Martin Labbe of Martin Labbe Associates told Fleet Owner that despite the soft economy, carriers still need to increase their rates to account for rising fuel costs and insurance premiums and to make up for lower residual value of their equipment.
“There is stiffness in demand for freight, but these companies still have to retain profitability,” Labbe said. “Everyone has to turn a profit if they want to stay alive.”
Yellow Freight Systems, Yellow Freight Corp.’s LTL unit, will raise non-contract rates in time for the strongest seasonal demand between August and November, with hopes that customers will pay more for freight transportation that helps them reduce inventory costs, according to published reports.
Other LTL carriers, such as Roadway Express and Consolidated Freightways, have told the Wall Street Journal they are considering similar rate increases.
``They are willing to pay more even in a down economy so they don't miss that sale or shut down the manufacturing plant,'' the paper quoted Yellow Freight Corp.’s chairman & CEO Bill Zollars as saying.
Analyst Satish Jindel of SJ Consulting Group told Fleet Owner other carriers will most likely mimic Yellow’s increase, despite the soft economy.
“Just because the economy is slow doesn’t mean the cost of business doesn’t change,” said Jindel, adding that Yellow’s increase is not out of the ordinary. “That’s the reality of life. Your fixed costs don’t remain the same so the cost per shipment has to go up.”
Jindel said he expects shippers to ease their costs by sending larger loads to get lower rates.
