Pulling ahead

Owner-operators saw major income jumps in 2003 and 2004, and the good times seem to have continued in 2005. What’s behind the increases?

To paraphrase Mark Twain: The death of the owner-operator has been greatly exaggerated. Indeed, owner-operators are not only alive and kicking; they’re prospering despite predictions of their demise.

“It’s a good time to be an owner-operator,” says Gary Salisbury, senior vice president and chief operating officer at Fikes Truck Line and a former owner-operator. “I went in the business in the late 1970s through 1980s, and the rates we got paid then are nowhere near what they’re getting paid now.”

In 2002, as the entire industry suffered a downturn, average owner-operator net income fell slightly to $41,800, according to the annual Overdrive Owner-Operator Market Behavior Report, and throngs of one- to 10-truck companies were bailing out voluntarily or through bankruptcy. Experts predicted that high fuel prices, slow freight and excess capacity would squeeze the small-business trucker toward extinction.

“In 2001, 2002 and to some extent in 2003, we saw the weaker business managers exit the market,” says Chris Brady of Commercial Motor Vehicle Consulting, who compiles the report.

But a funny thing happened on the way to the grave. As capacity shrank and the economy rebounded in 2003 and 2004, owner-operator income also rebounded, thanks to pay rate increases, new revenue from stoppage and detention pay, lucrative retention and productivity bonuses and, for fuel-efficient owner-operators leased to the right carriers, extra cash from fuel surcharges. The average owner-operator income jumped $10,000 – 21 percent – in 2004 to $57,400, according to the Market Behavior Report. Independents, averaging $58,900, did slightly better than leased operators, at $56,900.

The 2004 average was $22,000 higher than the national average annual salary for a tractor-trailer driver, according to the U.S. Bureau of Labor Statistics, which calculates compensation of drivers across the industry.

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“The rate per mile is going up due to scarcity of owner-operators in relation to freight volumes,” Brady says. “Carriers are increasing the rates because they need owner-operator capacity to meet shipper requirements. And there’s an abundance of freight.”

The good news didn’t stop with 2004, despite last year’s record spikes in fuel prices. “I’d say my overall gross revenue is anywhere from 10 to 15 percent higher than it was in 2004,” says Carey Pritt, an owner-operator leased to Danny Herman Trucking. “I’m clearing more money, too. It’s not a whole lot more, but it’s noticeably more.”

Pritt figures he earned $70,000 after expenses in 2005, the best of his five years as an owner-operator. He’s also driving more miles because of the 2004 revision of the hours of service, but most of his wage increase is due to his per-mile rate, which has increased three times in 12 months.

Pritt, who shuttles dry van freight back and forth to the Mexican border, also can count on higher pay because of Danny Herman Trucking’s lucrative productivity bonus, through which a driver earns up to 8 additional cents per mile. “They can make anywhere between 2 cents a mile and 8 cents per mile depending on how many miles they drive,” says Donald Hopson, Danny Herman’s director of recruiting.

Similar retention bonuses have raised owner-operator income at other fleets, as well. But Little Rock, Ark., trucker Wayne Mason says some of his additional income has come from more fuel-efficient operations and the healthy fuel surcharges provided by his carrier, Fikes. “I used to get 5.6 miles per gallon,” Mason says. “But then I switched to lower profile tires with less tread and made some other changes in equipment.”

He also slowed down and is averaging 6.9 miles per gallon. Those fuel savings turn to cash because Fikes’ fuel surcharge is based on trucks getting 5.5 mpg. “I figured up the miles I ran, fuel I bought and the fuel surcharge I was getting, and in one week last fall, my fuel was costing me only 9 cents a mile. It was running 25 cents a mile in the mid-1990s when it was closer to $1 at the pump.”

But like Pritt’s, Mason’s income surge has come mostly from rate increases. He’s been with Fikes for 13 years, and when he started hauling flatbed loads of steel and aluminum he could count on per-mile rates near $1. “I ain’t pulled a load under $1.45 in a year, and some of my loads are up around $2,” Mason says. He estimates he’ll clear $60,000 for 2005 after expenses.

Drivers in flatbed, dry van and refrigerated applications all did well, with pay for the latter going up nearly 25 percent in 2004. Dick Durst, president and CEO of Arctic Express, says the trend appeared to continue in 2005.

Stoppage and detention pay, fuel surcharges and increased rates have combined to improve income, Durst says. But drivers were able to turn more miles, too, because shippers have become more efficient since 2003.

“With the new hours of service rule, it’s become critical to keep owner-operators driving,” Brady says. “There is probably an increase in stoppage pay, but it’s more of a marginal increase than a driving force in their income. But shippers are turning them around faster, which means more revenue miles driven.”

This is true in dry van applications as well, says Danny Herman Trucking’s Hopson. “The shipping end of the industry, even the receivers, they’ve gotten better,” he says.

They also have been willing to pay higher rates as capacity has shrunk. Durst says his owner-operators, who get paid on percentage, quickly notice increases in their expenses and revenue. “They track every penny they make and spend,” he says.

Not every owner-operator is striking it rich. Mike Libby, leased to Cardinal Transport out of Edgewater, Fla., says he has earned less in recent years. “I made 15 percent less in 2004 than 2003. I probably made more, about 10 percent in 2005 [than in 2004].” Libby says fuel prices, maintenance and other business issues have reduced his income.

Other drivers credit higher pay and diligent work with raising their income. Augusta, Ga., owner-operator Lester Decell, who drives for Yucca Moving and Storage, says he made $28,000 in 2003 but took home $61,000 in 2004 and again in 2005. “I drive hard,” Decell says. “I work hard on the road. I don’t get a lot of home time.”

For drivers such as Decell, the opportunity is out there, says Fikes’ Salisbury. “If they manage their business well, they can make a lot of money. They have to understand their profit and change the way they operate to maximize it. But if you can’t make it now as an owner-operator, you never could have made it.”
–Lance Orr contributed to this story.