LTL industry taking rate increases as volumes drop

Across the industry, GRIs are coming in level or a little light of last year’s increases as freight demand has moderated from the all-time highs that extended into early 2022. Recent updates from carriers show that year-over-year tonnage declines accelerated during November. Old Dominion and Saia (NASDAQ: SAIA) reported high-single-digit declines while Forward Air (NASDAQ: FWRD) and Yellow (NASDAQ: YELL) recorded declines of roughly 20% or more during the month.

The LTL industry is highly consolidated with the top 10 carriers generating approximately 75% of the revenue. High barriers to entry requiring large capital commitments — a network of terminals, multiple equipment types, technology and operational expertise — keep new entrants at bay, allowing incumbents to remain price disciplined.

Even though the industry has seen demand pull back, many GRIs are still coming in ahead of the traditional first-quarter implementation.

ArcBest (NASDAQ: ARCB) installed a 5.9% GRI effective Nov. 7. The headline number was 1 percentage point light of the rate increase taken around the same time last year. Yellow’s recent 5.9% GRI was in line with last year’s increase but the Oct. 3 implementation was a month earlier.

TForce Freight (NYSE: TFII) announced a 5.9% increase, which went into effect Nov. 14, and FedEx Freight (NYSE: FDX) said base rates would go up as much as 7.9% at the beginning of the year. Forward Air’s recently announced 5.9% GRI was 2 percentage points lower than the increase it took last year.

Less-than-truckload carriers apply GRIs to base rates. The headline percentage announced is an expected average of all adjustments, which vary by lane and weight tier. The increases are used to cover cost inflation and make investments in real estate, equipment and technology. 

Forward Air said cost inflation throughout its network was up double-digit percentages compared to last year when it announced its GRI.

There is no guarantee that the rate bumps will stick and it’s not uncommon to see shippers balk and seek other options during a downturn. Roughly 25% of carrier revenue is impacted by a GRI.

“This GRI will affect our class tariffs and is intended to partially offset the rising costs of real estate, new equipment, technology investments, and competitive employee wage and benefit packages. Although the GRI will impact each customer differently based on specific shipment lanes and distance traveled, it is consistent with our long-term yield management philosophy and the overall impact of the increase is anticipated to be approximately 4.9 percent,” Polen said.

More FreightWaves articles by Todd Maiden

• Cass: November shipments flat, rates seeing last of increases
• Yellow to alter proposed network changes after listening to Teamsters
• Yellow sees outsize volume drop as network overhaul advances

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