Capacity constraints lead to strong carrier revenues

Tight capacity continues to drive up pricing levels for truckload shippers. Pricing reached unprecedented levels in 2004 and that trend is expected to continue into 2005, says equity research firm Morgan Stanley.

Operating margins and returns have been improving, says Morgan Stanley, but drivers remain scarce, causing carriers to remain cautious and to add capacity slowly. This will contribute to the tight capacity in 2005. Though carriers added 3% or 1,300 more tractors in the third quarter, the publicly traded companies had 850 more tractors parked than a year ago due to a lack of drivers.

Less-than-truckload (LTL) tonnage growth slowed a bit in the third quarter, but remains strong by historical standards. LTL volume growth in 2005 should be moderate but will outpace capacity growth.

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