ODFL set to raise rates, effective July 1

Less-than truckload (LTL) transportation services provider Old Dominion Freight Line (ODFL) announced today it plans to increase is rates for non-contractual freight in the form of a 4.9 percent general rate increase, effective July 1.

ODFL officials said the exact increase may differ for customers based on a number of variables, including the lanes utilized and the distance shipments move.

“The increased rate provides for a nominal increase in intrastate, interstate and cross-border lane charges,” ODFL said in a statement. “The new rate will also offset the rising costs of new equipment and insurance, while preserving competitive wages and benefits for employees.”

Many of ODFL’s LTL brethren have released mid-year rate increases of their own, including:

• Con-way Freight, the LTL subsidiary of transportation and logistics services provider Con-way Inc., will implement a 5.9 percent GRI for non-contractual business that will take effect on June 24;
• FedEx Freight announcing a 4.5 percent GRI scheduled to take effect July 1;
• UPS Freight rolled out a GRI increase of 5.9 percent for non-contractual shipments in the United States, Canada, and Mexico, which went into effect on June 10. The company set this increase applies to minimum charge LTL and truckload rates and accessorial charges;
• ABF said that it is revising its general rates and charges for its freight division, with rates increasing by about 5.9 percent, effective May 28, noting that the effect on specific lanes and shipments will vary. Company officials said the new rates can be viewed at http://www.abf.com; and
• YRC Freight rate increase kicked in June 3 at 5.9 percent for all non-contractual shipments in the United States, domestic and cross-border Canada, and Mexico, with the company explaining that the GRI will offset cost pressures for things like driver shortages and also to allow for investment in technologies and processes for compliance with new hours of service legislation and CSA safety initiatives

As LM has reported, there are many drivers contributing to the turnaround occurring in the LTL sector, including a sharp focus on yield management and contractual relationships, coupled with an ongoing commitment to service reliability. But even with this positive momentum, it is clear challenges still remain as volumes and the general economy remain below or near pre-recession levels seen in 2007 and earlier.

That situation, though, could also be changing, with the housing and automotive sectors showing signs of improvement, with consumer confidence also hitting higher levels, too.

A recent research note from Wolfe Trahan noted that while some LTL carriers have been asking for up to 6 percent rate increases, a shipper told the Wall Street firm that on average the increases have been closer to 2-3 percent year-to-date, due to the shipper’s consistent volumes, history with carriers, and her company’s short payment history.

Many LTL executives have told LM they view the current rate environment as “rational,” especially when compared to 2009-2010, when they were doing whatever they could to hold onto business while sacrificing price for volume to keep freight moving in their costly fixed network operations.

And other industry stakeholders have pointed out that there is no question that LTL rates are starting to firm up on the yield side and it has become a focus for carriers—with all having some sort of yield improvement process to raise rates.

Satish Jindel, president of Pittsbugh-based SJ Consulting, explained in a recent interview that while truckload and parcel carriers often see double-digit margins, LTL carriers are typically at the other end of the spectrum with low, single-digit margins.

“This is not because LTLs have a bad cost structure or because they are all bad operators,” said Jindel. “It is just that the industry has slacked some pricing discipline, and shippers have been able to leverage the multiple carriers they use in a way where they have been able to get lower pricing. Shippers may not like to hear this, but they don’t benefit from unprofitable carriers no matter which segment of the industry they are in.”