If you’ve worked in the LTL industry for any bit of time, then you know that it’s always changing. Yes, sometimes that means it gets a bit more complicated. Rates adjust. Rules and processes are modified. Despite all this, there is usually one constant - the core LTL carriers we work with. Yet, in 2023, that changed; we saw the departure of the legacy LTL carrier known as Yellow Corporation.
As someone with a career in LTL, I saw this happen in real time and have directly seen its ripple effects. I can answer some of those questions and share with you my thoughts, experiences, and observations of this impactful event in LTL history.
The Fall of Yellow Corporation
Yellow Corporation (commonly referred to as YRC) was no stranger to financial turmoil. The company was laden with debt that was worsened by the Great Recession. It almost put them into filing for bankruptcy in 2009.
A stint of other factors after that didn’t put them in a better position when COVID-19 rolled around in 2020. YRC was granted a $700 million COVID-relief loan by the U.S. government, which it used nearly half of to cover past due payments to healthcare and pensions, payments on equipment and properties, and interest accrued by its other debts. Fast forward to 2023, and that’s where their final chapter began.
A few months into 2023, YRC and the Teamsters Union engaged in back-and-forth negotiations. YRC wanted to change operational procedures and sought extra funding to help it pay off its debts. Teamsters disagreed with the proposed changes. We saw news articles and hit pieces about the conflict, week after week. It was nearly impossible for the industry to ignore it.
In July, whispers began of a possible union strike that would effectively halt YRC’s freight network. This was the writing on the wall for many shippers and third-party logistics (3PL) companies. At this point, the hull had been punctured, and water pouring in. Do you stay or do you go?
YRC and its subsidiaries were promptly disabled from countless TMS platforms. No customer wanted their freight stuck in limbo if Teamsters were to go on strike against YRC. Because of this, YRC saw a sharp decline in freight volume and tonnage. A company that was in financial disarray was now losing its primary source of revenue.
On July 30th, Yellow Corporation ceased all operations. The Teamsters had not agreed to the negotiations, and the 11th hour came and went. So, what now?
The Aftermath of YRC’s Closing
YRC’s exit affected two parties: shippers using LTL and other LTL carriers.
For shippers using LTL, there were two buckets: those who had already begun shifting their freight to other carriers in their pricing roster and those unfortunate enough to still have most or all freight with YRC. The latter had a more difficult situation to overcome as they now had to find an LTL carrier to move their freight without paying an arm and a leg.
For LTL carriers, YRC’s existing freight had to go somewhere, so they had to figure out how to absorb it. Carriers such as Estes, FedEx, and XPO and their capabilities were pushed to their limit, now drinking from a firehose of incoming freight. Volumes increased drastically, and with such a rapid rise came decreased capacity.
LTL carriers were making the difficult decision to exclude certain shippers in favor of others just to service accounts and keep their networks moving without bottlenecking. This left many smaller shippers stranded with a shorter list of available LTL carriers.
As carriers became inundated with freight, their operating ratios took a hit, and something had to be done to regain control. A season of atypical general rate increases (GRI) began. LTL carriers needed to remain profitable lest they succumb to a fate like Yellow.
3PLs and shippers alike started getting notifications from their carrier representatives about rates going up. Shipping LTL got more expensive now that the carriers had to pick and choose who they serviced with their finite capacity. The increased rate structures also priced out shippers that were used to YRC’s competitively priced tariffs or couldn’t stomach the increases.
For many shippers and 3PLs, the immediate aftermath of the Yellow Corporation bankruptcy was unlike any they had previously experienced.
Now, that’s the long and short of it, but how are things today? Surely, the disappearance of a significant LTL carrier like that would have lasting, irreversible effects.
Well, yes, but also no.
The Current Impact of YRC’s Closing
Today the LTL industry has mostly stabilized. YRC’s freight volume has dispersed, and the dust has settled. The LTL carriers have course-corrected their capacity concerns.
After the YRC bankruptcy, there were also new questions to answer, one of which was “What happens to their assets?” Those went through the bankruptcy courts, but the LTL carriers were eager to get a piece of it.
The purchased terminals and trailers meant increased footprint and capacity, which can be the difference between being the best and the biggest for LTL carriers. Several carriers bid to acquire the terminals left behind by Yellow Corporation.
Estes Express, a prominent national LTL carrier, was one of the larger victors in the bidding war. As one of Trinity’s carrier relationships, I asked Estes if they could share the impact YRC’s exit had on their company. Here’s what President and COO Webb Estes had to say:
“Estes acquired 29 terminals and a large amount of equipment as a result of Yellow’s exit from the marketplace. I can’t say enough about the dedication and resiliency of our team to work together tirelessly to quickly bring them online and add to our steady capacity growth. In addition, we purchased several tractors and trailers, and we were also able to buy many smaller items – such as load bars, airbags, and freight tables – all of which help us do an even better job protecting our customer’s freight,” said Estes. “One other surprising benefit is that the additional freight we’ve taken on has allowed us to add more direct linehaul lanes, and we’re seeing better overall service in 2024 compared to last year.” Estes added, “This is a great example of how Estes continues to invest wisely in assets and capabilities that create capacity, opportunity, and resiliency for our company and those we serve. And that remains a primary reason why customers from coast to coast continue to rely on us for their shipping needs.”
While LTL carriers, larger shippers, and 3PLs came out in the black or relatively unscathed, others did not. Smaller shippers with all their freight lanes with YRC had no backup plans except to pay increased, non-discounted LTL rates with other carriers or risk their business operations.
How Did Trinity Logistics Fare?
At Trinity Logistics, those first few months after the bankruptcy were interesting! We saw many new shippers start a relationship with us and saw some complications in LTL carrier transit lanes that bottlenecked. Don’t worry, they were quickly resolved. Since Trinity has a broad roster of national and regional LTL carrier contracts in place, our shipper relationships were able to use our rates to course correct from the YRC closure and effectively avoid any critical disruption.
Is this the last time we’ll see an industry-shaking event in the LTL space? Likely not. For now, the industry is stable, and many LTL carriers are growing and reporting profitable earnings.
In my 10+ years working in the LTL industry at a 3PL, the Yellow Corporation was always a top LTL carrier for us. Seeing them fade into the wind after decades of LTL service was surreal, and I felt sad for the many YRC employees I’ve grown to know.
Despite such an impactful event, now written in the history books, it’s a year later, and the LTL landscape is still thriving (and volatile), even with one less player at the table.
Final Thoughts
Considering the size of Yellow and the steady decline until evaporation from the industry, I expected more disarray from it. Sure, the first weeks after the bankruptcy had the GRIs, shipment delays, and new shipper partnerships for Trinity to handle, but after a month or two, it was relatively smooth sailing back to normal.
I think that speaks volumes to the age we live in. The amount of technology and time-saving efficiencies that LTL carriers invest in year after year. It allowed the industry to absorb the freight volume of one of the largest LTL carriers in the world and it did so in less than 60 days! It’s kind of crazy and a testament to the LTL industry and its controlled chaos.
Working with Yellow for so many years, I grew familiar with some of the names who worked there. People we would see at conferences, have calls with, or see in emails. People who had been in the industry much longer than I have had extensive backgrounds and grew their roots at Yellow.
The bankruptcy landed them in the middle of it all, but many of them went on to other LTL carriers and took their experience, adding value there. I think that’s a silver lining here. Despite the financial decision of Yellow as a company, it had people on its roster that brought purpose to LTL and now these people are creating an impact for other carriers and customers alike. For how vast it is, the LTL industry can be close-knit, so to see those former Yellow employees succeed at other LTL carriers is a bright spot in this saga.
