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Why track revenue per loaded mile excluding fuel surcharges?

AskWaves: A look at per-mile truckload rate metrics

The metrics that matter to carriers (Photo: Jim Allen/FreightWaves)

For truckload carriers, revenue per mile, sometimes referred to as rate per mile, is viewed as a proxy for rates.

The base calculation is simple: total revenue divided by the number of miles driven. The per-mile number for dry van loads typically ranges from $1.50 to more than $3 depending on capacity tightness in the market. When capacity is constrained and demand is high, it’s no longer uncommon to see general freight categories exceed the $3 mark on a per-mile basis.

A better way to view the metric is to strip out revenue from fuel surcharges as well as nonpaid or empty miles, commonly referred to as deadhead.

Carriers use fuel surcharge programs to capture changes in diesel prices on a weekly basis. Taking fuel out of the mix allows the per-mile rates to be evenly compared to prior periods, which may have experienced extremely high, or low, fuel prices.

Taking out deadhead provides a better comp as well.

Deadhead is seen in just about every carrier network, with dedicated contract carriage operations seeing very little. The empty miles, which involve the movement of tractor and trailer without cargo, are incurred while repositioning equipment to haul the next load. Those miles are usually displayed as a percentage of total miles on a carrier’s quarterly earnings report. The percentage is usually in the high-single to low-double digits and can vary by a couple hundred basis points from quarter to quarter.

Taking all revenue received, excluding fuel surcharges, and dividing it by all miles driven, excluding deadhead, results in revenue per loaded mile excluding fuel. Many analysts refer to the metric as a carrier’s rate per mile and compare it to prior periods to determine how well a fleet is pricing its capacity compared to the overall strength/weakness of the market.

This is usually the cleanest measure of per-mile rates or pricing a carrier will disclose. It strips out fluctuations in fuel prices as well as the number of miles the equipment ran empty.

However, some carriers provide the year-over-year or sequential percentage change in contract pricing accepted by their core customers. That’s typically the change in rate their regular customers under contract paid on average.

Revenue per loaded mile is only a rate-per-mile calculation and not indicative of equipment utilization. The best measure of utilization is revenue per tractor per week. That number takes into account changes in rates, additional fees and the number of revenue miles a tractor accumulated.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.