MAJOR WALL STREET RAILROAD ANALYST RELEASES "BRIEFING NOTE" ON NEGATIVE IMPLICATIONS OF BNSF POLICY

Major Wall Street railroad analyst releases "briefing note" on negative implications of
BNSF policy on eve of arbitration based on conversations with UTU.

Morgan Stanley says "losing" arbitration case may be a "winner" for carrier

CLEVELAND – A top Wall Street railroad analyst says that based on conversations with the United Transportation Union (UTU) his firm, Morgan Stanley Dean Witter, believes "frustration is building between Burlington Northern Santa Fe (BNSF) Railroad (NYSE: BNI) management and its largest union" because of the changes the carrier "has made in the way it manages its locomotive employees."

Morgan Stanley’s "briefing note," which is sent to the firm’s clients, noted that the arbitration hearing at the National Mediation Board on the BNSF "availability policy" is imminent. The hearing is scheduled for Thursday, October 14; a decision is expected by November 1.

Analyst James Valentine pointed out that "if BNI ‘wins’ the arbitration it may aggravate the union (UTU) further, thus making productivity improvement more difficult to achieve." He implied that BNI would probably come out a "winner" if it "lost the (arbitration) case" because it would "return to the status quo."

"Given that the former crew-calling system provided BNI with the best crew availability in the industry and that any productivity benefits provided by implementation of the new system were not in our numbers," the report noted, "we foresee no real change to our financial outlook for BNI under this scenario."

Morgan Stanley noted that although the availability policy is not a "strikeable issue, it has upset many contract employees on BNI. As such, UTU terminated its participation in BNI’s Safety Program. Under a worse-case scenario, employees would follow operating rules literally, which could limit productivity gains by the railroad."

UTU adamantly opposes BNSF’s so-called "availability policy" as a "breach of faith with the breakthrough work/rest principles" agreed to last spring at the National Wage & Rules Panel. UTU has told BNSF that it will not cooperate with it on any other matters unless the carrier lives up to the work/rest principles it was a party to.

The BNSF Availability Policy could force some employees to work up to 360 hours per month, or 30 twelve-hour days. The policy allows these employees only one day off per month, which may be denied by BNSF for any reason. If the employee then takes time off due to fatigue, the employee is subject to discipline.