Wednesday, July 21, 2010

A Quick Comparison Of Knight Transportation (KNX) to Arkansas Best (ABFS)

Knight Transportation (KNX) is having a banner year.  Its net income leapt 26% in Q2 on revenue growth of 14%.  Almost every conceivable operational metric improved.

Arkansas Best (ABFS) is still traveling a bumpy road.  Its losses narrowed in Q2 thanks to more tonnage carried.  It's not out of the woods yet, but their CEO attributed their improving performance to lower nonunion fringe benefit costs. 

Comparing a truckload carrier like KNX to an LTL carrier like ABFS isn't as much of a stretch as an apples-to-oranges comparison since they're both segments of the same broad industry.  Finding the key drivers (no pun intended) is never easy in trucking.  I'll hazard a guess as to where we can start.  KNX's emphasis on owner-operators gives them cost flexibility.  They don't have an overhang of underutilized drivers on the payroll who are just sitting around waiting for loads, and the independent operators they use have a pride in ownership that only entrepreneurs can understand.  ABFS is gaining a similar operating flexibility by cutting costs for the nonunion part of its workforce, but they're still hampered by obstructionist Teamsters who refuse to accept wage cuts!  ABFS can't even compete on cost with YRCW, my favorite whipping boy of late.

The lessons are clear.  Owner-operators in trucking take pride in their work, get the job done, and help KNX's bottom line.  Unions at ABFS get in the way of very necessary cost cuts.  Unions need to take a hike.