In the wake of the third-largest U.S. less-than-truckload carrier folding its operations, the LTL market has undergone a radical capacity shift. “We are seeing a reshuffling of the deck of freight,” an LTL expert told FleetOwner after Yellow Corp., which was No. 6 on the 2023 for-hire FleetOwner 500, filed for bankruptcy.
“Carriers are using the Yellow collapse as an opportunity to not only take advantage of the supply-side shock to lift rates but to optimize the freight they’re moving,” Kevin Day, president of LTL at AFS Logistics, explained. “They have this influx of volume looking for a home, and they’re evaluating it against their existing volumes. If there’s something from former Yellow customers that fits their network better, they’re looking to purge over-length, lightweight, and less desirable freight.”
AFS Logistics is a cost-management, supply chain optimization, managed transportation services provider and a less-than-truckload broker with a non-asset-based third-party logistics role.
See also: Estes enters as serious financial backer in Yellow bankruptcy
“This is being handled through mid-contract, out-of-cycle pricing actions,” Day added. “Shippers get notice of a major increase or change in accessorial charge, and they’re given the choice to accept it or cancel their contract.”
Yellow, which has an estimated $1.5 billion in debt, filed for bankruptcy protection on Aug. 6 and is looking to sell off its equipment and real estate by mid-October, according to its filings and hearings so far before the U.S. Bankruptcy Court District of Delaware. The next hearing in the Yellow bankruptcy case is Aug. 17, so much more likely will be known after that proceeding. The company and its subsidiaries held 12,700 tractors (about 1,000 of them leased) as well as 42,000 trailers (of which 7,200 are leased), 169 terminals, and six warehouses run by its Yellow Logistics subsidiary.
Rival LTL carrier Estes Express Lines (No. 11 on the FleetOwner 500 and the fifth-largest LTL in the U.S.) is offering to help fund Yellow’s short-term efforts to wind down its operations through Chapter 11 bankruptcy proceedings. Yellow executives and attorneys said they expect those asset sales to generate enough money to repay the company's loans and other obligations, including a $700 million pandemic-era loan that the Trump administration granted that gave U.S. taxpayers a 30% stake in the now-defunct carrier. Experts doubt Yellow's ability in bankruptcy to successfully repay the CARES Act loan, which has fallen under much scrutiny.
Yellow’s volumes plunged leading up to its demise
Yellow's shipment volumes fell almost as soon as the International Brotherhood of Teamsters—the union that represented about 22,000 Yellow employees—issued a strike threat on July 17 with a deadline of July 24.
According to bankruptcy filings, Yellow handled about 40,000 shipments for customers on July 17, which was about 20% less than its 2022 average. "The next day, Yellow's shipments declined to approximately 30,000,” Matt Doheny, Yellow’s former board chairman, now its chief restructuring officer, wrote in filings. “By Wednesday (of that week): approximately 20,000. By Thursday: approximately 10,000. By Friday: near zero."
Doheny, who served as the fleet’s chairman since 2019 and was a director with the company since 2011, added: “Any realistic prospect of obtaining out-of-court financing dried up… Yellow's customers are gone."
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By July 24, a strike by the Teamsters had been averted but the 99-year-old trucking company also had stopped accepting freight.
AFS Logistics’ Day named some carriers benefiting from Yellow’s exit: “We’re seeing this mainly with a handful of national carriers mainly concentrated in the Midwest and West Coast who most closely resemble [YRC Freight, Yellow’s national LTL] pricing, such as XPO,” which is the No. 12 for-hire FleetOwner 500 carrier. (XPO's executives said two days before Yellow filed Chapter 11 papers that they were seeing big increases in shipments because of Yellow's demise.)
Day said another example of these pricing changes is Saia (the No. 21 for-hire FleetOwner 500 carrier) changing their “rules tariff” on smaller, lightweight shipments. “Every carrier has a rule in their tariff called the ‘cubic capacity minimum,” he added. “Standard is 750 cubic feet, and greater at 6 pounds per cubic foot or less, it could be an alternate rate, or it could be the regular—whichever is highest. Theirs is now 350 to 750 cubic feet at 4 pounds per cubic foot. It’s targeted to get rid of light, fluffy freight, and smaller-size shipments.”
Saia's changes don't appear to have hurt its ability to pick up business from former Yellow customers: On Aug. 15, the company's leaders said that LTL shipments per workday climbed 6.0% year over year in July—after being down nearly 4% in the second quarter—and are up a whopping 13.0% per August workday so far. As with XPO's Yellow bump, Saia's weight per shipment has trended down as a result: 2.4% year over year in July and 6.2% so far this month.
Day concluded: “Transportation is cyclical, and oftentimes these carriers will aggressively pursue market share via favorable pricing when they’re competing for softening demand, then the pendulum swings back the other way and shippers can find themselves on the receiving end of aggressive pricing actions.”
Editor-in-Chief Josh Fisher and Senior Editor Geert De Lombaerde contributed to this story.
