Fuel costs are still high and freight volumes remain sluggish, yet many carriers report that the market for their services is stabilizing – both in terms of capacity and, more importantly, rates.
“Targeted growth initiatives, implemented late last year at our LTL unit, continued to produce market share gains,” noted Douglas Stotlar, president & CEO of Con-way Inc., in the company’s second quarter earnings statement. “We also began to see indications of a more stable pricing environment in the quarter.”
Stotlar added that, in the truckload sector, the weak economy drove a reduction in capacity as carriers continued to exit the market throughout the first half of 2008. “The trend of capacity leaving the market is improving the supply/demand balance which is benefiting Con-way Truckload,” he said. “Our truckload unit did an excellent job in managing costs, and taking advantage of synergy opportunities with its sister companies to reduce empty miles and improve asset utilization.”
“Although we are not satisfied with our recent results, we are encouraged and cautiously optimistic that the second quarter reflected a first step toward a more favorable relationship between freight tonnage and industry-wide trucking capacity,” added Kevin Knight, chairman & CEO of truckload carrier Knight Transportation.
“Our progress during the quarter was attributable to a modest improvement in freight demand, what appears to be a shrinking of available truckload capacity, vigilant management of our asset-based fleet, and continued growth in our non-asset based brokerage operations,” he noted in the company’s second quarter report. “Until the second quarter of 2008, we had experienced declining asset productivity in our dry van and refrigerated operations for several quarters.”
Both Con-way and Knight managed to book profits in the second quarter as well, despite the myriad of challenges they faced. Con-way reported net income of $48.7 million on 24.8% higher revenues of $1.34 billion compared to the same period in 2007, while Knight posted net income of $12.7 million – down $5.5 million compared to last year – on 14.4% higher revenue of $206.1 million compared to the second quarter of 2007.
“The short-to-medium dry van market, in particular, experienced increased competition from traditionally long-haul carriers that are seeking shorter loads to avoid price competition with intermodal service,” Knight noted. “The refrigerated market showed encouraging strength in May and June, and all of our asset-based operations seemed to be shifting toward market equilibrium of capacity and demand as the quarter unfolded.”
So despite the continued aggravation of high fuel prices, several carriers have now at least right-sized their fleet capacity and are seeing steady – and, in some cases, growing – demand for service.
“We continued to perform well in the second quarter of 2008 relative to a period in which rising fuel prices and an uncertain economic environment created challenging industry conditions,” said Earl Congdon, executive chairman of LTL carrier Old Dominion Freight Line, noting that net income increased 6% to $23.9 million on 16.2% higher revenues of $417.8 million compared to the second quarter of 2007.
“Our revenue growth for the quarter primarily resulted from a 10.2% increase in tonnage, which slightly exceeded our expectations at the beginning of the quarter,” Congdon added. “The tonnage growth was a result of a 7.1% increase in weight per shipment and a 2.8% increase in the number of shipments. Revenue per hundredweight increased 5.4% as compared to the second quarter of 2007 due mostly to the impact of higher fuel prices on our fuel surcharges. We believe that the overall pricing environment has somewhat stabilized [though it] remains challenging.”