It's taken nearly a year for someone to publicly acknowledge that their company has benefited from the February bankruptcy and subsequent shutdown of less-than-truckload (LTL) carrier New England Motor Freight Inc. (NEMF). That someone is Peter Latta.
Latta is chairman and CEO of A. Duie Pyle Inc., a privately held carrier founded in 1924 by his grandfather, Alexander Duie Pyle. The West Chester, Pennsylvania-based company, which will hit about $500 million in revenue this year, operates 24 LTL service centers across New England and the mid-Atlantic and has dedicated trucking and warehousing businesses that are growing fast, albeit off slower bases.
Though Pyle gains what Latta called "interregional scope" in the U.S. and Canada through partnerships with carriers like Southeastern Freight Lines, Dayton Freight Lines and Oak Harbor Freight Lines, its claim to fame — with the battle scars to prove it — lies in being a bona fide Northeast U.S. trucker.
Pyle's experience and connections in the Northeast served it well as NEMF was taking its last breath. During a Dec. 10 interview with Todd Fowler, transport analyst at Key Banc Capital Markets, Latta said the company got wind of the impending closure a few days ahead of time but kept the news to itself. Pyle executives met the weekend before the NEMF announcement to determine which freight was worth pursuing — no easy feat given that a large part of NEMF business was priced so low that it wasn't worth touching. Pyle was also mindful of not being a "hog at the trough" and absorb so much NEMF freight that it would compromise its network and service to existing customers, Latta said.
NEMF had a well-respected driver training program, and Pyle capitalized by recruiting about 150 of its top drivers, Latta said.
In the end, Pyle took about 700 daily NEMF shipments, as well as 300 additional shipments from another Northeast carrier, which Latta would not identify, that he said had bid too aggressively for NEMF freight and failed to service it well. "We were favorably impacted" by the NEMF shutdown, said Latta, whose company moves between 10,000 and 11,000 shipments per day. This has helped Pyle post solid volume numbers while other LTL carriers have struggled somewhat.
As many LTL carriers have become interregional operators over the years, Pyle has stuck to its geographic knitting. Carriers that expand their coverage must increase their reliance on breakbulk centers, which function in a similar fashion to airlines' hub-and-spoke systems. This adds complexity and costs, he said. Indeed, Pyle has flourished during a near 40-year period following motor carrier deregulation when carrier after carrier in the Northeast went out of business due to high legacy expenses and increased low-cost competition.
The Northeast LTL market was altered in 2017 when Saia Inc., one of the larger LTL carriers, entered the region. Saia will likely end 2019 with revenue three-and-a-half times that of Pyle. Latta appears unconcerned about Saia's presence, however. "They have [made] an aggressive push into the Northeast," he said. "But as a breakbulk operation their interest lies in the interregional than [in] the regional business."
The year as a whole will be favorable for Pyle following banner results in 2018, according to Latta. Year-to-date, revenue per shipment is up 5.7%. Daily volumes in December will rise 5.1% year-on-year. That follows a 4.8% increase in November, 6.7% in October, 9.5% in September and 10.3% in August. Revenue for every 100 pounds shipped, known as "revenue per hundredweight" and considered the key measure of the yield on every shipment, will rise by 11.8%. Latta said he pays closer attention to the revenue-per-shipment data than to the yield figures.
Pyle's weight per shipment declined to 1,195 pounds in November from 1,263 pounds in January, Latta said. All LTL carriers have experienced declining shipment weights this year due to a combination of a change in shipment mix to lighter weight shipments, slow demand for the industrial freight that LTL carriers heavily depend on and more selective tender acceptance that could disqualify heavier freight that's less profitable.
The only major mark on Pyle's calendar occurred in June and July, when it was the victim of a ransomware attack. The company refused to pay the ransom and resorted to doing business with handwritten receipts and 10 telephones while its IT systems were brought back to normal, Latta said.
Latta said he is "cautiously optimistic" on 2020, saying the uncertainties surrounding a general election year should be offset by a decent operating environment. Latta said he isn't expecting a major slowdown from current shipment and revenue levels and that low- to mid-single-digit gains are in the cards for next year.
Pyle's contract renewals are in the 3 to 4% range, according to Latta. Two publicly traded LTL carriers, which he would not name, have engaged in "reckless pricing" but have walked back those actions in recent months, Latta said. His comments run counter to those of other LTL executives who have said that pricing has remained stable and rational despite the yearlong weakness in industrial demand.
There's nothing in the air to signal an LTL price war, especially as carriers continue to enjoy the benefits of a concentrated market — the top 10 carriers control about 73% of share, according to data from consultancy Ship Matrix. However, Latta is not counting his chickens before they hatch, having lived through the decades of weak pricing that forced many truckers off the road. "It took 35 years to get to a favorable pricing environment for carriers," he said, adding that "we hope it doesn't end prematurely."
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