DELANCO, N.J.—Due to various market conditions, Jevic Transportation Inc., a regional less-than-truckload (LTL) carrier providing services in the Northeast, announced it has discontinued operations as of May 19.

In a letter to customers, Jevic President and CEO David H. Gorman said “the current high fuel costs, economic downturn, increasing insurance costs, and tightening credit markets have made this decision necessary.”

With market conditions in the LTL sector remaining unsteady and capacity continuing to outstrip demand, this news did not catch many off-guard.

According to Satish Jindel, president of SJ Consulting Group Inc., a Pittsburgh-based transportation consulting firm, this may be a glimpse into the future of the LTL industry, adding that it’s possible that $1 billion worth of capacity may exit the LTL market between 2008 and 2009.

According to Jindel, Jevic was a “hybrid” company, with both LTL and light truckload services and no breakbulk services. Another company that previously attempted this model was G.O.D.; however, according to Jindel, G.O.D. had trouble with service and as well as establishing a value proposition for shippers.

“With the way market capacity has been greater than demand, companies of this kind will struggle because it’s difficult for customers to understand what the true value proposition is,” said Jindel. “Other companies with revenues in the $50- to $100-million revenue range are likely to experience these types of challenges in the next four-to-six quarters.”

Even though Jevic is exiting the marketplace, Jindel said that this news will not affect market dynamics from a shippers’ point of view. He said that if carriers are not able to cover their operating costs, and if carriers are unable to recover fuel costs, it’s inevitable that the LTL industry will end up with fewer carriers.

“And carriers without proper pricing that allow them to recover total costs and earn reasonable margins may face the same demise as Jevic” he added. “Being aggressive on pricing where it affects your financial stability,” is a deadly approach to staying in business,” said Jindel.