LTL news: Rate increase on tap for Old Dominion Freight Line

Less-than-truckload (LTL) transportation services provider Old Dominion Freight Line (ODFL) is the latest LTL entrant to announce a second half 2011 general rate increase.

Effective September 6, ODFL will implement a GRI of roughly 4.9 percent, according to ODFL Vice President of Pricing Todd Polen.

“The general increase is in keeping with our long-term pricing philosophy and as such involves a restructure that provides for increases in our rates based on length of haul rather than the traditional across the board increases,” Polen said in a statement. “The tariffs affected by the Sept. 6, 2011, increase are the ODFL 559/555 and the 505 Canadian tariffs. The rate increase will also provide for a nominal increase in minimum charges in Intrastate, Interstate or cross border lanes. Although each customer will have a different financial impact based on the lanes and distance their shipments move, the overall impact of the increase is approximately 4.9 percent. Similar increases will also be taken on Alaska, Hawaii, Puerto Rico, Caribbean, Canada and Mexico.”

This increase follows matching 6.9 percent increases announced in recent weeks by UPS Freight, YRC, and Con-way, Freight, which took effect on August 1, and ABF Freight System, whose increase kicked in on July 25. FedEx Freight recently unveiled a 6.75 percent GRI bump, effective September 6.

Satish Jindel, president of Pittsburgh-based SJ Consulting, recently told LM that these rate increases are a good thing, because the LTL industry needs to become more profitable.

“The market is getting tighter, and it is a good time for this,” he said. “Capacity is part of this in terms of the two types of capacity the industry deals with: one being fixed capacity and the other being variable capacity.”

Regarding the latter, Jindel said it is very tight at the moment, as it involves driver availability, which is very challenging at the moment.

While raising rates is seen as key for recovering revenues lost during the recession, Jindel said there are other effective ways to address this situation. One way is for LTL carriers to charge for what they actually handle.

A recent research note from Ed Wolfe at Wolfe Research cited an LTL carrier as saying its recently implemented GRI was sticking, “although it could become more difficult to gain further price increases if the economy continues to slow materially.”