeah. Thanks very much. Good morning, everyone. I just want to come back to the yield question, sorry, to focus on that. But there were, and Jennifer, you mentioned a number of the key drivers being core price and fuel surcharge and mix and so on. I just wanted to make sure that we are understanding the charges that you were levying of the congestion side, those search, I will call it, congestion search charges for lack of a better word, that you registered through 2022. Are they — with them going away, does not — is that not another factor that will weigh against your revenue per carload or is that just not meaningful enough to enter into the equation?

Lance Fritz: Jennifer, you want to take that?

Jennifer Hamann: I think you were referencing congestion surcharges?

Lance Fritz: I think he’s talking about accessorial

Jennifer Hamann: Oh! Accessorial.

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