Navigating the New Era of LTL Pricing: How Industry Changes Impact Shippers

The largest general rate increase (GRI) in the less-than-truckload (LTL) sector this year was implemented by Saia, which raised its rates by an average of 7.9% in October. This adjustment reflects the same rate hike Saia reports achieving in its recent contract renewals. Frederick J. Holzgrefe, Saia’s President and CEO, emphasized during the company’s third-quarter earnings call that raising rates is a critical focus across all business segments.

This rate hike aligns with the broader LTL industry’s shift toward profitability-focused operations. The need for higher revenue stems from rising operating costs and the continuous expansion of terminal networks. For Saia, these investments include a projected $1 billion spend in 2024 on real estate, employee compensation, equipment upgrades, and technology adoption. This level of expenditure highlights the industry-wide commitment to building infrastructure that can support both current and future demand.

Shippers have expressed expectations for further increases in LTL costs in 2025, though many believe these hikes may not be as aggressive as carriers project. However, this optimism may prove misplaced as the industry continues to evolve with a sharper focus on disciplined pricing strategies and profitability-driven decisions.

Before the 2008-2009 Great Recession, rate increases were often softened during contract negotiations, particularly during soft market conditions. This is no longer the norm. Today’s carriers prioritize profitability over market share, with rate increases carefully calculated to reflect actual operating costs. According to Dean Jones, Chief Commercial Officer at AFS Logistics, the LTL industry has undergone a transformation. Profitability is now the cornerstone of carrier operations, as opposed to simply filling trucks with freight.

LTL carriers have become increasingly sophisticated in their pricing methodologies. Advanced costing models are utilized to analyze contractual customers on a lane-by-lane basis. This data-driven approach ensures that carriers know precisely which customers contribute to their margins and which detract from them. GRIs, while presented as averages, vary significantly depending on a customer’s shipping patterns and efficiency. Carriers consider factors such as shipment delays, expedited requests, and overall logistical complexity when calculating customer-specific rates.

This shift toward precise cost management and pricing discipline follows the playbook pioneered by Old Dominion, a carrier known for its profitability-based strategy. Companies that failed to adopt similar methodologies, such as Yellow and Central Freight Lines, have been unable to sustain operations.

Carriers are also exploring ways to increase revenue beyond base rate adjustments. Accessorial charges, premium services, and technology investments are becoming integral parts of the LTL business model. Charges for remote deliveries, once exclusive to parcel carriers, are now commonplace in LTL. Dimensioning equipment at docks ensures shipments are accurately classified and priced, reducing disputes and enhancing operational efficiency.

During the COVID-19 pandemic, carriers introduced length-based surcharges to mitigate terminal congestion. These surcharges remain in effect and have become a standard tool for influencing shipper behavior. FedEx Freight, for example, applies an extreme length surcharge ranging from $672 to $1,430 per shipment. This trend has been widely adopted, as carriers aim to discourage freight that disrupts efficiency, such as shipments exceeding 8 feet in length.

In addition to targeting long freight, carriers are placing greater emphasis on palletized, stackable shipments that maximize trailer utilization. Freight that does not conform to these preferences is subject to higher rates or outright rejection. This selective approach reflects a growing trend toward optimizing operations while minimizing inefficiencies.

The cumulative effect of these strategies is higher overall costs for shippers, but pricing now more accurately reflects the true expense of moving freight. While accessorial fees are a useful lever, carriers are focusing most on base rate adjustments as the primary driver of revenue growth.

The LTL industry has undergone profound changes, and navigating this new landscape requires expertise and strategic insight. PNG Worldwide is here to help shippers adapt to these evolving dynamics. With a commitment to providing competitive pricing, expert logistics solutions, and unmatched service, PNG Worldwide ensures its clients can thrive in an increasingly complex LTL environment. Whether optimizing shipping strategies or securing better rates, PNG Worldwide is your trusted partner in the LTL industry.