If an LTL carrier is looking outside the industry for a top pricing executive, it seems logical that the airline industry would be its first stop.
That’s the path followed by XPO Logistics Inc. (NYSE: XPO), which announced Tuesday that it named David Phalen, a 22-year airline industry veteran, to the newly created position of senior vice president of pricing for its LTL segment, effective immediately.
Phalen spent seven years with American Airlines Group (NASDAQ: AAL), where he served as managing director of international revenue management and managing director of revenue analysis, ancillary and fulfillment. Before that, he held senior pricing and revenue management roles for eight years at the former US Airways and for seven years at the former America West Airlines. Both carriers are now part of American.
Phalen should feel right at home at XPO. The LTL industry created the hub-and-spoke distribution model after World War I, nearly 60 years before the airlines implemented their version after the industry was deregulated in 1978. LTL carriers use linehauls or truck routes as spokes, with terminals functioning as hubs. The terminals collect local freight from the various shippers in their areas and use the hubs to consolidate the freight into regions or areas where those shipments are to be delivered.
The hub-and-spoke model is critical for both industries to maximize efficiency and profitable revenue from the densities of their respective customer bases.
LTL carriers live and die on their ability to properly cost and price their freight because they operate high-cost and high-touch networks. Old Dominion Freight Line Inc. (NASDAQ: ODFL), considered the best-run LTL carrier, owes much of its success to its costing and pricing prowess. Todd Polen, Old Dominion’s vice president of pricing services, has been with the company for nearly 32 years, the last 12-plus in his current role. Before that, Polen spent nearly 11 years as Old Dominion’s director of yield management.
Greenwich, Connecticut-based XPO plans to become a stand-alone LTL carrier by the end of the year after it spins off its North American truck brokerage, final-mile, managed transportation and freight forwarding businesses. It also plans to divest its European business. In March, XPO sold its North American intermodal and drayage business to STG Logistics for $710 million in cash.
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