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Warren Buffett in the wild west - BNSF impression Burlington Northern Santa Fe, LLC (BNSF) has a long and storied history, tracing its roots back to the Great Northern Railway Company of the 19th century. Today, it operates one of the largest railroad systems in North America, covering over 32,500 route miles of track in 28 states and three Canadian provinces.

BNSF's 2022 earnings report reveals an increase in railroad operating revenues and a decrease in pre-tax earnings compared to the previous year. This article aims to provide a comprehensive analysis of BNSF's 2022 earnings report, including a breakdown of revenue by product group and operating expenses, as well as an update on the recent labor negotiations.

The article is based on Berkshire's 2022 Annual Report. As always, you are very much encouraged to read it as it is the primary source directly from Warren Buffett himself.

Railroad Operating Revenues

In 2022, BNSF's railroad operating revenues increased by 11.9% compared to the previous year, driven by an 18.9% increase in average revenue per car/unit. The total railroad operating revenue is now above $25 billion, which is a great achievement!

This increase was partially offset by lower volumes of 5.8%, resulting from various supply chain disruptions and lower imports. Operating revenues from consumer products increased by 11.8% to $9.2 billion, while operating revenues from industrial products were $5.6 billion, a 5.6% increase from 2021.

Operating revenues from agricultural products increased by 12.6% to $5.7 billion, and operating revenues from coal increased by 21.7% to $3.9 billion, primarily due to higher average revenue per car/unit.

Railroad Operating Expenses

BNSF's railroad operating expenses increased by $2.9 billion (21.2%) in 2022 compared to 2021, totaling $16.6 billion. The ratio of railroad operating expenses to railroad operating revenues increased 5.0 percentage points to 65.9% in 2022 versus 2021.

The increase in operating expenses was primarily attributable to significant increases in the cost of fuel, as well as higher compensation and benefits expenses. Fuel expenses increased by $1.8 billion (65.6%) in 2022 compared to 2021, primarily due to higher average fuel prices, partially offset by lower volumes.

Compensation and benefits expenses increased by $557 million (11.9%) in 2022 compared to 2021, mainly due to wage inflation, higher health and welfare costs, and lower productivity. Equipment rents, materials, and other expenses increased by $384 million (21.8%) in 2022 compared to 2021, primarily due to general inflation, lower gains from land and easement sales, and higher casualty and litigation costs.

Labor Negotiations

Approximately 31,000 of BNSF’s employees are members of a labor union. The U.S. Class I railroads and rail labor unions were engaged in multi-party national negotiations from January 2020 through June 2022. Federal mediation was included in that timeframe, followed by a release from the National Mediation Board and subsequent appointment of a Presidential Emergency Board (PEB), in accordance with the Railway Labor Act.

The PEB issued its report and recommendations to settle the bargaining disputes on August 16, 2022. Tentative agreements based on these recommendations were reached with all labor unions in September 2022. Thereafter, a majority of the unions ratified those agreements with the remainder being imposed by Congress in December 2022. This concluded the national round which is not subject to re-opening until late 2024.

The ratified agreements include significant wage and benefit increases, as well as work rule changes, and are retroactive to January 1, 2020, with a new collective bargaining agreement term through December 31, 2024.

The ratified agreements are expected to increase employee compensation and benefits expense by approximately $1.8 billion over the term of the agreements, including a $429 million increase in 2022 compared to 2021.

The railroad labor agreements represent a significant portion of BNSF's operating costs and could have a material impact on our future financial results.

Generally, labor relations have a major influence on the railroad industry, as strikes and work stoppages can have significant operational and financial impacts. With the conclusion of these labor negotiations, BNSF is well-positioned to continue providing reliable service to its customers while supporting its employees.

However, it is important to monitor the ongoing labor relations between the company and its employees to ensure that any future disputes are resolved in a timely and effective manner.


Overall, BNSF had a strong year in 2022, with increases in railroad operating revenues. While lower volumes and higher operating expenses did impact pre-tax earnings, the company’s focus on yield management and fuel surcharge revenue helped offset these challenges.

Looking ahead, BNSF’s investments in technology and infrastructure will position the company to continue providing reliable service to its customers while also reducing its environmental impact.

The conclusion of the national labor negotiations was a significant milestone for the company and its employees, and the ratified agreements are expected to have a material impact on future financial results.

Overall, BNSF remains a key player in the North American railroad industry and a leader in innovation, sustainability, and customer service.

Berkshire Hathaway can be very happy to have BNSF in the team!

Appendix: BNSF Earnings Table

The following numbers are in million dollars:

2022 2021 2020
Railroad operating revenues $25,203 $22,513 $20,181
Railroad operating expenses:
Compensation and benefits $5,253 $4,696 $4,542
Fuel $4,581 $2,766 $1,789
Purchased services $2,102 $2,033 $1,954
Depreciation and amortization $2,517 $2,444 $2,460
Equipment rents, materials and other $2,147 $1,763 $1,684
Total $16,600 $13,702 $12,429
Railroad operating earnings $8,603 $8,811 $7,752
Other revenues (expenses):
Other revenues $685 $769 $688
Other expenses, net ($555) ($687) ($611)
Interest expense ($1,025) ($1,032) ($1,037)
Pre-tax earnings $7,708 $7,861 $6,792
Income taxes 1,762 1,871 1,631
Net earnings $5,946 $5,990 $5,161

As you can see, BNSF's revenue has been steadily increasing over the past three years, with railroad operating revenues of $20,181 million in 2020, $22,513 million in 2021, and $25,203 million in 2022.

However, operating expenses have also been increasing, primarily due to increases in compensation and benefits, fuel costs, and purchased services.

Despite these rising costs, BNSF's net earnings have remained relatively stable, with $5,161 million in 2020, $5,990 million in 2021, and $5,946 million in 2022.

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