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May 12, 2014

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SURFACE & DOMESTIC TRANSPORTATION 62 THE JOURNAL OF COMMERCE www.joc.com MAY 12.2014 TRUCKLOAD CARRIERS SAY the rising cost of putting drivers in trucks and keeping them is a major obstacle to expanding truckload capacity, even as freight demand and rates climb. Plenty of truckload carriers would tell you they have too many driverless trucks — all parked against the fence for lack of drivers. Covenant Transport's recent financial earnings underscore how trucking is being short-seated and short-changed by a driver shortage. In the first quarter, 5.6 percent of Covenant's average fleet of 2,652 tractors — nearly 150 trucks — sat idle because the company didn't have drivers to operate them. That's up from 4.4 percent of 2,846 trac- tors, or about 125 trucks, in the first quarter of 2013. The number of unseated trucks increased, and increased as a percentage of the total fleet, despite a 6.8 percent reduction in the average number of tractors operated by Covenant, the nation's 15th-largest truck- load carrier. Those unseated or "open" trucks con- tributed to a 1.5 percent drop for the quarter in freight revenue, to $126.3 million, at Chat- tanooga, Tennessee-based Covenant. With fuel surcharges also falling, the carrier's total revenue declined 2.3 percent year-over- year to $161 million. The drop in freight revenue came at a time when freight demand and the rate envi- ronment were favorable, Covenant said, but qualified professional drivers "remained in short supply." Covenant lost $1.4 million in the first quarter, compared with a $2 million net loss in 2013's first quarter. The rollout of an enterprise management system at subsidiary Southern Refrigerated Transport cut operating profit by $900,000. Most of the implementation issues were resolved by March, the company said in its earnings statement. Despite the drop in freight revenue, Cov- enant managed to increase average revenue per tractor per week by 1.7 percent to $3,284 and lift average freight revenue per total mile 3.2 percent, so the company is getting more money out of each tractor-trailer as it reduces the size of its fleet. This year, the company plans to eliminate more older trucks and buy a smaller number of new ones, reducing its fleet size by 2 to 3 percent. "In the first quarter of 2014, we took delivery of approximately 125 new com- pany tractors and disposed of approximately 300 used tractors," Richard B. Cribbs, senior vice president and CFO, said in the statement. Covenant this year plans to sell 1,250 used tractors and buy 950 new ones, he said. Even if unseated trucks represent only a small portion of a truckload carrier's fleet, collectively they represent a significant amount of idle capacity that shippers can't use, said Mike Regan, chief of relationship development at logistics company TranzAct Technologies. "We're not bringing new driv- ers into this industry," said Regan, who also chairs the advocacy committee for shipper group NASSTRAC. "I talked with one truck- load carrier executive recently who said, 'we're not hiring new drivers, we're getting drivers by poaching them.' " The number of heavy-truck or trac- tor-trailer drivers in the U.S. increased 1.9 percent in 2013, according to the U.S. Bureau of Labor Statistics, but is still 6.4 percent below its 2007 peak. Trucking companies will have to raise driver pay 15 to 25 percent to attract more drivers, accord- ing to Kevin Knight, chairman and CEO of Knight Transportation. "We are very aggressively taking a large portion of what we're able to receive in terms of rates and making sure that we give that to our driving associates," he said. JOC Contact William B. Cassidy at wcassidy@joc.com and follow him on Twitter: @wbcassidy _joc. By William B. Cassidy TRUCKING'S PARKING LOT Growing driver shortage forcing truckload carriers to idle more rigs, squeezing capacity and pushing up rates

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