Some Freight Carriers Raising Rates Despite Uncertain Market Conditions

David Paul Morris/Bloomberg News

This story appears in the Sept. 12 print edition of Transport Topics.

Several freight companies, including UPS Inc., have announced rate increases in the early fall despite the uncertain freight market.

UPS announced a 4.9% increase for domestic ground as well as air and international services, airfreight within and between the United States, Canada and Puerto Rico, and for less-than-truckload freight. The package and international increases take effect Dec. 26, while the LTL prices will rise Sept. 19.

“UPS continues to make investments in the speed, scope and coverage of our transportation network,” the Atlanta-based carrier announced, noting that the increases were on an average basis. “Rate increases will support ongoing expansion and capabilities enhancements, while UPS strives to maintain the high service levels customers expect.”

While the company, which ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, signaled its pricing intentions, rival FedEx Corp. (No. 2 on the for-hire TT100) hasn’t yet disclosed future pricing for packages as well as air and LTL freight, a spokesman said.

In the LTL sector, No. 3 XPO Logistics, No. 12 ArcBest Corp.’s ABF Freight unit and No. 5 YRC Worldwide’s national Freight unit announced higher rates. ABF’s increase was 5.25% as of Aug. 29. XPO and YRC announced a 4.9% hike. All of those price adjustments are on noncontract freight.

UPS also said more package rate information would be available as of Nov. 18. The UPS increase matches the 2016 pricing adjustment for most shipments. Last year, FedEx also set a 4.9% increase for 2016.

YRC and XPO’s increases also included cross-border Canadian freight.

YRC said the increase “is being made to offset industry-specific cost pressures such as driver shortages.”

Other large LTL carriers, such as No. 11 Old Dominion Freight Line, No. 14 Estes Express Lines and No. 31 Averitt Express. haven’t yet announced price adjustments. Neither has YRC Regional.

While the rate increases have begun to take hold in the LTL sector, ABF and Old Dominion have disclosed some third-quarter shipment and rate information that show far smaller improvements in revenue per 100 pounds of freight, based on analysts’ assessments.

Keybanc Capital Markets analyst Todd Fowler estimated that ABF yield, a proxy for rates on that basis, are up about 1.5% year-over-year, including fuel surcharge. ArcBest last week said ABF July and August shipments rose 1%. However, Fowler said weight per shipment apparently fell 4%, leading to a decline in tonnage per day.

“We anticipate further potential yield benefit in September from the August general rate increase,” he said in a report issued last week.

Old Dominion’s report showed prices excluding fuel surcharge rose 2% to 2.5%.

“While the freight environment continued to be challenged, the company noted that pricing has remained stable,” a report from Cowen and Co. analyst Jason Seidl said.

Old Dominion’s August results included 1.4% fewer tons per day, reflecting 1.5% fewer shipments per day in that month.

During the first half of 2016, LTL carriers whose shares are publicly traded showed a mixed picture with regard to rates, which was complicated by the fact that not all carriers disclosed prices both with and without fuel surcharges. Most carriers’ increases including fuel charge were in the 1% to 2% range. One exception was XPO Logistics’ LTL unit, where revenue per 100 pounds of freight rose 5.5% including fuel collections.

In the package sector, UPS and FedEx have relied on higher volume to boost their revenue totals, since revenue per piece reported this year has declined about 1%.