Winter weather, low West Coast demand and rising costs contributed to a $2.5 million first quarter net loss at truckload carrier Covenant Transportation.
“Our number of loads from the West Coast states declined over 17 percent from the prior year quarter,” said David R. Parker, chairman, president and CEO of Covenant.
West coast freight demand improved steadily in recent weeks, Parker said, who noted average freight revenue per total mile rose 5.1 percent in the quarter.
That increase in yield indicates truckload rates continued to rise — but so did costs.
Total freight revenue decreased 3.8 percent to $124.4 million. First quarter freight revenue dropped 8.9 percent from $136.6 million in the fourth quarter.
Total revenue, including freight surcharges, rose 2.9 percent to $156.4 million.
Covenant is one of many truckload carriers struggling to find the right freight at the right price in the right lane and balance higher rates with higher operating costs.
The Chattanooga, Tenn.-based company returned to profitability in 2010 with $3.3 million in net income on $546.3 million in freight revenue after four years of losses.
This year’s severe winter storms led to 43 percent more fleet shutdowns than Covenant experienced in the 2010 first quarter, company executives told analysts.
While total West Coast loads decreased 17 percent, expedited traffic from the West Coast dropped 24 percent, in part an indication of how disruptive the storms were.
The long-haul truckload carrier’s miles per tractor decreased 5.8 percent year-over-year, and average length of haul increased 3.1 percent to 886 miles.
Covenant also increased driver pay on a cent per mile basis in the first quarter, a wage hike partially offset by reduced workers compensation and insurance costs.
Fuel price hikes were harder to offset. The cost of diesel was up 27 percent over the first quarter a year ago and 15 percent from the fourth quarter, Parker said.
Any rapid run-up in diesel prices makes it difficult to quickly recover costs through fuel surcharges, which typically are adjusted weekly based on federal price data.
Covenant will “partner with customers to favorably adjust fuel surcharge programs which are inadequate to recover a fair portion of rising fuel costs,” Parker said.