Outlook Worsening for US Transportation Companies
A rapidly deteriorating U.S. economy, slowing growth worldwide, and credit market dislocations are stepping up the pressure on North American transportation companies, according to Standard & Poor’s Ratings Services.
The sharp decline in oil prices ( S&P projects average prices of $44 per barrel in 2009, compared with $100 in 2008) provides a significant offset for airlines but only modest relief for other sectors that already had means to pass through higher fuel costs, according to the report, “Industry Report Card: Recession Is Creating A Dim 2009 Outlook For The North American Transportation Sector.”
“We see trucking and car rental companies under the greatest pressure and recently downgraded several large participants in those sectors: YRC Worldwide Inc (NYSE:YRCW), Avis Budget Group Inc. (NYSE:CAR) and Dollar Thrifty Auto Group Inc.(NYSE:DTG).
The weakness is spreading to other sectors that had previously seen only moderate weakness, including air express, shipping, railroads, and equipment leasing companies. In each case, volumes are slipping, though pricing is holding up fairly well in selected sectors, such as railroads, the report notes.
Around half of the rating outlooks for North American trucking, car rental, and airline companies are negative or CreditWatch negative, compared with about one-third for the transportation sector overall.
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