This article was corrected Friday, April 7, 2011.
The modest economic recovery in 2010 pumped life back into pummeled less-than-truckload carriers, filling trailers with enough freight to push up revenue 9.8 percent at the top 25 LTL trucking companies, to $24.2 billion.
That marked the biggest annual LTL growth spurt since 2005, when a 9.9 percent increase in revenue took trucking companies to the top of the last economic cycle.
But last year’s gains represented only a partial recovery from 2009, when those same companies suffered the worst contraction in LTL freight sales in decades, according to The Journal of Commerce’s list of Top 25 LTL Carriers, prepared by SJ Consulting Group (see rankings, page 46).
The LTL trucking industry lost almost a quarter of its 2008 revenue — $8.1 billion out of $33.3 billion — in the 2009 recession and regained only $2.3 billion in 2010. Total industry revenue rose from $25.2 billion to $27.5 billion last year, according to the Pittsburgh-based transportation consulting firm.
The recovery was widespread last year, with all but two of the top 25 carriers returning to revenue growth after shrinking in 2009. That’s a gratifying turnaround for a group of companies whose sales dropped between 10.1 and 47.3 percent in 2009 with the collapse of freight shipping. But not all carriers bounced back equally last year. Growth rates among the Top 25 ranged from 2 to 30 percent.
This year’s list of Top 25 LTL carriers underscores the high level of concentration in the LTL industry. The 25 largest carriers together command 87.6 percent of the market.
Nine trucking companies with more than $1 billion in sales accounted for 77.1 percent of the $27.5 billion in revenue reported by the carriers making the 2010 list and 67.5 percent of the total LTL market. That’s a 16 percent increase from 2009 for the “billion-dollar club.” R+L Carriers of Wilmington, Ohio, rejoined that club in 2010, increasing its LTL revenue 12.2 percent after it slipped to $960 million in 2009, SJ Consulting estimates.
In addition to R+L, the members of the billion-dollar club include FedEx Freight, Con-way Freight, YRC’s national and regional carrier groups, UPS Freight, ABF Freight System, Old Dominion Freight Line and Estes Express Lines.
The revenue of the LTL carriers that didn’t make the Top 25 list — hundreds if not thousands of smaller regional and local companies that handle palletized freight — shrank 22.7 percent over the past two years to $3.3 billion. That’s a billion dollars less than the revenue of the largest stand-alone LTL carrier alone.
The SJ Consulting Group study ranks the top 25 LTL truckers by LTL freight revenue, excluding business from logistics and freight brokerage services and other types of carriage, including truckload and intermodal divisions, where possible.
In 2010, the LTL revenue at the Top 25 carriers ranged from $114 million at Ward Trucking of Altoona, Pa., to $4.4 billion at Memphis-based FedEx Freight.
Ward Trucking made the list for the first time since 2007, while Wilson Trucking of Fishersville, Va., dropped out of the Top 25 with 2010 LTL revenue of $113 million, SJ Consulting said.
None of the carriers listed in 2009 went out of business, one of the odd outcomes of the downturn that held true through most of the transportation world. After Jevic Transportation’s shutdown in May 2008, no operators with significant LTL operations closed their doors during the downturn, although there has been some minor consolidation this year at the smaller end of the spectrum.
Roadrunner Transportation of Cudahy, Wis., had the strongest growth last year, increasing its LTL revenue 29.7 percent in 2010. Roadrunner moved two rungs higher on the list to rank as the 14th-largest LTL trucking operator.
Four companies expanded their top line more than 20 percent last year, while 13 carriers increased revenue from 10 to 20 percent. Only seven of the top 25 carriers experienced single-digit growth in 2010, ranging from 1.9 at New England Motor Freight to 9.9 percent at Central Freight Lines.
Only one carrier on the list saw its revenue drop in 2010: national LTL carrier YRC of Overland Park, Kan. YRC National’s LTL revenue fell 16.8 percent, according to the study. That compares with a 44.3 percent drop at YRC in 2009. YRC Worldwide’s regional group of carriers — Holland, New Penn and Reddaway — shifted out of reverse and increased LTL revenue 2.5 percent last year and ranked eighth on the list of Top 25 carriers.
SJ Consulting’s research tracks the rapid slide of YRC National’s revenue and market share. YRC, long the largest LTL carrier, is now third in market share by revenue, behind FedEx Freight and Con-way Freight. YRC’s share of the LTL market dropped 9.1 percentage points from 2006 through 2010, to 9.6 percent.
The fight for market share has been costly for the carriers at the top. YRC parent company YRC Worldwide lost $322 million in 2010, compared with $622 million in 2009. FedEx Freight lost $250 million over its last four quarters and ABF Freight System, $58 million in 2010, according to company reports.
With R+L’s ascent, the number of carriers in the $500 million-to-$999 million revenue range dropped to three: Saia, Southeastern Freight Lines and Vitran Express. Eight companies were in the $200 million-to-$499 million range: Averitt Express, Roadrunner Transportation, AAA Cooper Transportation, Central Transport International, New England Motor Freight, Pitt Ohio, Dayton Freight Lines and A. Duie Pyle. The number of carriers with less than $200 million in LTL revenue in the Top 25 remained constant at five: New Century Transportation, Central Freight Lines, Daylight Transport, Oak Harbor Freight Lines and Ward Trucking.
SJ Consulting doesn’t delve into the profitability of the LTL industry, but seven of the top 10 LTL carriers are publicly owned, and three of them lost money in 2010.
That’s a marked improvement over 2009, when only two of those public carriers, Old Dominion Freight Line and Con-way Freight, were profitable. (Although Con-way Freight had a $51.3 million operating profit in 2009, its parent company, Con-way, lost $110 million, with $107 million in losses at its truckload division.)
Thomasville, N.C.-based ODFL not only stayed in the black last year, it also boosted its net profit 116.9 percent to $75.7 million, making it the most profitable publicly owned LTL carrier. Ann Arbor, Mich.-based Con-way Freight’s operating profit fell 44 percent to $28.9 million, even as its LTL revenue rose 17.5 percent to more than $3 billion, surpassing its previous sales record in 2008.
Commentary: Trucking's Big Shift.
The sharply different results at Con-way Freight and ODFL reflect divergent pricing and operating strategies that echoed across the LTL landscape last year, softening the rebound for some carriers and giving others a boost. Con-way Freight struggled much of last year to strike a balance between price and volume. The carrier, which slashed rates during a bitter price war in 2009, was thrown off kilter when a surge in inventory restocking swamped Con-way with low-priced freight in the second quarter of 2010, raising operating costs. Con-way gained market share, rising to the No. 2 position, at the expense of higher profits.
ODFL kept rate discounts in check during 2009, even as net profit fell nearly 50 percent and LTL revenue dropped 20.8 percent, according to SJ Consulting estimates. Its operating ratio rose from 88.9 in the third quarter of 2008 to 96.6 in the first quarter of 2009, the height of the recession. ODFL’s focus on the profitability of individual shipments, accounts and lanes helped reverse that trend and drive the operating ratio back to 90.7 for 2010. The carrier’s LTL market share rose from 4.4 percent in 2008 to 5 percent in 2010.
In the incomplete recovery, many LTL carriers say they plan to follow ODFL’s lead and focus their energies on building profit, rather than pursuing market share. They can’t afford to do otherwise. LTL carriers need to increase profitability and raise rates to reinvest in their businesses and cover rising operating costs.
The company that casts the longest shadow over the Top 25 is YRC Worldwide. YRC’s survival despite more than $2.5 billion in losses since 2006 has done as much to shape the LTL industry as its oft-predicted bankruptcy would have.
In previous economic recessions, at least one major LTL carrier exited the business. In 2002, it was Consolidated Freightways. That company’s collapse shortly before Labor Day that year sent LTL rates soaring and realigned an entire market.
That didn’t happen in 2009 when YRC Worldwide fended off attempts to price the carrier out of business, won major labor concessions and narrowly avoided bankruptcy.
YRC’s survival — still not a sure thing in 2011 — is forcing many carriers on the Top 25 list to take a more measured approach to growth in what looks likely to remain a slow recovery in an uncertain and volatile global economy.
Contact William B. Cassidy at firstname.lastname@example.org.