UPS,

Overnite Transportation announced its general rate increase, following a trend among less-than-truckload (LTL) carriers in 2005 to make such announcements earlier than in years past. Overnite's 5.6% general rate increase went into effect May 2, a full month ahead of last year's rate increase. However, it also reflected a general slowing in the rate of increases (Overnite's 2004 general rate increase was 5.95%).

Equity research firm Morgan Stanley notes that according to its first quarter results, Overnite saw a 2.7% increase in tonnage volumes year over year. Similar to other large, publicly held LTL carriers (ABF Freight System, Con-Way Transportation, USF Corp. and Yellow Roadway Corp.), volumes fell short of analyst expectations. Pricing — using revenue per hundredweight, adjusted for mix and fuel surcharges — is estimated to increase 3.6% year over year.

ABF benefited from better fuel surcharge collection, says Morgan Stanley, despite flat volume growth in April. ABF's general rate increase of 5.8% was to take effect May 23, nearly a month ahead of the 5.9% rate increase it announced in 2004. The company cited slowing economic trends, but Morgan Stanley suggested market share losses to carriers with excess capacity helped depress volume growth.

Comparisons with the large volume growth achieved in 2004 will prove more difficult for carriers like ABF as the year goes on. July and August LTL tonnage rose 12% and 10%, respectively in 2004. After dipping to 9% in September, it was back up to 10% in October.

Morgan Stanley reports that ABF complained of "pockets of aggressive pricing" and, though this is good news for shippers as it will help contain increases, it is less positive for carriers' earnings. ABF reported a 95.5 operating ratio, tight but an improvement over the same period in 2004.

Average tonnage growth slowed to 3.7% year over year, according to equity analyst firm Legg Mason. This signaled a deceleration in the first quarter after a number of quarters of tonnage growth in the mid-to upper-single-digit levels.

It appears, says Legg Mason, that nonunion regional LTL carriers grew about 10 times faster than unionized national LTL companies. Legg Mason also supports the view that the national LTL carriers could be losing market share because of expanded geographic reach of regionals and interregional growth.