Transportation Industry News

1. Transportation Industry News Prepared by: CPA International, Inc. October 2010

3. United, Continental Merger Closes United and Continental airlines officially closed their $3.2 billion merger on Friday, extending the consolidation of the U.S. aviation industry and creating the largest cargo-carrying passenger airline in the United States. United said in a statement that consolidating operations will be �complex� and take 12 to 18 months. The new United Continental Holdings becomes the largest airline in the world and will operate the United and Continental networks separately until the fleet, crew, maintenance and other operations can be blended together. The combination will make United Continental by far the country�s largest cargo carrier among the combination airlines. United and Continental had a combined $560 million in cargo revenue in the first half of 2010, while Delta Air Lines counted $387 million in belly freight business.

4. YRC Chief Zollars to Retire After Recovery Plan Is Done William Zollars, the chief executive officer who built YRC Worldwide Inc. into a $10 billion freight company and then navigated the company through large losses during the recession, said last week that he will retire when the company�s comprehensive recovery plan is completed. YRC, in a Sept. 28 regulatory filing, didn�t give a specific date for Zollars� departure, though it said the 62-year-old executive would retire sometime after Dec. 31. �Upon the successful resolution of many of our recent business challenges, the time would be right for me to hand over the reins to new leadership,� said Zollars in a statement that noted YRC �had to deal with the most difficult economic environment our industry has ever experienced.� YRC said in its statement that it will begin a search for a successor both within and outside the company. John Lamar, lead director for YRC who was commenting for the board, said, �We are grateful to Bill for his exemplary leadership, first directing the company�s business expansion over more than a decade, and most recently switching gears to help navigate the organization through its most challenging period. We are pleased that he will remain at the helm through this process as we work together to identify his successor.�

5. USPS Loss Hits $6 Billion The U.S. Postal Service estimates it lost about $6 billion in its 2010 fiscal year, raising the pressure for greater cost-cutting after lawmakers and regulators failed to bring needed relief to the USPS�s beleaguered finances. Postmaster General John Potter said the projected loss for the 12 months that ended Sept. 30 was better than the $7 billion loss the USPS had projected earlier. But it came with a decline of 7 billion pieces in mail volume, part of a structural shift in delivery the postal service is struggling to respond to with cost cuts and operational changes. But the USPS still faces large mandated pension fund payments � it paid $5.5 billion in 2010 to a fund for retiree health benefits � and the Postal Regulatory Commission last week turned down a request for a rate increase, saying the USPS had not proven the need to raise First Class Mail prices 2 cents. The Postal Service also has started negotiations with the first two of its four employee unions that have contracts expiring over the next 14 months. The USPS already has said it will seek help from the unions in scaling back costs to meet a fundamental change in mail services. Without help on several fronts, however, Potter estimates the USPS could run out of cash by the end of its current 2011 fiscal year.

6. UPS Profit Leaps in 'Moderate' Economy Stronger global demand and daily shipping volume helped UPS boost its profit margin to 8.1 percent from 4.9 percent in the third quarter a year ago. The transportation giant made across-the-board gains in profit in the three months ending Sept. 30 even as the second-quarter freight surge began to slow. UPS's net income shot up 80.5 percent in the quarter compared with the same period last year and 17.3 percent from the second quarter to $991 million. Its overall operating margin was 13.3 percent for the quarter, with its domestic and international package units reporting operating margins of 14 and 15.7 percent. Consolidated revenue climbed 9.3 percent from the 2009 third quarter and declined about 1 percent from the second quarter to $12.2 billion. UPS's international and domestic package units both had double-digit operating margins, and its supply chain and freight division reported gains in profit and yield. Domestic U.S. package volume rose 3.6 percent from a year ago on a 3.9 percent increase in ground and 3.2 percent increase in next-day air shipments. Overall, package volume was up 5 percent from a year ago and 1.1 percent from the second quarter. Total package revenue was just shy of $10 billion

7. Union Pacific Net Jumps 51 Percent Western U.S. carrier Union Pacific Railroad posted a 51 percent gain in net income in the third quarter from a year earlier, to $778 million, as revenue increases outpaced expenses. UP�s total operating revenue � freight and non-freight � gained 20 percent to $4.408 billion in the July-September period, while costs rose 11 percent. That produced a profit margin of 17.6 percent of total sales, up from a 14 percent profit in the same period of 2009. Company officials told analysts that UP�s core freight pricing rose 5.5 percent in the period, including revenue from fuel fees. �Strong volume growth, pricing gains and operating efficiency combined to produce another record quarter for our company,� said James R. Young, UP chairman, president and CEO. UP�s freight revenue at $4.187 billion was up 21 percent from a 2009 third period when the economic recovery was just getting under way. Coal and other energy shipments provided the single largest sales segment at $922 million, for an 11 percent gain. Close behind was intermodal at $880 million, up 34 percent. Automobile-hauling revenue jumped 36 percent and industrial products 25 percent, while farm shipment sales grew 16 percent.

8. USA Truck Returns to Profit in 3Q USA Truck reported a $600,000 profit in the third quarter, compared with a $1.6 million loss a year ago. Per-share, the company earned 6 cents, compared with an 16-cent loss last year. Revenue rose to $100.8 million, from $82.3 million, while trucking revenue rose 14.5% to $87.6 million, the truckload carrier said in a statement. �While we are optimistic about the industry�s prospects as 2011 and beyond unfolds, we are bracing for what is likely to be two challenging quarters between now and next spring,� CEO Clifton Beckham said.

9. Economy, Regulations Top Trucking Industry�s Concerns The economy and government regulations are the two most pressing issues facing the trucking industry, according to a survey of executives conducted by the American Transportation Research Institute. The top four issues were the sluggish economy, changes brought on by CSA 2010, other government regulations and the hours-of-service rule, according to ATRI�s annual list of critical issues facing the trucking industry released here Sunday at American Trucking Associations� Management Conference and Exhibition. �ATRI�s annual survey gives us a clear roadmap of the strategies we collectively need to pursue as an industry,� said ATA Chairman Tommy Hodges, chairman of Titan Transfer, Shelbyville, Tenn. CSA 2010 appeared on the list for the first time ever 2010, with roughly 25% of respondents saying it was their top concern, �not only due to the expansive nature of FMCSA�s new regulatory framework, but also due to the uncertain impact CSA will have on carriers and drivers.�

10. Business Inventories Rise Faster Than Sales Inventories at U.S. businesses rose in August for the eighth straight month and grew faster than business sales, the Commerce Department said. Transportation companies have been watching for inventory restocking that would signal expectations of continued economic recovery and increased freight shipments. Freight volume was boosted earlier this year as companies rebuilt inventories after liquidating them to cut costs during the recession. August inventories rose 0.6 percent from July while business sales rose 0.1 percent. The inventory-to-sales ratio rose to 1.27 in August, indicating it would take 1.27 months to sell current inventory at the current pace of sales. The July ratio was 1.26. Retailers' inventories increased 1 percent in August, led by a 3 percent rise in stockpiles of autos and parts. Excluding cars, other retail inventories were up 0.2 percent. Inventories at clothing stores rose 0.3 percent while inventories rose 0.5 percent at furniture stores and 0.2 percent at general merchandise stores. Building materials inventories dropped 0.3 percent. Food and beverage store inventories fell 0.1 percent. Manufacturers� inventories rose only 0.1 percent from July while merchant wholesalers� inventories had a month-to-month increase of 0.8 percent.

11. CSX Profit Jumps 43 Percent to $414 Million  CSX Transportation, the eastern U.S. railroad that is the first of the major rail lines to report earnings for the July-September quarter, saw net income jump 43 percent to $414 million on a combination of increased business and continued cost cuts. CSX revenue rose 16 percent from the same 2009 quarter to $2.67 billion, but expenses fell 9 percent to $1.84 billion on double-digit declines in fuel and labor costs. Its profit margin � net income as a percent of revenue � was 15.5 percent in the 2010 period, up from 12.7 percent a year earlier. Michael Ward, the board chairman, president and CEO, said with the economy improving, CSX saw volume growth in nearly all markets while boosting productivity. Total carload and intermodal traffic rose 10 percent from a year earlier, while revenue per unit rose only 6 percent. That was mainly from a shift in intermodal, where volume rose 19 percent in the latest quarter but average revenue per shipment fell 11 percent.

12. Apparent Explosives Prompt Air Cargo Terror Alert  Law enforcement officials acting on what President Obama called "a credible terror threat," found package shipments with suspected explosives in air cargo networks bound for the United States. Obama, in a late afternoon televised statement, said the packages had been shipped from Yemen "do apparently contain explosive material." He said the packages were addressed to "places of Jewish worship" in the Chicago area. One of the packages was found in the UPS system at the East Midlands Airport in the UK and other was at a FedEx facility in Dubai. Authorities also isolated and searched three UPS freighters that landed in Philadelphia and Newark, N.J., early Friday, because they also carried cargo that originated in Yemen. U.S. fighter jets also escorted an Emirates passenger aircraft to New York's John F. Kennedy International Aircraft because that plane had cargo from Yemen. The UPS planes, two of them 767s and one an MD-11, had flown Friday from airports in Paris, East Midlands in the United Kingdom and Cologne, Germany, where UPS has its main European hub. The Transportation Security Administration issued a statement saying, �Out of an abundance of caution the planes were moved to a remote location where they are being met by law enforcement officials and swept.�

13. Old Dominion�s 3Q Income More Than Doubles Old Dominion Freight Line said its third-quarter income more than doubled on stronger less-than-truckload pricing. Its profit jumped to $24.4 million, or 44 cents per share, from $10.5 million, or 19 cents, a year ago. Revenue rose 22.7% to $396 million. �We anticipate further strengthening in the overall industry pricing environment due to reduced capacity in the LTL industry and as general rate increases that have been recently announced by a number of other LTL carriers take effect,� ODFL David Congdon said in a statement.

14. YRC Posts Improvement in Quarterly Results YRC Worldwide Inc.�s third-quarter financial results improved on both a year-over-year basis and from the second quarter of 2010, the less-than-truckload company said last week, reporting that tonnage improved and operating losses declined. While the LTL giant�s financial position improved in the third quarter, one analyst said the company �still faces meaningful challenges,� including potential higher costs if union employees turn down the concessions Teamsters leaders agreed to last month The new set of concessions would extend a 15% wage cut until 2015 and include a restoration next year of just 25% of pension contributions that the company has halted. YRC committed itself to raising $300 million in new investment.

15. Teamsters Approve YRC Cont The Teamsters union�s rank-and-file membership at YRC Worldwide ratified a new labor agreement to run through 2015 it said is aimed at saving 25,000 jobs at the less-than-truckload carrier. YRC Worldwide and its USF Holland regional LTL unit�s union members ratified the agreement 62% to 38%, while members at YRC�s New Penn Motor Express division ratified it by a 69% 31% margin, the Teamsters said in a statement. About two-thirds of YRC�s Teamsters members cast ballots. The new contract extends the previous agreement, slated to expire in 2013, until March 31, 2015. The two sides had reached preliminary agreement in late September on the deal, which YRC said would save it $350 million a year. The union and YRC said Sept. 29 their leadership had agreed to extend a previous 15% pay cut for two more years, partially restore pension contributions next year and obtain a $300 million capital infusion from a new investor. This contract positions YRC for �improved performance by providing a long-term market competitive cost structure as well as enhanced efficiency to meet the demands of today's transportation and supply chain customers,� Mike Smid, president of YRC Inc. and chief operations officer of YRC Worldwide, said in a statement.

16. Transportation Industry News For specific questions regarding these topics, please contact CPA International toll free at 888-684-4288 or via Email cpa.intl@snet.net for details.