TOP US intermodal provider Knight-Swift Transportation is to terminate its exclusive agreement with BNSF Railway (BNSF) to partner with Union Pacific Railroad (UP) to handle its container business effective January 2022, the company said, a decision that will shift a portion of the company's 150,000 to 200,000 annual intermodal loads to a new rail partner, reports IHS Media.
Swift Intermodal - the intermodal division of Knight-Swift Transportation - is the fourth largest asset-owning US intermodal marketing company (IMC) with almost 11,000 containers, according to Jason Hilsenbeck, who operates drayage directory Loadmatch.com and tracks fleet sizes annually.
Dustin Ohlman, vice president of intermodal for Knight-Swift, said the decision to end its relationship with BNSF is unrelated to service problems since last autumn in Los Angeles and Chicago, but rather is based on the strength of UP's intermodal network in key US markets.
"The UP network is strong in some of the Texas markets where we have a heavy trucking presence such as San Antonio and El Paso," he said. "We also have a very strong presence near Salt Lake City, Denver, and Portland, where we think this partnership with UP will open up new business opportunities to serve customers."
Mr Ohlman said Knight-Swift also sees opportunities to provide more capacity to shippers on the Interstate 5 corridor between Los Angeles and Seattle-Tacoma. He said this is one of the densest lanes for Knight Transportation and Swift Transportation, the company's two truckload divisions, but capacity is tight and the combination of Swift Intermodal boxes on UP's intermodal network will open new options for shippers.
He also said while the decision had nothing to do with BNSF's performance, he believes UP's reservation system will be better for shippers during peak demand periods. BNSF sets allocation caps when demand is too high, limiting how many containers each intermodal provider can tender per day, whereas UP does not.
"The UP-reservation system will protect our [shipper's] volume better than we probably have historically, so we expect more consistency in getting containers on the train. Then once it's on the train, the chances of it moving are high," he said. "We expect a very strong service product on [final-mile] drayage because it's our national drayage fleet that we have insourced.
Although IMCs do not disclose how many loads are tendered to each railroad, Swift Intermodal ranks in the top five US asset-owning IMCs, based on earnings reports, behind J B Hunt Transportation Services, Schneider National, and Hub Group. XPO Logistics does not release domestic intermodal volume numbers, so it is unclear which company has a larger intermodal business, but both companies own about the same number of 53-foot containers.
Mr Ohlman said Swift Intermodal will purchase new containers in 2022 to grow and transform the intermodal business, although he declined to provide specifics on the size of the order.
Swift Intermodal has not generated much operating income historically, and often operates at a loss, but Mr Ohlman said signing deals with UP and Norfolk Southern Railway (NS) in the US and developing a Mexico presence are the pillars of the company's transformation strategy. By growing the container fleet, he said Swift Intermodal is investing in its asset-heavy model, rather than divesting to become an asset-light or non-asset company.
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