Another distressed trucking company files Chapter 11 bankruptcy
According to The Street, The trucking industry is facing mounting financial distress, leading a growing number of logistics companies to file for bankruptcy. After enduring the significant impacts of the Covid-19 pandemic, which led to 88,000 trucking job losses and the closure of more than 3,000 companies in 2020, the industry began its recovery. Companies started rehiring truckers to address a driver shortage of 81,000, but challenges have persisted.
A Trucking Recession Amid Declining Shipping Rates and Rising Costs
As the industry rebounded, shipping rates began to drop in 2022, and fuel prices surged, doubling in cost. The logistics sector soon entered what many call a “trucking recession” by the spring of 2022, according to FreightWaves. By July 2023, the number of registered for-hire drivers increased by 96% to over 475,000, but demand for shipping services had already started to fall. Inflation, rising interest rates, and higher insurance and wage costs further strained companies’ financial health.
Earnings Struggles for Major Trucking Companies
Some of the nation’s largest trucking companies have not been immune to these challenges. Both J.B. Hunt Transport Services (JBHT) and Knight-Swift Transport Services (KNX) reported disappointing earnings in April 2024, largely due to weaker demand. Inflation had curbed consumer spending on new goods, affecting the need for transportation services. However, Knight-Swift’s CEO Adam Miller expressed optimism that demand could rise in the third quarter, with seasonal activity potentially alleviating the trucking recession by the fourth quarter, as reported by the Farm Journal.
Bankruptcies Surge Amid Industry Struggles
Despite some hopeful signs, several trucking companies continue to struggle under the weight of mounting debt and financial pressures. Many have turned to Chapter 11 bankruptcy as a means of reorganizing their debts:
- Miami-based trucking company AB Brothers USA and its affiliate A1 Transport Network filed for Chapter 11 bankruptcy protection on July 20, 2024. They reported $593,000 in assets and $1.05 million in liabilities.
- AOG Trucking, based in McAlpin, Fla., filed for Chapter 11 on July 17, listing assets and liabilities between $1 million and $10 million. The company owes over $713,500 to its largest creditor, BMO Harris Bank.
- Alexander Trucking from Mesa, Ariz., filed for Chapter 11 reorganization on July 25, reporting assets between $100,000 and $500,000 and liabilities between $500,000 and $1 million.
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Fastline Cargo: A Notable Bankruptcy Case
Cinnaminson, N.J.-based Fastline Cargo, operating as FLC, became the latest company to seek Chapter 11 bankruptcy on July 29. The company cited financial struggles and is attempting to reorganize its debts in the U.S. Bankruptcy Court for the District of New Jersey. Fastline Cargo has requested approval for debtor-in-possession financing from its factoring company, RTS Financial Services, with which it signed a factoring agreement in May 2023. The company owes over $880,000 in secured collateral.
With 41 drivers and 54 power units, Fastline Cargo has expressed concerns over its ability to continue operations if it cannot meet payroll obligations. Without the necessary approval for financing, the company faces potential closure, further exacerbating the financial crisis in the trucking industry.
