Last Monday, I wrote a piece highlighting the Dow Jones Transportation Average, and how it could serve as an indicator of where the economy is heading (see “Pirates, Truck Drivers, and the Dow Jones“).  Based on the results reported by J.B. Hunt and Landstar Systems last week, it doesn’t seem like we’re on the path to economic recovery just yet.

It’s difficult to compare the financial results of J.B. Hunt (JBH) and Landstar due to their different business models.  The impact of fuel charges, which have decreased significantly since the second half of last year, also complicates year-over-year comparisons.  Nonetheless, here are some interesting data points from the press releases and information disclosed by these two companies last week.

• In its truck segment, JBH eliminated 948 tractors (or 23 percent of its fleet) from Q108 through the end of Q109. This reduction is consistent with a strategy the company adopted a few years ago to “right size” its fleet. Revenue from this segment also decreased 39 percent in Q109 compared to the first quarter of 2008 (excluding fuel surcharges).
• JBH also reported that rates per loaded mile (excluding fuel surcharges) decreased 2.4 percent compared to Q108. Also, spot activity increased from 5.4 percent of total volume in Q108 to 8.4 percent in Q109, and “continued soft demand and aggressive pricing from competitors forced our own spot prices downward during this period.”
• Compared to Q108, average length of haul for JBH trucking dropped 7.5 percent, and empty mile percentage increased from about 12.5 percent to almost 13.7 percent.
• For Landstar, load volume decreased 17 percent in Q109 compared to the previous year, and according to Henry Gerkens, Landstar President and CEO, “volume declines were experienced in just about every sector serviced by the company.”
• Gerkens also said, “Although volume declines compared to the 2008 first quarter remained generally consistent with the year over year volume decline experienced during the last four weeks of December 2008, the increased pressure on price, along with lower fuel surcharge revenue on freight hauled by truck brokerage carriers, caused overall revenue to decline 23 percent quarter over quarter.” He also stated that “although there are some encouraging signs, there is still much uncertainty and as such Landstar will not be providing second quarter 2009 revenue and earnings guidance at this time.”

On the positive side, JBH reported higher intermodal segment volumes and significant growth in its Integrated Capacity Solutions (ICS) segment (revenue up 51 percent, load volume up 84 percent compared to Q108).  For Landstar, cash from operations was $81 million in the quarter, compared to $34 million in Q108.

Granted, JBH and Landstar are just two data points in a large industry, but their performance and comments are consistent with what I’ve been hearing from shippers and carriers over the past few months: “soft demand” has lead to excess trucking capacity, which has prompted many shippers to conduct procurement engagements to reduce their rates, and also to execute more spot tenders; many shippers are moving away from one-way truck freight and shifting more volume to intermodal and dedicated fleets as a way to “take freight off the [truckload] grid,” as one of our shipper clients put it.  For many shippers, this mode shift is in anticipation of trucking capacity getting very tight again when the economy recovers, as evidenced by the actions JBH, Werner, and other carriers are taking to reduce their fleet capacity.

The uptick in JBH’s empty mile percentage, while not surprising due to fewer opportunities for backhauls and continuous moves, underscores an ongoing issue for the industry, particularly in its efforts to become more “green.”  According to a press release issued by the Owner-Operator Independent Driver Association back in January, “[OOIDA] contends effective environmental solutions begin with addressing inefficiencies in the supply chain such as time and fuel wasted by truckers waiting to be loaded or unloaded and the amount of empty miles truckers must drive.  Those two inefficiencies alone cost trucking and consumers a combined $5.7 billion dollars annually.  Addressing those problems would go a long way toward reducing fuel burned as well as emissions.”

The bottom line: keep your raincoats and galoshes on.  These dark clouds above the transportation industry (and the economy as a whole) will likely linger around for at least a few more months.