Aftermath: analysts await ‘02

Two weeks have passed since the terrorist attacks on New York and Washington, and trucking analysts are having mixed opinions on what the aftermath will bring to the carrier sector of the industry. Analysts agree that integrated express carriers such as FedEx and UPS will see hard times, but they don’t agree on how LTL and TL carriers will be impacted. One analyst says he thinks only the integrated

Two weeks have passed since the terrorist attacks on New York and Washington, and trucking analysts are having mixed opinions on what the aftermath will bring to the carrier sector of the industry. Analysts agree that integrated express carriers such as FedEx and UPS will see hard times, but they don’t agree on how LTL and TL carriers will be impacted.

One analyst says he thinks only the integrated carriers will suffer through hard times, which started at the time of the attacks, and have continued even though U.S. Transportation Secretary Norman Y. Mineta re-opened the nation’s airways. While that analyst thinks this will be a boon for carriers that solely rely on trucks, others think those carriers, based on recent history, will also travel a rough road ahead.

Two carriers released quarterly reports this past week. And if the statements made by executives from Roadway and FedEx indicate anything, even the carriers are uncertain of the effects of the attacks.

“The long-term effects on Roadway's business from the New York and Washington terrorist attacks have yet to be determined, but we don't anticipate them to be materially significant in terms of either lost business, or increased volumes from air cargo shipping changes,” said Michael W. Wickham, Roadway’s chairman & CEO. “Looking ahead, we expect business levels to remain well below last year.”

And FedEx notes that the global economy has weakened further since its first quarter ended. “It is extremely difficult for us to fully assess the financial effects of last week's events,” said FedEx CFO Alan Graf. “Our volumes were substantially reduced last week while our aircraft were grounded. Our volumes have not recovered to levels existing before the tragedy.”

Satish Jindel, president of Pittsburgh-based SJ Consulting Group, said he doesn’t think the cargo industry will be negatively affected by the attacks. However, he thinks the shippers that rely on passenger airlines will be since it will take a longer time to clear cargo for transport.

The integrated carriers, Jindel told Fleet Owner, may in the end gain business because of this, but they may face added cost to their air networks. The overall cost of an air network will go up through higher landing fees charged for more airport security measures, he said.

But most analysts, like Chris Brady, president Manhasset, NY-based Commercial Motor Vehicle Consulting, think the industry-wide slowdown will only continue in the wake of the attacks.

“With all the uncertainty it’s so hard to figure out right now,” Brady told Fleet Owner. “Has this adjusted spending for one to two weeks or will it be long term? The huge risk is that it can bring on a recession in the third and fourth quarters and that would cause traffic levels to fall.”

The only carriers that would see something positive from all this are the ones that haul military ammunition, Brady said, adding that it is but a small segment of the industry.

According to Jerry Leonard of Ormond Beach, FL-based Martin Labbe Associates, a lot of what happens with carriers will depend on two things – durable goods and housing starts. If these two indicators start to fall, so will the industry, as it did in 1990 and 1991 during the Gulf War.

New housing construction plunged 6.9% last month to a seasonally adjusted annual rate of 1.53 million, the Commerce Department reported last week. The drop was the steepest since March 2000, and left housing starts at their lowest level in 10 months.

Housing starts fell 16% during the Persian Gulf War, and Leonard said that happened because consumers reeled on house-buying with the war going on.

“I can’t see anything from the attacks as a good thing for trucking. Maybe it can be seen as neutral, but it will probably have a negative impact,” Leonard told Fleet Owner. “Consumer confidence had started to decline prior to the attacks, and I don’t see it coming back.”

Consumer confidence plunged in September to its lowest point since early 1996 as this month's terrorist attacks added to Americans' concerns about the already frail U.S. economy, New York-based business group Conference Board said today. Its consumer confidence index sank to 97.6 from a revised 114.0 in August, the largest monthly point drop since the Persian Gulf War.

U.S. economic conditions on September 11 were similar to those at the time of the Oklahoma City bombing in April 1995 and the Iraqi invasion of Kuwait in August 1990. Both events reinforced a downturn in consumer confidence.

"While survey results conducted before and after the terrorist attacks on September 11 differed slightly, there was no reversal in the downward trend of the index," the board said in a statement.

Peter M. Toja, president of Long Island-based Economic Planning Associates, said in a report released to clients last week that there will be “short-term economic pain” due to the aftermath of the terrorist attacks.

However, like most of the analysts that cover the industry, he predicted first-quarter results in 2002 will indicate a steeper rebound than anticipated as a result of bold fiscal and monetary policies.

Leonard said he appears to agree with Toja. He said current conditions will probably lead to a recession in the third and fourth quarters, a comeback in the first quarter of 2002 and a return to growth in the second quarter. But if housing starts fall, like it had been expected before the attacks, he said it will be an “extra bit” for carriers to overcome.

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