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LTL’s Rapid Downsizing
Monday, 15 March 2010 00:00
Industry shrank 25 percent in 2009, and 25 percent since 2006, study shows

The recession pummeled less-than-truckload carriers in 2009 without regard to size, driving revenue down at a double-digit rate at all of the top 25 LTL trucking companies.

The steep downturn triggered by the global financial crisis in late 2008 spurred the worst contraction in LTL freight revenue in decades, according to The Journal of Commerce’s list of the Top 25 LTL Carriers, prepared by SJ Consulting Group.

The deep declines weren’t evenly spread around, however; as the industry’s revenue collapsed, market share shifted, with the three largest companies drawing closer than ever in market share.

The study throws a spotlight on the severe damage suffered by carriers across the board last year. The LTL industry lost a quarter of the revenue it had in 2008—$8.1 billion—as sales plunged 24.4 percent from $33.3 billion to $25.2 billion. The top 25 carriers, which together represent 87.5 percent of the LTL market, saw their combined revenue fall 23.8 percent last year.

In comparison, the LTL trucking industry shrank less than 1 percent in 2008, and revenue for the carriers was basically flat in 2007 compared to the previous year, despite a downshift some call a ‘freight recession” that began driving down sales for many carriers as early as 2007.

Unusually high fuel surcharge revenue masked declining revenue from tonnage and shipments in 2008, but as the national average diesel price fell from the July 2008 high of $4.76 a gallon to a 2009 low of $2.01 in March, those surcharges were stripped away, baring the real damage done to trucking and freight shipping by the recession.

Over the past three years, the LTL industry lost a quarter of the $33.7 billion in revenue it had in 2006, the SJ Consulting Group study shows, with most of that loss in 2009.

The study ranks the top 25 LTL trucking companies by LTL freight revenue, excluding revenue from logistics services and other types of carriage wherever possible.

As such, the study didn’t delve into the profitability of the industry, but at least five of the top six publicly held carriers—all with more than $1 billion in sales—reported losses for the full year. Only Old Dominion Freight Line of Thomasville, N.C., was in the black for the full year, reporting $34.9 million in net profit—a decline of 49.2 percent from 2008.

In 2009, listed companies’ LTL revenue ranged from $104 million at Oak Harbor Freight Lines of Auburn, Wash., to $4.4 billion at YRC Worldwide, according to SJ Consulting. The top 25 LTL carriers saw revenue drop anywhere from 10 percent to 47 percent.

However, all the carriers among 2008’s top 25 survived 2009. A few carriers on the list in previous years were dropped, however, as their revenue fell below the $104 million threshold set by Oak Harbor in 2009.

The best year-over-year result came from New England Motor Freight of Elizabeth, N.J., which saw LTL revenue fall only 10.1 percent from the previous year.

Central Freight Lines of Waco, Texas, fared worst, with a 47.3 percent drop in revenue. Owned by trucking entrepreneur Jerry Moyes, the regional carrier lost a major account and consolidated its network, SJ Consulting Group said.

The losses were deep enough to go around, however: Nine carriers saw revenue drop between 10 and 15 percent last year; seven saw a decline of 15 to 20 percent; six, a decline of 20 to 30 percent. Only two companies reported declines higher than that.

None of the carriers listed since 2006 went out of business during the recession, although acquisitions consolidated the industry and some companies shut down subsidiaries.

SJ Consulting’s research suggests how intense the competition heated up in 2009 between market leaders YRC Worldwide, FedEx Freight and Con-way Freight, as YRC Worldwide’s seemingly insurmountable market share lead began to whither amid reports of the company’s financial hardships and concerns among many shippers about its long-term viability.

The study ranks YRC Worldwide’s regional group—which consists of LTL carriers New Penn, Holland and Reddaway—separately from YRC National, the integrated nationwide operations of Yellow Transportation and Roadway now known as YRC.

YRC Worldwide is still the largest U.S. less-than-truckload operator, but its national and regional carriers’ share of total LTL revenue dropped 22.5 percent last year to 17.5 percent, according to a survey of the top LTL trucking companies.

That’s about a 30 percent reduction in market share for YRC Worldwide over the past three years. In 2006, YRC Worldwide had 25.1 percent of the LTL market, SJ Consulting said. That slipped to 24.3 percent in 2007 and 22.6 percent in 2008. That slide reflects a 44.3 percent drop in LTL revenue at YRC National, according to the study, which reports YRC Regional’s revenue declined 32.4 percent.

FedEx Freight and Con-way Freight, gained substantial share last year, in part through aggressive pricing that lured shippers away from YRC Worldwide.

FedEx Freight saw the largest gains, increasing its share of the LTL market to 14.4 percent at the end of 2009, the study said. That’s a 4.9 percent increase from the 13.7 percent share it held in 2008, and a 30 percent leap since 2006, when it had 10.2 percent of the LTL market. FedEx Freight acquired Watkins Motor Lines, now FedEx National LTL in 2006, which helped boost its share to 13.1 percent in 2007.

FedEx Freight’s LTL revenue fell 20.8 percent last year from 2008. But for the first time, it outpaced YRC National, a sign of deep network cuts made in the reorganization and consolidation of long-haul LTL operations at YRC Worldwide.

Con-way Freight’s market share rose 4.7 percent in 2009 to 10.2 percent, a 16.7 percent increase from 2006 when its share of the LTL market was 8.5 percent. Its LTL revenue slipped 14.6 percent in 2009, according to SJ Consulting.

Even as LTL’s new “Big Three” carriers draw closer in terms of market share, SJ Consulting’s study underscores the strong concentration of revenue within the industry.

Seven of the top 25 less-than-truckload carriers reported more than a $1 billion in revenue in 2009. Together, they accounted for $16 billion in LTL sales, 63.4 percent of the total revenue of all LTL carriers in the U.S.

That $16 billion is still 25.8 percent less than the $21.6 billion in LTL revenue the same carriers had in 2008.

In addition to YRC Worldwide, FedEx Freight and Con-way, the billion-dollar club includes UPS Freight, ABF Freight System, Old Dominion Freight Line and Estes Express Lines.

The recession squeezed the next revenue class, cutting the number of carriers with LTL revenue of between $500 million to $999 million from six to four last year. They were R+L Carriers, Saia Motor Freight Line, Southeastern Freight Lines and Vitran Express.

Two carriers with more than $500 million in LTL revenue in 2009 moved down to join six others in the $200 million to $399 million ranking, Averitt Express and AAA Cooper Transportation.

Other carriers in that revenue range were Central Transportation International, Roadrunner Transportation, New England Motor Freight, Pitt-Ohio Express, Dayton Freight Lines and A. Duie Pyle.

The number of carriers with less than $200 million in LTL revenue in the top 25 grew from three to five. They were New Century Transportation, Central Freight Lines, Daylight Transport, Wilson Trucking and Oak Harbor Freight Lines.

Journal of Commerce, 3/15/2010