OAK BROOK, Ill. — Lessened demand, increased competition, and closed rail lanes caused a 9% decline in third quarter intermodal volume, officials of the Hub Group announced Wednesday.
Intermodal revenue declined by 7% to $539 million at the intermodal, trucking, and third-party logistics company.
“Intermodal has in fact lost some share, and it’s not just in the 750- to 1,000-mile type of line hauls; it’s even up in the 2,000 [-mile range],“ CEO Dave Yeager told an investor earnings call. “Dallas-LA has become a very competitive market, so a lot of it is the truck competition.
“I think that they’re doing anything just to keep their tractors and their drivers moving,” he says. He does not believe truckers have a long-term strategy against intermodal.
Industry-wide, truckers are eroding intermodal’s traditional cost advantage by charging rates close or equal to intermodal prices.
Due to truck pricing that Chief Operating Officer Phil Yeager describes as “dumbfounding,” some Hub Group customers have moved from intermodal to trucks in the short term.
Heaviest truck competition is in the East, according to Terry Pizzuto, chief financial officer.
Hub Group’s 9% decline in volume was greater than the industry average of 7 % due to the bankruptcy of a customer, Pizzuto says, “so we don’t think we lost a whole lot of market share.”
Hub Group regional intermodal volumes declined by 11% in both the East and West, while transcontinental volume was down 3%, she says.
The company has also been hit by increased intermodal competition, according to Phil Yeager.
Normally, the third quarter sees heavy import freight volume as retailers prepare for fourth-quarter holiday sales. So far, imports have been below expectations.
“We’ve seen it uptick a little bit, but it hasn’t been to where we expect,” says Dave Yeager. “And I would say our customers … some have very large forecasts and they’ve been brought down.”
In anticipation of tariffs, some retailers and others have stocked up on inventory throughout the year.
“We haven’t seen the import volumes at the level that we would’ve anticipated, which is certainly disappointing, but also understandable, given where the inventory levels are,” according to Dave Yeager.
Disruptive to intermodal companies were railroad closures earlier this year of intermodal lanes, primarily in the East.
Hub Group officials are hopeful railroads will re-examine those decisions.
“At this time, I don’t anticipate any further rationalization of lanes. Certainly, they have changed their minds before,” says Phil Yeager. “I actually think they’ll see a reopening of lanes more than cancellations … I think at this point, given some of the volume challenges that the industry has had, that would be a prudent move.”
Overall Hub Group third-quarter net income was $26.1 million, up from $25.8 million from third quarter 2018. Quarterly revenues of $913 million were down 2%.
One customer goes bankrupt and you lose 9% of your business? That is why throwing customers away via PSR is economic suicide. You still lose customer through no fault of your own.
UP, CSX, and NS drop your pricing.. You shouldn’t be charging more than the competition when you can’t even compete on service quality. Lower your lanes and drive em out the market..
The Yeager’s are still in charge…they were in charge when I worked for Pacer Global Logistics 15 years ago, and they’d already been around for years then.