LTL Market Stabilizes in 4Q as Fleets See Growth Ahead

This story appears in the Feb. 15 print edition of Transport Topics.

The long-depressed less-than-truckload market has stabilized and is showing initial signs of modest growth, LTL carriers said in fourth-quarter earnings statements.

The chief executive officers made their comments as Con-way Inc., Old Dominion Freight Line Inc. and Saia Inc. reported that fourth-quarter results from operations trailed 2008.

YRC Worldwide Inc. also saw signs of a stabilizing market for LTL.

Old Dominion reported $9.7 million profit, or 26 cents a share, while Con-way lost $1.9 million, or 4 cents a share, and Saia lost $3.1 million, or 31 cents a share. Though LTL revenue fell at Old Dominion and Saia, it rose at Con-way Freight, and month-to-month trends reflected improvement at all three companies.

“We have begun to see some early indications of some positive trends,” said Con-way Inc. Chief Executive Officer Douglas Stotlar on a Feb. 5 conference call. “We are seeing some signs of demand recovery.”

Volume rose 30% in January over the same month of 2009 at Con-way Freight, President John Labrie said.

Con-way reported the market was relatively stronger at the truckload unit, as Stotlar commented that “a little more economic demand will evaporate the excess capacity pretty quickly.”

Richard O’Dell, chief executive officer of Saia, said the tonnage and rate trends grew stronger during the quarter and in January, and tonnage last month topped 2009.

“This is the first time that I can make a statement like that over the past 18 months,” he said on a Jan. 25 conference call.

Executive Chairman Earl Congdon of Old Dominion said on Jan. 28 that, for the only month in 2009, tonnage in December topped the same month of the year before.

In contrast with these assessments, Judy McReynolds, president of Arkansas Best Corp., reported only “occasional signs” of modest economic improvement for nationally oriented subsidiary ABF Freight System Inc. and an “extremely weak and uncertain freight market that has continued now for 40 months.”

Arkansas Best lost $22.1 million, or 88 cents a share, from continuing operations.

While the three regionally focused carriers had a more upbeat assessment than nationally oriented ABF, the regionals’ executives followed different strategies in a market plagued by overcapacity.

Con-way reported a 21% increase in shipments per day and a 14% drop in price, as measured by revenue per hundred pounds of freight shipped.

“We made a strategic decision to attract more volume to use that excess capacity,” Stotlar said. “The competitive dynamics of the pricing environment put a damper on profits.”

Labrie said his company hopes to be able to raise rates, now that the market has stabilized.

Freight revenue rose 7% to $683.9 million, but truckload revenue and logistics revenue de-clined. Corporate revenue at Con-way Inc. dipped less than 1% to $1.12 billon.

The freight unit’s operating ratio was 99.6, worse than the 98.2 recorded in the fourth quarter of 2008 after one-time charges were excluded.

Old Dominion and Saia said their approach to the market was to try to hold the line on rates as much as possible.

“We have been taking a firmer stance on pricing, starting in the second half of last year, and we saw some results from that,” Saia’s O’Dell said, citing year-to-year pricing improvement in January.

“Our position is that the rates clearly can’t continue to go down, and we need to make some headway to get them going in a different direction,” he said.

Saia’s fourth-quarter pricing fell 4% from 2008 levels and revenue was off 12% at $202 million.

The operating ratio at Saia was 101.8, worse than the 97.7 recorded in the 2008 quarter, excluding impairment charges.

Congdon said Old Dominion remained committed to focusing on stable pricing, as evidenced by a modest 3% year-to-year drop in rates. Its revenue fell 8% to $310.9 million.

Old Dominion’s operating ratio continued to lead the publicly traded carriers at 93.9, although it deteriorated somewhat from 93.2 in the 2008 fourth quarter.

On a companywide basis, Con-way lost $49.7 million, or 94 cents a share, in the fourth quarter of 2008 because of one-time costs.

One-time costs also hurt Saia in the fourth quarter of 2008, when the loss was $28 million, or $2.10 a share.

Arkansas Best results also were affected by one-time charges, but those were in the fourth quarter of 2009. It posted a loss of $88.7 million, or $3.54 a share, after one-time charges.

Revenue at ABF declined 8% to $347.7 million, while tonnage slipped 2%. The company’s operating ratio excluding one-time charges deteriorated to 109.3 from 104, sinking to the worst among publicly traded carriers.

YRC’s less-than-truckload operating ratio, which previously trailed the industry, was 109.1 in the fourth quarter.