During an interactive session at the 2009 Intermodal Expo and TransComp in Anaheim, Calif., this week, 44 percent of the audience said they expect the economic recovery to play out in a "U" shape, or a slow upturn. Meanwhile, 26 percent anticipate a "W" shape, or a double dip in economic activity. For the most part, panelists agreed with the audience and expect an elongated "U,"

meaning the economic recovery is coming, but it will be slow going.

During the session "Freight Transportation One Year Later: The New View from Wall Street," three transportation analysts presented their views on where the industry is headed in 2010. According to Jason Seidl, director at Dahlman Rose & Company, we need to see an improvement in unemployment and consumer spending before the industry can get excited. Thomas Wadewitz, analyst of air freight and services transport at J.P. Morgan, said the level of freight is still weak in an absolute sense, but there is room for an upside surprise in 2010.

Third quarter gross domestic product, or GDP, rose 3.5 percent, but that did not correspond with freight volumes, according to John Barnes III, managing director of equity research for transportation at RBC Capital Markets. The Department of Transportation's Freight Transportation Services Index was only up 1.8 percent in the third quarter. Barnes believes the third quarter boost in GDP came out of unsustainable industries, such as the automotive sector, which was buoyed by the federal Cash for Clunkers program. He's worried the industry might see a double dip in freight volumes.

Is Business Better?

In another question to the audience, 56 percent indicated that their business has been mildly improving since Sept. 1. In addition, 25 percent answered "no change," 10 percent said they see significant improvement, while 9 percent said things are getting worse.

"I'm not surprised by these results," said Barnes, who believes the responses are based on a degree of seasonality in freight in the third quarter. "It's hard to feel good about it," said Wadewitz, of the seasonal uptick in freight.

According to Seidl, there has been a slight uptick in the truckload, rail and chemical sectors, but the jury is still out on less-than-truckload. In fact, when the audience was asked which sector will see the most downward pricing pressure in 2010, LTL received 39 percent of the vote, followed by truckload at 24 percent, and ocean at 22 percent. However, the analysts said the fate of LTL will depend largely on whether YRC Worldwide stays afloat or not. Many industry analysts believe the LTL giant is headed for bankruptcy. With it out of the picture, capacity would tighten and rates would rise.

Barnes does not expect asset values to improve any time soon. Brokers are trying to keep small players in business via quick pay programs, while OEMs are trying to force demand through financing efforts, he said. Any tightness in capacity in 2010 would be very short term in nature, he added.

Intermodal Appeal

The panelists also expect a gradual and strategic shift toward intermodal. It makes shippers look good from an environmental standpoint, but this is not the primary driver of the shift to intermodal, Wadewitz said. It also heavily depends on where fuel prices go, and over the long term, they're expected to increase, he said.

Fifty-three percent of the audience expect crude oil prices to average $80 a barrel next year, while 39 percent believe it will shoot up to $100 a barrel. But the panelists said it depends on economic activity. If demand rises, oil prices will see an increase. Barnes' team at RBC expects to see another rapid rise in fuel prices, similar to 2008. This would cause shippers to turn to more fuel-efficient ways of transferring freight, a move that is motivated more by greed than the environment, Barnes said. "At the end of the day, it's all about protecting profitability."

The question of pricing in 2010 also came up during the discussion, with mixed results. When asked how attendees would describe their ability to implement price increases next year, 26 percent were pessimistic, 24 percent neutral, 24 percent said it was too early to tell, and 17 percent were optimistic. Seidl said pricing would depend on where the economy goes. According to Wadewitz, if carriers can achieve flat pricing in 2010, this would be a win. "Let's walk before we can run here," he said.