Less-than-truckload (LTL) carrier Arkansas Best Corp. on April 23 reported a first-quarter loss significantly larger than the loss it reported in the first quarter of 2009, highlighting the need for wage concessions that will soon be voted on by its 7,000 employees represented by the Teamsters union.
ABF Freight System, the unit that represents virtually all of Arkansas Best's business, reported revenue of $333 million, a per-day increase of 2.2 percent over the 2009 period. However, ABF reported a $35.7 million operating loss, compared with a $26.8 million operating loss in the year-earlier quarter. The company's operating ratio, the ratio of operating expenses to operating revenues, rose to 110.7 from 108.3, a sign that ABF's expenses rose at a faster clip than its revenues.
"Despite some signs of improvement in our nation's economy resulting in the stabilization of our business, Arkansas Best's first-quarter results illustrate the ongoing effects of low freight levels combined with a weak pricing environment," said Judy R. McReynolds, Arkansas Best's president and CEO, in a statement.
McReynolds said ABF's operating results will not significantly improve without "further increases in freight demand, strong improvements in pricing, and the positive financial impact of wage concessions."
Earlier this week, ABF and Teamster leadership reached a tentative contract agreement that includes 15-percent wage concessions through March 2013. In exchange, employees will receive wage increases depending on certain improvements in ABF's operating ratio.
McReynolds said the "agreement offers ABF the opportunity to adjust its cost structure to be more comparable with the LTL marketplace." The final result from a rank-and-file vote isn't expected until late June.
Jon A. Langenfeld, transportation analyst at Milwaukee-based Robert W. Baird & Co., said the results demonstrate—much to his surprise—that LTL pricing has yet to show meaningful improvement. ABF will continue to sustain operating losses without such "external relief" as the wage cuts to be voted on by the union rank and file, Langenfeld said.