On Wednesday, Forward Air announced a 7.9% general rate increase (GRI) for tariff-based prices. According to the business, some accessorial and minimum costs will also be increased. The adjustments will take effect on February 1st.
Last February, Forward (NASDAQ: FWRD) announced a 6% GRI, while most other less-than-truckload carriers implemented 5.9% increases around the same time. According to the asset-light haulage and logistics company, capacity surcharges will be extended beyond 2021 until June 30, 2022.
“We believe the GRI will allow Forward to continue investing in service development, fleet maintenance, technology advances, and other areas to serve clients more effectively and efficiently,” according to a news announcement.
Forward has been deliberately substituting more oversized, higher-value loads for lower-margined freight. During the third quarter, tonnage per day in the expedited sector climbed by 8% year over year, despite a 17 percent drop in shipments. The tonnage rise was driven by a 30% increase in weight per shipment, primarily due to a larger count of denser industrial-related shipments vs. e-commerce packets.
The modification improved the segment’s operating margin by 190 basis points, with the company’s LTL margin increasing to 17.5 percent in September.
GRIs are issued annually by most carriers on freight carried under general tariff codes that are not subject to a contract. The higher fees are used to cover wage increases for drivers and dockworkers and expenditures in technology and real estate. Carriers often release a headline GRI % that is an average of the total impact of rate adjustments. The percentage increases differ depending on the lane and shipment.
Increases for 2022 are slightly more significant and earlier than the usual first-quarter implementation period, indicating that robust LTL demand is anticipated to persist.
For its LTL services, ArcBest (NASDAQ: ARCB) adopted a 6.9% GRI on Nov. 15, and Yellow (NASDAQ: YELL) issued a 5.9% GRI on Nov. 1.
Many carriers took advantage of a healthy freight market in 2021 to purge their client lists of low-cost, difficult-to-transport goods. While enhanced freight selection has increased yields and margins, the company continues to face significant cost increases in areas like driver/dockworker pay, operating supplies (fuel) and acquired transportation (often third-party linehaul moves using spot market capacity).
Privately owned and operated On Monday, Estes implemented a 5.9% GRI.
“This GRI is required to offset our investment in operational resources like equipment and employees, as well as the rising costs of technology advancements that enable our clients with online transportation capabilities to simplify their shipping experience,” according to an Estes statement.
