With team capacity so tight, Covenant implements a $40,000 bonus for "teaming up"

covenanttransport.jpg

Carrier offers unprecedented bonuses for team drivers

Covenant might be the most brilliant trucking company in the U.S. It has announced a $40,000 total bonus to team drivers, payable in increments based on miles driven. For those new to the industry, team operations involve trucks that contain two drivers. The advantages of such an operation is that it enables the truck to keep moving, running nearly around the clock.

This near-continuous operation is ideal for a number of reasons: it increases truck utilization, keeps the drivers engaged in tasks other than sitting at the dock, and most importantly, it’s a huge customer service advantage because of the distance a truck can cover in a day.

Under HOS rules and ELD enforcement, the most a truck can expect to run is around 450-500 miles on a typical day. With a team, a truck can push close to 1,000 miles a day. In the pre-ELD days, some independent operators would pretend to operate as a team and haul the tweener freight (600-800 mile length of hauls). Assuming ELD compliance and enforcement is real, an overnight load that is 700-800 miles will require a team.

Elon Musk reminded us a few months back that the vast majority of loads are short hauls. But there are a significant number of loads that meet this tweener qualification that shippers have been able to get reliable capacity for. In the new world of ELD enforcement, this will be incredibly difficult.

So, Covenant’s move of throwing out a big headline bonus is brilliant. $40K is a lot of money. If you’re a husband and wife team willing to deal with the open road, it’s an amazing amount of money. Even for an individual driver willing to run team, $20,000 is quite an added bonus. FreightWaves pays exceptionally well, but these bonuses are tempting me to get out on the road.

Of course, this is a decision Mrs. Wimberly and I will have to make together. Not sure she would be a huge fan of the payout schedule, considering we would have to stay in confined quarters for four years.

Covenant is paying this bonus to teams of $2,000 for every 60,000 paid miles covered. To get the full $40,000 my wife and I would have to drive 1.2 million miles before we get the full payout.

Assuming we are pushing the upward boundaries of utilization of 6,000 miles a week, it would take 200 weeks to achieve that mark. That is a long time. I suspect I would be dead by then. Not because I physically couldn’t do it, but my wife and I can barely survive a vacation together--much less four years of teaming up in the truck.

Having said that, the scheme is still a step in the right direction. Team freight will go for a huge premium. Covenant sports the largest number of teams in the U.S. and they will be incredibly well positioned to offer shippers team expedited capacity.

In theory, they should be able to name their own price. A 3.3 (do the math) CPM bonus is great, but team rates will likely push a 20-30 cent per mile premium over solos next year.

Additionally, smart operators know that a higher percentage of teams give them amazing leverage in shipper negotiations for additional freight in solo and regional operations.

FreightWaves has argued that at least 40% of the industry rate increase should go towards drivers, meaning that Covenant should consider doubling or tripling the amount. Plus, since it is paid out upon completion of the milestone, drivers that fail to achieve this will not benefit from the bonus.

We applaud Covenant for taking a huge leap in staffing up their teams, but to make the role more attractive, the carrier should consider front loading the amount earlier in the cycle or increasing the number. The impact will be interesting to watch during quarterly reports over the next year to see if it increases seated team count.

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.