Truckload giant U.S. Xpress Enterprises Inc. has today completed the sale of its airport-to-airport operations and its customer list, run by its subsidiary Xpress Global Systems (XGS), to air cargo forwarder Forward Air Corp. for $12.75 million in cash. With U.S. Xpress also making a noncompete agreement with its former rival, this will leave Forward Air Corp. as the only major player with a nationwide network for time-definite airport-to-airport ground forwarding services.
Andrew Clarke, Forward Air CFO told Fleet Owner, “We certainly hope to capture a lot of business they were doing and run additional sections or additional runs on a particular lane segment. Our desire is to take the freight they were running through their network into our existing network.”
XGS will continue to provide transportation, warehousing and distribution services to the floorcovering industry and pooled distribution services to commercial accounts through its network of terminal locations in North America.
U.S. Xpress estimates it will incur a one-time pre-tax charge, net of proceeds from this transaction, of between $2 to $3.5 million related to the transaction.
According to Dow Jones, the revenue from the sale will be used to pay down some of the $125.7 million in debt U.S. Xpress had as of March 31.
Airport-to-airport operations dragged on earnings, as XGS suffered a $3.5 million operating loss in the first quarter compared with an operating income of $230,000 for the same period last year. The loss came despite managerial changes, including Stephen Fuller taking the reigns as president of XGS, and efforts to reduce “fixed overhead and purchased transportation costs.”
“There were quite a few carriers that tried [to get into airport-to-airport],” Satish Jindel, president of transportation consulting firm S.J. Consulting, told Fleet Owner. He noted Old Dominion as an example of a player that exited the market. “But it’s not just about linehaul-- it’s also about having the facilities in the right places.”
“The cost of developing our nationwide airport-to-airport network over the last three years has negatively impacted the operating margin of XGS,” according to a 2003 annual report released by U.S. Xpress. “However, we are optimistic that this operation will contribute positively our XGS results in the upcoming years, as we add more volume to what is one of only two nationwide airport-to-airport networks serving the airfreight forwarding market.”
One of those attempts to add volume came in July 2004 when U.S. Xpress purchased airport-to-airport LTL carrier CRST Van Expedited for an undisclosed amount.
“Forward Air is just buying more volume,” Chris Brady, president of Commercial Motor Vehicle Consulting, told Fleet Owner. For example, if they had a half-filled truck from one terminal to another, the additional freight they’re buying might make that truck fully loaded. That’s where profitability comes in-- you’re not getting any increase in cost but revenues would be much higher.”
U.S. Xpress and Forward Air have shared an embattled history in the courtroom as well as in the marketplace. In 2002 U.S. Xpress paid a $1.3-million court settlement over a dispute on unfair competition and trademark infringement.
U.S. Xpress could not be reached for comment.