Transportation Industry News

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

2. Diesel Slips to $2.939 per Gallon Slipping an average of seven-tenths of a cent across the country, the price of diesel ended a five-week climb at $2.939 per gallon Monday, according to the U.S. Energy Information Administration. The average price of diesel fuel has risen 46 percent since just over a year ago, when it hit bottom at $2.017 on March 16, 2009, the lowest point in the last five years. In the past year, diesel has hit several minor peaks but not surged as it did from $3.039 in mid-October 2007 to the $4.764 per gallon all time record on July 14, 2008. In those nine months, diesel soared 57 percent. The last time, diesel cost as much as it did last week was in November 2008, as it swooped down from that historic peak. Please remember that you can follow Diesel Fuel Pricing trends on our web site: www.cpaintlinc.com.

3. Flooding Keeps I-95 Closed In Rhode Island Interstate 95 remained closed in Rhode Island Thursday April 1st, as the state continued to contend with the worst floods in more than 100 years, news services reported. State transportation officials closed a section of Interstate 95 Tuesday in Warwick near the state�s main airport due to the extensive flooding in the region. Homeland Security Secretary Janet Napolitano plans to visit the state Friday, AP reported, and President Obama issued an emergency declaration for Rhode Island, ordering federal aid and authorizing the Federal Emergency Management Agency to coordinate efforts. The closed section of I-95 is covered in more than three feet of water, the Providence Journal reported.

4. FedEx to Launch All-Electric Delivery Trucks FedEx Corp. announced it will launch the first all-electric parcel delivery trucks in the United States when it rolls out four vehicles in June. Two of the trucks will come from Navistar International Corp., FedEx said. These trucks are based on the Modec design that FedEx currently operates in Europe. FedEx did not name the manufacturer of the other trucks. All four of the electric trucks will serve the Los Angeles area, FedEx said. The vehicles will be designed with a range that will allow couriers to use them for full 8-hour shifts

5. Union Pacific Rates to Climb Union Pacific Railroad �will continue to generate core price increases of roughly 4-6 percent over the next few years,� said stock analyst Lee A. Klaskow of Longbow Research. Klaskow said in a report to investors that UP�s rate increases would be �partly supported by legacy re-pricing opportunities� as old contracts with various freight shippers come up for renewal at new rates. Intermodal has been a weak link in rail pricing in recent years as railroads fought to hold share while truckers were slashing their rates to move containers and trailers on highways instead. But new strength in the economy has lifted intermodal volume, while new UP contracts with a couple of shipment consolidators are helping stabilize rail rates for the box moves. Compared with other major railroads, Klaskow said, UP �deserves a slight premium� in an industry outlook, �since it has the most re-pricing opportunities and potential for continued intermodal market share gains.�

6. Maersk Line Close to Break Even Maersk Line CEO Eivind Kolding predicted that the container line is "about to break even" as ocean freight rates jump, and predicted demand will be in the upper end of its forecast range. "We still feel there's a good balance between supply and demand, but we also know that part of it is because of inventory replenishment," Kolding said in an interview with Bloomberg News. He said container demand will rise about 5 percent in 2010, compared with a March 4 forecast of 3 percent to 5 percent. The Danish carrier�s container activities, which lost a record $2.09 billion last year, won't have an "acceptable return" this year because of low rates, Maersk said March 4. "Container rates have increased quite a lot since December and they are now approaching the level where we're about to break even," said Kolding. Stock rebuilding has helped push demand 10 percent to 20 percent higher so far this year, Kolding said

7. ABF, Union Expected to Talk; LTL May Receive Concessions ABF Freight System and the Teamsters union appear to be heading toward talks that could result in wage, health or pension concessions for the nation�s fifth-largest less-than-truckload carrier, officials from both sides have said. ABF and its parent company, Arkansas Best Corp., have been asking for concessions to the 2008 National Master Freight Agreement since the Teamsters union granted some concessions to YRC to help the nation�s largest LTL stay afloat. The Teamsters union had rebuffed ABF�s requests until March 12, when a union letter to members posted on the Internet suggested that the time had come to begin negotiations. �Based on our current understanding of the industry, the company�s financial position and from concerns raised by many of you, we now believe it is in our best long-term interest to fully engage ABF through formal discussions to determine if, and what type of, contractual relief may be necessary,� the union said in the letter

8. New Home Sales Fall to Record Low in February New home sales fell in February to a record low, the Commerce Department said Wednesday. Sales fell 2.2% to an annual rate of 308,000 units, from a revised 315,000 in January, Commerce said. Economists had forecast the rate to hold at the 315,000-unit pace, Bloomberg reported. Bad weather and continued high unemployment contributed to the sluggish rate, Bloomberg said. Rising home sales can mean more business for flatbed trucking companies that haul building materials and dry van freight carriers that haul household appliances and furniture. New home sales account for about 15% of residential real estate sales

9. Arrow Trucking Owes Nearly $100 Million Bankrupt flatbed carrier Arrow Trucking owes creditors nearly $100 million and has assets of only $8.5 million, documents filed in U.S. bankruptcy court in Oklahoma show. Arrow Trucking, which shut down Dec. 22, owes unsecured creditors approximately $94.2 million, according to a list of assets and liabilities filed by Arrow's trustee. Creditors with secured claims against the company are owed about $4.8 million. The carrier's assets include $8.2 million in real property -- including terminals and office buildings and a residence valued at $2.49 million -- and $353,000 in personal property, including office equipment and furniture, according to a report in the Tulsa World.

10. Flatbed Trucker C. Bean Transport Shut Down C. Bean Transport, a flatbed and truckload carrier, closed its trucking operations last week and filed for Chapter 11 bankruptcy protection. The Fort Smith, Ark.-based carrier was placed in receivership last month after defaulting on a $5.6 million loan. The company closed its trucking operations March 17 but kept its warehousing operations running as it sought bankruptcy court permission to reorganize. About 200 truck drivers hauled freight for C. Bean regionally and nationally. The trucking business was an affiliate of the Curt Bean Lumber Co., which has offices in Amity and Glenwood, Ark., and Buckner, Mo. According to its Web site, Tim Bean started the trucking operation in 1986 to support the lumber business.

11. YRC Sees Improving Freight Volumes; Reports 4Q Profit YRC Worldwide said its freight demand is improving this month following two months of severe winter storms lowered volumes, the Associated Press reported. March shipments in March have increased by about 10% over February and are above normal seasonal levels, the company said. The report came a day after YRC said in a regulatory filing it had returned to a profit during the fourth quarter. YRC said it earned $119.5 million, or $1.64 a share, compared with a year-ago loss of $244.9 million, or $4.15 a share, AP reported. The less-than-truckload carrier originally released its fourth-quarter results on Feb. 5, but did not provide net income or per-share figures at that time.

12. FedEx Posts 146% Increase in Fiscal Third-Quarter Profit FedEx Corp. posted a 146% increase in quarterly net income driven by explosive growth in returns at its air express division and a nearly one-third increase in ground parcel delivery profits, the second-largest company in North American freight transportation said March 18. FedEx earned $239 million, or 76 cents a share, on quarterly revenue of $8.7 billion. In the year-ago quarter it earned $97 million, or 31 cents a share, on revenue of $8.14 billion. In addition to the news on improving profits, company executives said recovery in the global economy is accelerating, and that will enable management to engage in a comprehensive campaign to improve pricing for its services, even if it means walking away from poorly paying accounts. �In our view, the improving economy will result in a better pricing environment, consistent with our strategy to improve yields across all our transport segments,� FedEx Chairman and CEO Frederick Smith said at the start of an earnings call.

13. FedEx Freight Loss Leaps 81 Percent LTL unit loses $107 million in quarter despite 26 percent surge in shipments. FedEx Freight�s losses nearly doubled in the quarter ending Feb. 28, despite a surge in revenue and shipments in the three-month period. The rising loss was attributed to highly discounted pricing in the trucking market and higher purchased transportation costs. An 84 percent increase in purchased transportation costs accounted for $87 million of FedEx Freight�s $107 million loss. Without that increase, its loss would have been $20 million -- a 66 percent improvement over the $59 million loss last year. The increase in purchased transportation came as more freight flowed into FedEx Freight�s network. Its revenue increased 14 percent to $1.04 billion. FedEx Freight handled 26 percent more shipments per day, moving 83,400 shipments on average.

14. FedEx Freight Loss Leaps 81 Percent FedEx Freight, which also operates FedEx National LTL and FedEx Custom Critical, was one of several large LTL carriers engaged in a price war targeting the largest U.S. LTL operator, YRC Worldwide, in the last months of 2009. While that price battle may have weakened YRC, it didn�t knock the company out of business, and left many of its competitors, including Con-way Freight and FedEx Freight, with more freight, bigger market share and bigger losses on their books as well. Five of the top six publicly owned LTL carriers reported losses last year. Many have stepped back from deep discounts and are working to improve yield, account-by-account. �FedEx and Con-way have definitely abandoned their get Yellow out of business pricing; that�s gone,� said one shipping industry executive who requested anonymity. FedEx Freight and FedEx National LTL �are aggressively pursuing opportunities to increase yields,� the company said in a statement.

15. Maersk CEO: Carriers, Shippers Need Stability Container shipping is beginning to recover from its worst-ever recession, but shippers and carriers need to develop long-term relationships to ensure stability in rates and service, Maesk Line CEO Eivind Kolding said. Carriers were battered last year by what Kolding said was a 29 percent drop in rates combined with a 10 to 13 percent drop in global container volume. He said he believed estimates that container lines lost nearly $20 billion last year were "fairly accurate." Global container volume exceeded GDP growth by 2.3-to-1 in the 1980s, 2.9-to-1 in the 19990s and 3.8-to-1 from 2000 until 2008, when the ratio turned negative for the first time. Kolding said he expects that long term, it will recover to about 2-to-1. He said, however, that as cargo demand recovers, shippers and carriers must find ways to develop a "new, efficient, less volatile and sustainable industry."

16. Maersk CEO: Carriers, Shippers Need Stability Kolding said that requires longer-term contracts that provide shippers with rate and service stability and carriers with an opportunity to eliminate costs and waste. One example: overbookings by shippers, which he said now total 25 to 35 percent in the trans-Pacific. He said the solution lies in improved shipper-carrier cooperation, perhaps encouraged by a combination of incentives for accurate forecasting and penalties for overbooking. Kolding also said carriers need to increase their use of automation to reduce documentation errors and simplify shipping processes. He said the industry needs "to make it as easy to book a container online as it is to buy a book from Amazon."

17. Far East-U.S. Containers Fall for Second Year Volume dropped 15.3 percent in 2009, after 7.9 percent slide in 2008 Container shipments from the Far East to the United States declined by 15.3 percent in 2009 from the previous year to 10.1 million 20-foot equivalent units, down 2.8 million TEUs from their peak of 12.9 million TEUs in 2007. The decline in 2009 traffic, following a 7.9 percent drop in 2008, is equivalent to a weekly reduction of 55,000 TEUs since 2007, according to Alphaliner, the Paris-based container shipping consultancy. Alphaliner has recorded a net reduction of 16 "strings" on the trans-Pacific route since the mid-2008 peak when there were 70 weekly strings linking the Far East to the U.S. East or West Coast. Carriers are now operating 54 strings with total capacity down 20 percent. All major carriers have trimmed operating capacity over the past 18 months, but there have been shifts in market shares and some lines have added capacity during the period.

18. LTL Industry Shrinks 24.4 Percent The less-than-truckload industry shrank 24.4 percent in 2009, as total U.S. LTL revenue plunged from $33.3 billion to $25.2 billion, according to an industry study. The recession triggered by the 2008 global financial crisis spurred the worst decline in freight revenue in several years, the study by SJ Consulting Group revealed. The LTL industry contracted less than 1 percent in 2008 and was basically flat in 2007 compared with 2006, despite a freight downturn in those years, according to the study. Over the past three years, the LTL industry lost a quarter of the $33.7 billion revenue it had in 2006, the study shows, with most of that loss occurring in 2009. Waco, Texas-based Central Freight Lines fared worst, with a 47.3 percent drop in revenue. The carrier lost a major account and consolidated its network, SJ Consulting Group said. 

19. DOE Sees Diesel Climbing Toward $3 a Gallon Diesel will average $2.96 a gallon this year and $3.14 in 2011, the Department of Energy said, about in line with a previous forecast. Trucking�s main fuel averaged $2.46 a gallon last year, DOE said in its monthly short-term energyoutlook released Tuesday. Last month, DOE said diesel would average $2.95 this year and $3.16 next year. The department pegged its projected increases in motor fuels to anticipated higher crude oil prices. Oil will average over $80 a barrel this spring before rising to $82 by the end of 2010 and $85 per barrel by the end of next year, DOE said.

20. 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.