The well publicized financial troubles of Yellow Roadway Corporation (YRC) have brought into question the future of the LTL market. However, after months of speculation and turmoil, YRC has seen a few big wins in the first half of 2009.

First, YRC was able to hold off a Q2 EBITA covenant with creditors and negotiated a 10% employee wage reduction with the teamsters union. As of last week, an additional 5% wage cutback was in the works, as well as an 18 month pension freeze that would save up to $900 million.

Next, YRC was able to push back $83 million in pension payments until January 2010, using the company’s real estate as capital.

YRC also completed the integration of Yellow and Roadway in March of this year, a milestone the company believes will provide accelerate month over month operational efficiencies and bottom line improvements.

Even with these changes, the economy is still hurting, with no real recovery on the near horizon. Without a major uptick in moves, it is unclear if YRC’s recent wins will keep the company viable or simply delay the inevitable.

So who stands to gain from an LTL market without YRC? Right now YRC companies have about 23% of the market share, according to the March issue of Logistics Management. FedEx Freight comes in second with 14%, followed by Con-Way at 9% and UPS Freight at 6%. On the face, it looks like the remaining big three have the most to gain, and they are already looking for ways to distinguish themselves from the rest of the pack. Examples:

FedEx recently implemented a guaranteed Next Day before 10:30 AM expedited service, similar to their offering in the small parcel arena.

UPS announced improvements in standard transit times for over 1,000 lanes Southeast and Southwest.

Con-Way introduced capped pricing on large LTL shipments. No LTL shipment will cost more than a truckload shipment in the same lane – a major beef for many shippers.

The United States Postal Service is also eyeing entry into the LTL market on a national basis, as the low cost (and low service) alternative.

That said, there is currently excess capacity across the board, a trend that is likely to continue over the next few months. Much the way DHL exited the U.S. market without any takers on their domestic business, with so much capacity available, it is unlikely any of the major players will look to pick up YRC in total - should they fail. However, YRC is really a network of many regional carriers, so look for profitable segments of the company to split off or get absorbed.

Regardless of what happens to YRC, look for terminal closures and extended standard transit times at a national level in the near term. Expectantly, shippers will begin to reconsider their one-carrier-fits-all approach and turn (back) to regional players such as Southeastern, Pitt-Ohio, and New England Motor Freight, that can provide shorter transit times and a lower cost, but do not have a national presence. Overall, these Regional’s and Super-Regional’s have the most to gain, as it appears the national market can only absorb a certain number of major players providing the same basic point to point options, transit times, and costs.
Share To:

Joe Payne

Post A Comment:

1 comments so far,Add yours

  1. After the demise of DHL carrier there are three major companies left. FedEx, UPS and USPS ( United States Postal Service ). There is not a single carrier better than other. It is harder for a layman to know which one will be best for the destination he or she is sending the package. You have to know your package. All carriers are charging the rates according to dimensions, destination and service type. According to me, if you are sending a light weight package, then USPS priority mail service is the best way to go. Also USPS has "Flat Rate Boxes" with few different dimensions which is good for cross country shipment for a fixed price ( I believe $ 9.99 ). If it fits in that box then it ships.