Yellow Corp. optimistic with year of change ahead of it

May 11, 2022

Chuck Robinson

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Yellow Corp. paints a rosy financial picture as it faces a year of change to become a super-regional carrier.

During a first-quarter earnings call on May 10, Overland Park, Kan.-based Yellow Corp. executives discussed the “One Yellow” strategy that includes revamping its three legacy LTL subsidiaries.

Yellow’s brand consolidation was announced in 2021. The restructuring means Yellow’s historic brands – Reddaway, Holland and New Penn – will disappear. Their drivers and some of their equipment will keep rolling under the Yellow name.

Yellow Corp.’s Reddaway subsidiary is the first of three regional subsidiaries scheduled to change this year.

Yellow Corp. plans to eliminate nine terminals in the West as it moves forward with its plans. Yellow officials last week notified the Teamsters union of the proposed change of operations for the Reddaway subsidiary. Implementation will begin no sooner than July 17.

Later this year, Yellow’s Eastern regional LTL carrier New Penn is expected to be consolidated in the third quarter of this year. Midwest regional LTL carrier Holland is expected to be consolidated before the end of this year.

The goal is to become “One Yellow,” a super-regional carrier combining a national footprint with an emphasis on next- and second-day regional service.

“As we transform the network to operate as a super-regional carrier, we are integrating the linehaul network to support both regional and long-haul services as well as optimize our pickup and delivery operations to eliminate redundancies,” Darrel Harris, Yellow president and chief operating officer, said during the May 10 earnings call.

When completed, the linehaul optimization efforts will help drive speed, efficiency and consistency in Yellow’s network, he said.

“The city pick-up and delivery optimization efforts will eliminate the overlapping coverage that currently exists in the brand. We will have one Yellow driver interacting with our customers for both regional and long-haul services.”

Once the network transformation is complete, Hawkins said asset utilization will improve and capacity will expand without having to add terminals.

Financial outlook

Although the first two months of the first quarter presented “unique challenges,” the quarter ended on a strong note, Harris said.

LTL tonnage per day was down 20% in the first quarter, with a 16.5% decrease in shipments and a 4.3% decrease in tonnage.

Nevertheless, Yellow had the best first quarter adjusted earnings before interest, taxes, depreciation and amortization and best first quarter operating income, excluding property disposals since 2016, Harris said. In addition, as of the end of the first quarter, the last 12 months’ adjusted earnings had doubled compared to a year ago.

For first quarter 2022, Yellow operating revenue was $1.26 billion, compared to 1.2 billion in 2021, Dan Oliver, Yellow chief financial officer said during the earnings call. Operating income was $9.2 million, including a $5.5 million net gain on property disposals, compared to an operating loss of $27.6 million in the prior year, which included a $1 million net loss on property disposals.

Driver wages

As far as driver wages are concerned, total union wages are expected to increase about 5% for the full year 2022, Oliver said. That is because of wage increases in the company’s national master freight agreement of 40 cents per hour and 1 cent per mile on April 1 and Oct. 1. In addition, a cost of living adjustment kicks in April 1. It is estimated at 60 cents per hour and $1.50 per mile.

The total April wage increase is expected to be $1 per hour and $2.50 per mile.

One Yellow transformation

Phase 1 of the One Yellow transformation is planned to be implemented this summer in the western part of the U.S. It was described as having the lowest execution risk profile during the earnings call. It includes optimizing of 89 legacy YRC freight and runaway terminals.

“The city pickup and delivery optimization efforts will eliminate the overlapping coverage that currently exists between brands,” Harris said. “And we will have one Yellow driver interacting with our customers for both regional and long haul services.”

Under the plan, the Reddaway dispatch system will be implemented in the western operating terminals of YRC Freight, its long-haul carrier, reports Logistics Management. There are some exceptions.

YRC Freight terminals in Bloomington, Calif.; Denver; Phoenix; Portland, Ore; Albuquerque, N.M.; and Salt Lake City will continue to follow the current dispatch methods “until integration of the Super Regional network is able to be implemented,” according to document sent to the Teamsters.

The planned change of operations consolidates 20 terminals into existing terminal operations and establishes 11 “velocity distribution centers.”

Eliminating nine terminals is expected to reduce road turns, meet and turns, layovers, and the number of sleeper team drivers.

Historic brands to disappear

The legacy subsidiary names of Reddaway, Holland and New Penn are expected to disappear.

Holland and Reddaway became subsidiaries of Yellow Corp. in 2005, when Yellow acquired USF.

Holland, founded in 1929 in Holland, Mich., was bought by TNT Ltd. in 1985. TNT became and USF in 1996.

Reddaway, founded in 1919 by Art Reddaway in Oregon City, Ore., was purchased by USF in 1989.

New Penn, incorporated in 1936, was acquired by Yellow Corp. in 2001.

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Chuck Robinson formerly was senior copy editor for a weekly trade publication serving the fresh produce industry. He has served trade publications, horticultural journals and community newspapers for 25 years.