Source: Company reports ■ Quarterly year-over-year percent change in domestic package and international package revenue at UPS shows the international side is no longer a safe haven for the carrier while domestic demand sags.
International Domestic
-25% -20% -15% -10% -5%
0% 5% 10% 15% 20%
2Q 1Q'09 4Q 3Q 2Q 1Q’08 4Q 3Q'07
parcel delivery service from Mexico to the U. S. last week.
But even as it trumpets added services, UPS is signaling it is taking actions in the market based on what the company actually sees happening and not on projections that long guided carrier outlays. Those forecasts, Davis suggested, amount to little more than speculation that even a company with $3.3 billion in cash and cash equivalents won’t gamble on.
“Whether or not we are at the bottom is not the main issue,” Davis said. “What is important is how long we remain here and what type of recovery we will have . . . We will continue to manage the company under the assumption that the economy will stay at this level until definitive signs of improvement materialize.”
The signs it sees now, however, aren’t giving the company any reason to pull back its cost cuts. The third quarter, when parcel shipping usually starts to pick up speed heading into the fall peak season, is looking a lot like the second quarter, UPS said.
“Our trends for July show no material uptick in growth,” Kuehn said. We don’t think things are getting dramatically worse, but we don’t have any confidence that either demand or activity is going to pick up substantially.” JOC
SURFACE & TRANSPORTATION
By John D. Boyd
RAILROADS’ SUMMERTIME BLUES
AT THIS POINT in the recession, with rail employment at the lowest levels of the decade and traffic stuck in a stubbornly low range, even hefty profits don’t inspire rail executives to see good times ahead.
BNSF Railway reported a 15. 4 percent jump in second-quarter net income from the comparable 2008 period, to $404 million, on aggressive cost cutting and some price hikes, despite plunging cargo volume that slashed freight revenue 26 percent to $3.2 billion.
Yet the best estimate Chairman, President and CEO Matthew K. Rose could offer of the market was that, finally, “volumes have recently stabilized.”
Even that is something, of course. Talk of “green shoots” of business activity in the spring quickly gave way to another round of rail traffic declines. Only in recent weeks have bulk railcar loadings and intermodal trailer or container counts begun to show some firmness and a mild upturn from their lowest levels.
Despite that improvement, carload volume at major U.S. railroads was down 17. 9 percent in the latest week from a year earlier, and box traffic was down 18. 8 percent.
Rose and the BNSF team are not banking on a steady rise from here, either.
“The third and fourth quarters are typically our strongest volume and earnings quarters,” Rose told analysts. “However, at this time we are not seeing any significant cyclical increases.”
Union Pacific Railroad, BNSF’s competitor across the Western U.S., has a similar
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