The proposed acquisition of LTL conglomerate Roadway Corp. by fellow LTL giant Yellow Corp. is a recognition that LTL carriers must move beyond traditional business segments if they want to spur freight and revenue growth, according to one analyst.
"The LTL industry is not growing, we've been saying that for the last seven years," said Satish Jindel, president of Pittsburgh-based transportation consulting firm SJ Consulting. "This acquisition confirms first that there are still too many players in the LTL market and second that carriers must look at how they can compete within the broader transportation market, not just in LTL."
Jindel noted that the combination of Yellow and Roadway is a recognition that the LTL industry should plan to compete against the likes of global transportation leaders such as UPS and FedEx, instead of other LTL operators such as Overnite Transportation. He also doesn't see government approval of the merger as much of a problem, as there remains too much capacity in the LTL industry.
"Yellow and Roadway will have to look at how they can get more productivity and how they can provide other non-traditional LTL transportation services, such as express, expedited, and international shipments," he told Fleet Owner. "However, Yellow and Roadway only have a marginal presence in the international transportation market and that's an area they'll need to strengthen in order to compete against UPS and FedEx."
Jindel added that while both companies plan to operate for now as separate entities and only merge and share back-office functions, they will at some point have to look at integrating their linehaul operations.
"Right now, they need to stay separate to minimize disruption among their labor force and customer operations," he said. "But at some point they will have to integrate operations to drive productivity."