Forward Air announced Wednesday a 7.9% general rate increase (GRI) for rates based on tariffs. The company said some accessorial and minimum charges will be raised as well. The changes take effect Feb. 1.
Forward (NASDAQ: FWRD) implemented a 6% GRI last February with most other less-than-truckload providers installing 5.9% increases around the same time. The asset-light trucking and logistics provider also announced that capacity surcharges will extend beyond the end of 2021, through June 30, 2022.
“The GRI is intended to offset rising costs associated with the challenging operating environment and we believe will allow Forward to continue investing in service enhancement, fleet maintenance, technology innovations and other areas to serve customers more effectively and efficiently,” a press release read.
Forward has been actively replacing lower-margined freight with heavier, high-value loads. During the third quarter, tonnage per day in its expedited segment increased 8% year-over-year even though shipments fell 17%. A 30% increase in weight per shipment, mostly due to a higher count of denser industrial-related shipments versus e-commerce parcels, drove the tonnage increase.
The change led to a 190-basis-point improvement in the segment’s operating margin, with the company’s LTL margin climbing to 17.5% in the month of September.
Most carriers issue GRIs annually on freight carried under general tariff codes not subject to a contract. The higher rates are used to absorb driver and dockworker pay increases as well as technology and real estate investments. The headline GRI percentage announced by carriers is typically an average of the overall impact the rate changes will have. The percentage increases can vary by lane and shipment.
Increases for 2022 are coming in a little bit higher and ahead of the normal first-quarter implementation period, a signal that strong LTL demand is likely to continue.
Many carriers have used a strong freight market in 2021 to scrub customer lists from poorly priced and tough-to-haul loads. While the improved freight selection has driven yields and margins higher, the group is still contending with notable cost inflation in areas like driver/dockworker pay, operating supplies (fuel) and purchased transportation (often third-party linehaul moves using spot market capacity).
Privately held Estes implemented a 5.9% GRI on Monday.
“This GRI is necessary for offsetting our investment in operational resources such as equipment and personnel, as well as the rising costs of technology enhancements that provide our customers with online transportation tools to simplify their shipping experience,” an Estes statement read.
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