Union Pacific 2009 Annual Report Download - page 31

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31
Intermodal – Decreased volumes and fuel
surcharges reduced freight revenue from
intermodal shipments in 2009 versus
2008. Volume from international traffic
decreased 24% in 2009 compared to 2008,
reflecting economic conditions, continued
weak imports from Asia, and diversions to
non-UPRR served ports. Additionally,
continued weakness in the domestic
housing and automotive sectors translated
into weak demand in large sectors of the
international intermodal market, which
also contributed to the volume decline.
Conversely, domestic traffic increased 8%
in 2009 compared to 2008. A new
contract with Hub Group, Inc., which included additional shipments, was executed in the second quarter
of 2009 and more than offset the impact of weak market conditions in the second half of 2009.
Price increases and fuel surcharges generated higher revenue in 2008, partially offset by lower volume
levels. International traffic declined 11% in 2008, reflecting continued softening of imports from China
and the loss of a customer contract. Notably, the peak intermodal shipping season, which usually starts in
the third quarter, was particularly weak in 2008. Additionally, continued weakness in domestic housing
and automotive sectors translated into weak demand in large sectors of the international intermodal
market, which also contributed to lower volumes. Domestic traffic declined 3% in 2008 due to the loss of
a customer contract and lower volumes from less-than-truckload shippers. Additionally, the flood-related
embargo on traffic in the Midwest during the second quarter hindered intermodal volume levels in 2008.
Mexico Business – Each of our commodity groups include revenue from shipments to and from Mexico.
Revenue from Mexico business decreased 26% in 2009 versus 2008 to $1.2 billion. Volume declined in
five of our six commodity groups, down 19% in 2009, driven by 32% and 24% reductions in industrial
products and automotive shipments, respectively. Conversely, energy shipments increased 9% in 2009
versus 2008, partially offsetting these declines.
Revenue from Mexico business increased 13% to $1.6 billion in 2008 compared to 2007. Price
improvements and fuel surcharges contributed to these increases, partially offset by a 4% decline in
volume in 2008 compared to 2007.
Operating Expenses
Millions of Dollars 2009 2008 2007 % Change
2009 v 2008 % Change
2008 v 2007
Compensation and benefits $ 4,063 $ 4,457 $ 4,526 (9) % (2)%
Fuel 1,763 3,983 3,104 (56) 28
Purchased services and materials 1,614 1,902 1,856 (15) 2
Depreciation 1,444 1,387 1,321 4 5
Equipment and other rents 1,180 1,326 1,368 (11) (3)
Other 687 840 733 (18) 15
Total $ 10,751 $ 13,895 $ 12,908 (23) % 8 %
2009 Intermodal Revenue
International
51%
Domestic
49%