Con-way Freight to implement 6.9 percent GRI, effective July 9
June 22, 2012
Con-way Freight, the less-than-truckload subsidiary of Con-way Inc., is the most recent LTL carrier to roll out a mid-year general rate increase (GRI).
The company said yesterday that a GRI averaging 6.9 percent for non-contractual business will take effect on July 9. And it added that the GRI will be implemented for customers on the company’s CNW 599 tariff and will apply to general LTL rates, minimum charges and accessorial or supplemental fees for special services associated with LTL shipments moving within the United States and Canada, as well as cross-border shipments moving between the U.S., Puerto Rico and Canada.
“The effect of the rate increase will vary for individual customers and shipments based on characteristics such as geography, lane, product classification, weight and dimensions,” said Con-way officials.
Other LTL carriers recently announcing rate hikes include FedEx Freight’s 6.9 percent GRI, effective July 9 and ABF’s 6.9 percent GRI increase announced on June 11. ABF did not specify when the rate increase would take effect.
As LM has reported, the LTL sector has made up significant ground from the depths of the Great Recession. This is due, in part, to tighter capacity and steady rate gains since 2010.
What’s more, there are many drivers contributing to the turnaround occurring in the LTL sector, including a sharp focus on yield management and contractual relationships, coupled with an ongoing commitment to service reliability. But even with this positive momentum, it is clear challenges still remain as volumes and the general economy remain below pre-recession levels seen in 2007 and earlier.
In an interview with LM, Satish Jindel, president of Pittsburgh-based SJ Consulting, said that this 6.9 percent is in line with previous increases made by many LTL carriers in 2011 and about 1 percentage point higher than 2010 LTL increases, which were in the 5.9 percent range. Many LTL carriers rolled out multiple rate increases in 2010—in the first and fourth quarters.
“In LTL, a much smaller percentage number of customers experience these rate increases,” he said. “LTL’s have to cover the higher costs of supporting all their customers from a smaller group of customers [with the 6.9 percent GRI]. And the LTL industry as a whole struggles with getting a return on its operations.”
With three of the major LTL players having introduced rate increases in recent weeks, it stands to reason that more are on the way.
Stifel Nicolaus analyst David Ross wrote in a research note that LTL’s should continue to have the upper hand over shippers when it comes to pricing power.
“During 1Q12, LTL yields (excluding fuel surcharges) continued to climb from the late 2009 trough, and we expect them to continue rising through 2014, even as comps get tougher, because they are still a good bit away from where they need to be, in our opinion,” wrote Ross. “Given increased price rationality among competitors and the structural tightening in active capacity (# of trucks and people moving LTL freight), we believe pricing power should remain with the carriers as long as capacity and pricing remain rational.”
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