Pricing Across the Transportation Modes

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 4/1/2006

TRUCK

Average prices charged by trucking companies fell 0.2% from January to February. The impetus for this small price cut came from local general freight haulers, where tags dropped 1%, and long-distance carriers of specialized freight (such as chemicals in tanker trucks), where prices declined 0.6%. Prices for hauling truckload and less-than-truckload freight held steady from January to February, but were up a respective 3.6% and 6.8% compared to February 2005. New cost-model analysis shows the trucking industry’s overall costs rose 2.4% in the 12-month period ending February 2006. Direct wages for truckers were up only 1.1% while indirect labor and benefits costs were up 3.9%. By comparison, aggregate industry prices increased 5.6% over the same time period.

In February average prices for cargo on scheduled U.S. airlines jumped 6.7% from year-ago levels. Worse yet, international and domestic air courier prices soared 17% and 8.6%, respectively, during the same time frame. Looking at the total (passenger and cargo) U.S. air transportation industry, we see that airlines are finally asserting some pricing power. Average industry prices were up 6.7% in the 12 months ending February 2006. That was a sharp increase from the 3.1% price escalation seen six months earlier, and an enormous increase over the meager 0.01% rate set 12 months ago. New analysis shows the airline industry has a good handle on labor costs, which slowed to a 2.2% escalation rate in the year ending February 2006. Spending on all non-labor items, however, accelerated by 3.3%.

Rate inflation reported by inland waterways carriers continues to be a problem. According to the latest surveys by statisticians at the U.S. Bureau of Labor Statistics, average prices for shipping on inland waterways jumped 11.4% in February. That one-month hike more than offset January’s 10.8% price decline. If this number survives the regular revision process, then it’s fair to say that the inflationary effects of Hurricane Katrina are lingering far longer than we had forecast. During the 12-month period ending February 2006, inland waterways prices were up 19%. At the same time, looking at the entire water transportation sector, service providers reported an average 5.1% price hike while industry costs increased 2.8%.

Here’s a switch: The prices reported by rail carriers for carload shipments were weaker than expected, while those for intermodal railroads were stronger. In February average carload tags fell 0.3% on the heels of a 1.2% decline in January. Intermodal prices, meanwhile, rose by 0.1% in February and 0.3% in January. Looking at price trends over a longer period, we see in the 12 months ending in February that prices for carload service were up 12.1% and intermodal was up 6.6%. Our new cost model for the railroad industry shows total costs increased 2.5% in the year ending in February. The rail industry’s spending on other transportation services and warehousing, which accounted for 14.9% of total costs, increased 3%.