Transportation Services Sector
Description
Companies in this industry are primarily engaged in providing transportation services, including air transportation of passengers and freight; support activities to transportation; mail services under a universal service obligation; and air, surface, or combined mode courier and express deliver services of parcels not operating under a universal service obligation. Major companies include Union Pacific, United Airlines, UPS, US Postal Service, and YRC Freight (all based in the US), as well as AP Moller Maersk (Denmark), Deutsche Post and Lufthansa (both based in Germany), and East Japan Railway and NYK Line (both based in Japan).
Asia-Pacific is the largest region in the global transport market, followed by North America, according to Statista. Emerging economies with growing middle classes present opportunities for market expansion.
The US transportation services sector includes about 240,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $900 billion.
COMPETITIVE LANDSCAPE
Transportation services companies depend highly on the health of the global economy, which affects manufacturing output, commodity trade, consumer and business spending, and business and leisure travel activity. Because many costs are fixed, the profitability of individual companies is determined by efficient operations and on favorable fuel and labor costs. Large companies enjoy economies of scale in purchasing and the ability to provide more extensive services. Small companies can compete by serving local or regional areas. The US industry is fragmented: the 50 largest firms generate about 40% of industry revenue.
Competitive Advantages:
IT Integration - Companies across the transportation sector rely on complex information systems to track cargo, manage schedules, optimize routes, and monitor performance. To remain competitive, providers must also continuously develop and upgrade customer-facing technologies such as mobile apps and Web-based tools for scheduling and tracking transportation services.
Managing Fuel Costs - Fuel is the largest operating expense for many transportation service providers. Companies may engage in financial hedging strategies to protect themselves from variable fuel prices. Locking in low fuel rates and guarding against future price spikes is crucial for maintaining profit margins.
Targeting Emerging Markets - Much of the industry's growth potential lies in regions with emerging economies. Market growth in Asia is expected to outpace industry expansion in established economies in North America and Europe over the next decade.
Companies to Watch:
American Airlines is the largest airline in the world by most metrics, operating an average of nearly 6,700 flights per day to nearly 350 destinations.
AP Moller Maersk has transportation holdings ranging from the world's largest container shipping company (Maersk Line) to freight forwarding and supply chain management services (Damco).
Didi Chuxing - Uber may have led the vehicle-for-hire revolution, but China-based Didi is currently the world's largest ride-sharing service provider.
Space Exploration Technologies - Going where few have gone before, SpaceX has been at the forefront of private space transportation.
UPS is the world's leading package delivery company and a major provider of trucking and freight forwarding services.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major services by transportation service companies include the transportation of boxed, palletized, and other packages at about 15% of the industry's revenue and domestic, schedules passenger transportations accounting for about 10%. Other services include transportation services for small packages, documents, and letters and freight transportation arrangement (both at over 5%).
Major airline services include domestic passenger transportation and international passenger transportation; mail and freight transportation accounts for most of the remainder. Other revenue comes from providing maintenance, servicing, training, and reservations. Some airlines also offer nonscheduled (charter) flights.
Railroads transport of commodities, including coal, grain, crushed rock, and chemicals; containers of consumer goods; automobiles; and passengers. The overwhelming majority of railroad revenue comes from transporting commodities, most notably coal. Container transport, also known as intermodal rail traffic, moves consumer goods to ships and trucks without unloading the freight from containers between modes of travel.
Waterborne transportation services handle the movement of freight and passengers along deep sea, coastal, lake, and inland routes. Deep sea services include freight vessels and cruise ships. Freight services include intermodal containers, boxed and palletized goods, dry bulk cargo and bulk liquids and gases; transportation of automobiles and trailers; and maintenance and repair services. Major vessel types include containerships, which transport intermodal shipping containers, dry bulk carriers, which transport commodities such as iron ore, coal, and food; liquid bulk carriers such as tankers that ship crude oil, chemicals, and petroleum products; and roll-on/roll-off (RORO) vessels that transport wheeled cargo such as cars, trucks, and trains.
The cruise industry includes large ships sailed to ports around the world, as well as smaller ships in lakes and along inland and coastal waterways. Inland water transportation services include freight transportation and towing and tugboat services. Freight transportation services consist of dry cargo (such as grain, coal, steel, fertilizers, and aggregates) and liquid cargo (refined petroleum products, petrochemicals, black oils, and agricultural chemicals). Major coastwise and lakewise transportation services include the transportation of bulk liquids and gases, box and pallet freight, intermodal containers, dry bulk, automobiles, and waste.
General trucking services include long-distance and local trucking. These classifications can be subdivided into truckload (TL) and less-than-truckload (LTL) services. TL shipments have trailers dedicated to a single shipper's cargo. A trucking customer typically loads a trailer full (or nearly full); the trucker then transports the container, and a receiver unloads the contents. Shipments are usually delivered within one or two days, depending on the distance. LTL shipments are a smaller but growing part of the market. LTL carriers transport the consolidated cargo of several shippers on one truck, dropping goods off at multiple delivery points. Long-distance LTL truckers typically operate a network of terminals connected by long-distance routes. Because most shipments involve transfers at terminals, delivery times for LTL shipments are generally longer than for TL shipments. To lower delivery costs, LTL trucking companies often work with logistics companies to arrange, consolidate, time, and monitor shipments. Local trucking services, whether TL or LTL, are typically offered within a metropolitan area and involve one-day trips.
The transit and ground passenger industry includes bus service (school, urban, interurban and rural, charter, and paratransit), as well as taxi and limousine services. Commuter rails service is also included in the industry.
Pipeline transportation services move bulk liquids and gases. Primary product categories include crude oil, natural gas, and refined petroleum.
Major warehousing services include general and refrigerated. Other services include records storage and farm products storage. Many operators provide contract warehousing services, in which a warehouse is dedicated to a single major customer. Others offer public warehousing services, in which warehouse facilities are shared by customers too small to require dedicated facilities.
Asia-Pacific is the largest region in the global transport market, followed by North America, according to Statista. Emerging economies with growing middle classes present opportunities for market expansion.
The US transportation services sector includes about 240,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $900 billion.
COMPETITIVE LANDSCAPE
Transportation services companies depend highly on the health of the global economy, which affects manufacturing output, commodity trade, consumer and business spending, and business and leisure travel activity. Because many costs are fixed, the profitability of individual companies is determined by efficient operations and on favorable fuel and labor costs. Large companies enjoy economies of scale in purchasing and the ability to provide more extensive services. Small companies can compete by serving local or regional areas. The US industry is fragmented: the 50 largest firms generate about 40% of industry revenue.
Competitive Advantages:
IT Integration - Companies across the transportation sector rely on complex information systems to track cargo, manage schedules, optimize routes, and monitor performance. To remain competitive, providers must also continuously develop and upgrade customer-facing technologies such as mobile apps and Web-based tools for scheduling and tracking transportation services.
Managing Fuel Costs - Fuel is the largest operating expense for many transportation service providers. Companies may engage in financial hedging strategies to protect themselves from variable fuel prices. Locking in low fuel rates and guarding against future price spikes is crucial for maintaining profit margins.
Targeting Emerging Markets - Much of the industry's growth potential lies in regions with emerging economies. Market growth in Asia is expected to outpace industry expansion in established economies in North America and Europe over the next decade.
Companies to Watch:
American Airlines is the largest airline in the world by most metrics, operating an average of nearly 6,700 flights per day to nearly 350 destinations.
AP Moller Maersk has transportation holdings ranging from the world's largest container shipping company (Maersk Line) to freight forwarding and supply chain management services (Damco).
Didi Chuxing - Uber may have led the vehicle-for-hire revolution, but China-based Didi is currently the world's largest ride-sharing service provider.
Space Exploration Technologies - Going where few have gone before, SpaceX has been at the forefront of private space transportation.
UPS is the world's leading package delivery company and a major provider of trucking and freight forwarding services.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major services by transportation service companies include the transportation of boxed, palletized, and other packages at about 15% of the industry's revenue and domestic, schedules passenger transportations accounting for about 10%. Other services include transportation services for small packages, documents, and letters and freight transportation arrangement (both at over 5%).
Major airline services include domestic passenger transportation and international passenger transportation; mail and freight transportation accounts for most of the remainder. Other revenue comes from providing maintenance, servicing, training, and reservations. Some airlines also offer nonscheduled (charter) flights.
Railroads transport of commodities, including coal, grain, crushed rock, and chemicals; containers of consumer goods; automobiles; and passengers. The overwhelming majority of railroad revenue comes from transporting commodities, most notably coal. Container transport, also known as intermodal rail traffic, moves consumer goods to ships and trucks without unloading the freight from containers between modes of travel.
Waterborne transportation services handle the movement of freight and passengers along deep sea, coastal, lake, and inland routes. Deep sea services include freight vessels and cruise ships. Freight services include intermodal containers, boxed and palletized goods, dry bulk cargo and bulk liquids and gases; transportation of automobiles and trailers; and maintenance and repair services. Major vessel types include containerships, which transport intermodal shipping containers, dry bulk carriers, which transport commodities such as iron ore, coal, and food; liquid bulk carriers such as tankers that ship crude oil, chemicals, and petroleum products; and roll-on/roll-off (RORO) vessels that transport wheeled cargo such as cars, trucks, and trains.
The cruise industry includes large ships sailed to ports around the world, as well as smaller ships in lakes and along inland and coastal waterways. Inland water transportation services include freight transportation and towing and tugboat services. Freight transportation services consist of dry cargo (such as grain, coal, steel, fertilizers, and aggregates) and liquid cargo (refined petroleum products, petrochemicals, black oils, and agricultural chemicals). Major coastwise and lakewise transportation services include the transportation of bulk liquids and gases, box and pallet freight, intermodal containers, dry bulk, automobiles, and waste.
General trucking services include long-distance and local trucking. These classifications can be subdivided into truckload (TL) and less-than-truckload (LTL) services. TL shipments have trailers dedicated to a single shipper's cargo. A trucking customer typically loads a trailer full (or nearly full); the trucker then transports the container, and a receiver unloads the contents. Shipments are usually delivered within one or two days, depending on the distance. LTL shipments are a smaller but growing part of the market. LTL carriers transport the consolidated cargo of several shippers on one truck, dropping goods off at multiple delivery points. Long-distance LTL truckers typically operate a network of terminals connected by long-distance routes. Because most shipments involve transfers at terminals, delivery times for LTL shipments are generally longer than for TL shipments. To lower delivery costs, LTL trucking companies often work with logistics companies to arrange, consolidate, time, and monitor shipments. Local trucking services, whether TL or LTL, are typically offered within a metropolitan area and involve one-day trips.
The transit and ground passenger industry includes bus service (school, urban, interurban and rural, charter, and paratransit), as well as taxi and limousine services. Commuter rails service is also included in the industry.
Pipeline transportation services move bulk liquids and gases. Primary product categories include crude oil, natural gas, and refined petroleum.
Major warehousing services include general and refrigerated. Other services include records storage and farm products storage. Many operators provide contract warehousing services, in which a warehouse is dedicated to a single major customer. Others offer public warehousing services, in which warehouse facilities are shared by customers too small to require dedicated facilities.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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