LTL news: YRCW is latest carrier to roll out a 2011 rate increase

Less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) is the most recent market player to announce a 2011 general rate increase (GRI).

The company yesterday rolled out an average GRI of 6.9 percent which will cover non-contractual shipments in the United States, Canada, and Mexico, with increases varying by lane and shipment type, according to company officials.

And YRCW added that these rate hikes will take effect on August 1 and apply to minimum charge, LTL rates, and accessorial charges, with domestic Canada rates not being impacted.

This increase follows matching 6.9 percent increases announced in recent weeks by UPS Freight and Con-way, Freight, which also take effect on August 1, and ABF Freight System, whose increase kicks in on July 25.

Satish Jindel, president of Pittsburgh-based SJ Consulting, recently told LM that these rate increases are a good thing, because the LTL industry needs to become more profitable.

“The market is getting tighter, and it is a good time for this,” he said. “Capacity is part of this in terms of the two types of capacity the industry deals with: one being fixed capacity and the other being variable capacity.”

Regarding the latter, Jindel said it is very tight at the moment, as it involves driver availability, which is very challenging at the moment.

While raising rates is seen as key for recovering revenues lost during the recession, Jindel said there are other effective ways to address this situation. One way is for LTL carriers to charge for what they actually handle.

While these LTL carriers have each announced pending GRI increases, the situation at YRCW is somewhat more fluid, given its financial struggles and its upcoming earnings call on Friday, which is expected to shed more light on its financial restructuring plan.

The company recently announced it has obtained commitments for a three-year, $400 million asset-based loan (ABL) facility that will replace its current asset-backed securitization (ABS) facility.

Company officials said that commitments for the ABL facility are in compliance with agreements the company reached with key stakeholders on April 29 regarding its financial restructuring plan. And they added that YRCW expects to close its restructuring this month.

“Replacing the ABS facility with this new facility should improve the company’s liquidity,” said John Lamar, chief restructuring officer and lead director of YRC Worldwide, in a statement. “That helps support our industry’s seasonal pattern of revenues and provides the financial flexibility and run room we need to grow the business.”

YRCW has lost in excess of $2.7 billion the last four years, reported a $102 million loss in the first quarter on a 5.6 percent rise in revenue to $1.1 billion, compared with a $233 million loss in the 2010 first quarter.

During its first quarter earnings announcement, YRCW said it has engaged Morgan Stanley to arrange a new $400 million asset-based loan facility that CEO Bill Zollars said will “enhance our liquidity and strengthen our balance sheet.”