Breaking News: Schneider Moving Western Intermodal Business to Union Pacific

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Union Pacific is going to be the intermodal carrier for Schneider National in the western part of the U.S. beginning in 2023.

Union Pacific UPN announced the agreement Wednesday morning. The relationship will begin in January of next year. 

"Schneider's intermodal business is a great fit for Union Pacific's diverse network," UP Chairman, President and CEO Lance Fritz said in a prepared statement released by the railroad. "We look forward to growing in the intermodal space together."  

Based on what Schneider SNDR reported in its 10-K annual report for 2020, the deal with Union Pacific will mark a significant shift in its intermodal business. In that report, Schneider reported that its intermodal business' "primary contracts" were with BNSF and CSX CSX. Given that BNSF competes in the West with UP, the new arrangement is likely to be a hit to BNSF's business.

Darren Field, the president of the intermodal division at J.B. Hunt JBHT, made reference to the possible shift on the company's fourth quarter earnings call Tuesday. "We are aware of another channel that certainly left BNSF and went to Union Pacific, and certainly, that presents an opportunity, I mean, those lifts were occurring on BNSF, we are aligned with BNSF in a growth strategy, we have discussions with BNSF daily about our efforts to grow together and we have a lot of focus in that area in 2022," Field said.

In that 10-K, Schneider signaled that it was facing possible limitations in its western intermodal business. "One of our competitors has a preferential contractual arrangement with BNSF, which limits the market share and relative profitability of the services we provide through BNSF," the company wrote in the report. "In certain markets and rail corridors, rail service is limited to a few railroads or even a single railroad due to the lack of competition." 

Despite those limitations, Schneider's intermodal business was strong in 2021, based on nine months' worth of financial reporting. For the first nine months of last year, the intermodal business reported revenue of $825.5 million, up from $705.4 million in the previous year. Operating income in the segment was $100.6 million for the nine months, exactly doubling from the first nine months of 2020.  

Schneider did not break out intermodal revenues or income based on region. 

"We are excited to have Schneider be a part of our intermodal service offering," Kenny Rocker, UP's executive vice president for marketing and sales, said in the statement. "Schneider's operational excellence and focus on growth, combined with the strength of Union Pacific's intermodal network are a natural fit."

FreightWaves will continue to cover this story.

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