Three LTLs Up Rates 5.9%, Push Effective Dates 6 Weeks

This story appears in the June 10 print edition of Transport Topics.

Three of the largest less-than-truckload carriers recently announced 5.9% rate increases, continuing a trend of accelerating the timing of rate adjustments.

The increases at YRC Freight, ABF Freight System and UPS Freight began to take effect six weeks earlier than last year’s increases, which took effect in July. Other LTL carriers didn’t immediately follow suit, but several indicated an increase is expected.

“The companies moved to announce increases while they could,” said David Ross, a Stifel Nicolaus analyst, noting that the moves preceded a June 3 report showing the lowest optimism about manufacturing since mid-2009. “They need to do price increases because they can’t count on increased freight density in the current economy, and they need the added revenue to reinvest.”

“The trend is not really an annual rate increase anymore,” Ross said. “It’s turned into an 11-month cycle.”

LTL pricing actions have been moving earlier each calendar year since 2007, when they were made in December. During the depths of the recession, loss-plagued LTL fleets tried to increase prices twice in one year, Ross said.

Union carriers ABF and UPS announced the rate increases soon after negotiating new tentative contract agreements with the Teamsters union. Neither of those deals has been ratified.

ABF parent Arkansas Best Corp. said during its contract talks that it would need to improve pricing and lower costs to restore profitability.

ABF’s losses have mounted in recent years, resulting in a 105.5 operating ratio in the first quarter, as much as 10 percentage points worse than its pre-recession levels.

UPS doesn’t disclose profitability of its freight unit.

The first effective date of an increase was May 28 at ABF, Fort Smith, Ark., with YRC, Overland Park, Kan., following June 3 and UPS Freight, Richmond, Va., on June 10. Last year, the earliest effective date was July 9.

“The general rate increase will offset cost pressures, such as those associated with driver shortages, and enable additional investment in technologies and processes for compliance with new hours-of-service legislation and CSA safety initiatives,” YRC said in a May 20 statement posted on its website.

Ross pointed out that LTL rate increases don’t apply to contract shipments that cover 60% to 80% of the freight moved by those fleets, with the amounts varying from carrier to carrier.

Carriers such as Estes Express, Richmond, and Oak Harbor Freight Lines, Auburn, Wash., said an increase is coming.

“Estes will implement a general rate increase, but the amount and effective date is being evaluated,” said Paul Dugent, vice president of pricing at Estes.

Troy Jensen, director of pricing and information technology for Oak Harbor, said the company in mid-June plans to announce an increase similar to the 5.9% figure.

Con-way Freight spokesman Gary Frantz said the company is working on its rate increase plan, but no details have been finalized.

Others were less specific.

“There are several factors we consider before changing our shipping rates, including the costs of doing business and the need to adjust to the economic environment in the marketplace,” FedEx Freight spokesman Brian Anderson said. “We have nothing to announce at this time.”

FedEx was the first to raise prices last year, announcing a 6.9% increase. Its competitors followed with similar increases. The smallest 2012 increase was 4.9% at Old Dominion Freight Line, whose 2013 pricing plans haven’t been disclosed.

Geoff Muessig, executive vice president at Pitt Ohio, said the Pennsylvania carrier doesn’t do general rate increases like YRC and others just announced.

“We choose to evaluate each account on an individual basis to gain a better understanding of the account’s growth opportunities and cost drivers,” Muessig said. “In many instances, we find that our price covers our costs and that we can forgo a rate increase with an account.”

YRC’s regional carriers — Reddaway, Holland and New Penn — have not posted rate increases.

UPS Freight said its increase also is being applied to LTL shipments if a single load was so large that it filled a trailer and no other freight could be accommodated.