Larger LTLs will benefit from CF's downfall

Sept. 3, 2002
The collapse of Consolidated Freightways (CF) should benefit LTL carriers Roadway Corp. and Yellow Corp. in the long run, though smaller carriers may see some short-term financial gain, industry analyst Martin Labbe said today. "The bottom line is freight does not stop moving," Labbe, president of Martin Labbe Associates, told Fleet Owner. "Roadway and the regional LTLs stand to gain from CF's decision."
The collapse of Consolidated Freightways (CF) should benefit LTL carriers Roadway Corp. and Yellow Corp. in the long run, though smaller carriers may see some short-term financial gain, industry analyst Martin Labbe said today.

"The bottom line is freight does not stop moving," Labbe, president of Martin Labbe Associates, told Fleet Owner. "Roadway and the regional LTLs stand to gain from CF's decision."

According to Bloomberg, shares of Roadway rose $2.04, or 8.6%, to $25.64 in Instinet trading at 9:07 a.m., while Yellow gained $1.51, or 6.8%, to $23.80. In addition, Arkansas Best rose 92 cents to $21.59 and US Freightways Corp. increased $1.60 to $28.60.

Labbe said CF's decision to shut down operations does not come as much of a surprise to analysts that cover the industry. Analysts have been talking about the amount of debt the carrier has compiled, but said filing for Chapter 11 reorganization is the last resort.

In April, Vancouver, WA-based CF posted a net loss of $36.5 million on first quarter revenue of $463 million as it lost business to what it called "growing competitive pricing pressure."

Then-CEO Pat Blake said the carrier's revenue decline of 19.4% for the quarter was the result of the difficult economic environment and unusually competitive pressures. Those factors caused total tonnage to decrease 17.1%, though revenue per hundredweight was up 0.7%.

John Brincko, a business turnaround specialist, replaced Blake in June. CF's board said then that its restructuring had reached the point at which it needed an experienced turnaround professional to carry the process forward to successful completion.

According to Labbe, Roadway and Yellow could increase their profitability as they pick up future contracts from CF customers because they are the Number 1 and 2 LTL carriers. Both carriers have established national freight networks as well as lanes that parallel CF's.

The regional carriers should gain some short-term financial gain because freight that is in CF's terminals and trailers still has to be delivered, Labbe said. He added that CF's customers could request emergency deliveries of freight that CF is holding, but for the majority of customers to expect delays in getting existing shipments.

About the Author

Tim Parry

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