ODFL announces rate hike

Following the lead of its industry brethren, less-than-truckload (LTL) transportation services provider Old Dominion Freight Line (ODFL) said it is increasing its base rates by roughly 4.9 percent, effective November 15.

ODFL Vice President of Pricing Todd Polen said in a statement that this rate increase “involves a restructure that provides for increases in ODFL’s rates that are based on length of haul rather than traditional across the board increases.”

He added that the tariffs affected by this pending increase are the ODFL 559/555 and the 505 Canadian tariffs, with the rate increase also providing for a nominal increase in minimum charges in Intrastate, Interstate or cross border lanes.

In recent weeks, several other major LTL players have announced general rate increases for non-contractual freight that have already taken effect or will be early next year.

Some of the recent GRI increases by LTL carriers include YRC Worldwide, ABF Freight Systems and UPS Freight all at 5.9 percent and UPS Freight at 6.9 percent.

As LM has reported, anecdotal evidence suggests that many LTL carriers are seeing rates recover and as a result are turning their attention to rate increases, following a difficult 2009 which saw LTL carriers hone in on volume gains with pricing power largely diminished due to weak demand.

But, now, it is a different story as LTL carriers are seeing improvements in pricing, volume, and weight per shipment in recent months, according to industry analysts and company data.

Last month, an LTL executive told LM that LTL rates are definitely firming up on the yield side, and it has become a focus for carriers—with all LTL carriers having some sort of yield improvement process to raise rates in place.

A research report from Stephens Inc. said that there is not always a direct correlation between GRI’s and overall rates.

“Our studies have found that, historically, GRIs have little correlation with rate performance over the following year, as supply/demand dynamics are the true drivers,” according to Stephens. “To be sure, we do see the opportunity for these “out-of-cycle” GRIs to have some positive impact as 1) LTL pricing has been artificially deflated, 2) large players are reducing their network size, and 3) concerns about YRCW’s survival are beginning to weigh on shippers’ minds. However, absent a YRCW failure, we think Street estimates overstate the impact of GRIs and understate the incremental costs coming back on line in FY11.”