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Trucking sensation Forward Air sits unchallenged in the industry’s less-than-truckload sweet spot.

Many have tried to emulate the success of the Greeneville-based company, founded by Scott Niswonger, but few have succeeded. Forward Air provides time-definite ground transportation and logistics between airports to the North American deferred air freight market. (Similar to the airline industry, it runs designated routes on a schedule, even when the shipments are not full.)

Forward Air doesn’t haul directly for large retailers but instead has become best friends with freight forwarders, those who advise their clients of the best rates, routings and modes of transportation. Since launching in 1990, the company has ramped up the density of its freight, so that its trucks are rarely less-than-truckload. In 2005, reported revenue was at a robust $321 million.

The less-than-truckload niche may be easy to enter—”Anybody with a truck can run a trucking company,” says Andrew Clarke, CFO of Forward Air—but it’s not easy to compete with an established market leader. Most who try end up selling out to Forward Air.

Chattanooga-based U.S. Xpress Global Systems discovered firsthand how steep the climb to reach Forward Air’s market position can be. Xpress purchased a comparable business from CRST Van Expedited for an undisclosed amount in July 2004. By mid-2005, it unloaded the less-than-truckload operations to Forward Air for a mere $12.75 million in cash.

While not impossible, “a newcomer would have to commit to years of financial loss” before cutting into Forward Air’s position, says Alexander Brand, financial analyst with Stephens Inc. New entrants can only compete on price, which is too risky when running less than full. By any measure, Brand adds, “they have the secret sauce.”

While a good place to be, being a niche leader still has its challenges. On Wall Street, Forward Air is typically pigeonholed in the “asset light trucking” category. Without strong competition, its stock can be harder to sell, Brand says. (Brand’s firm expects to receive or intends to seek compensation for investment banking services from Forward Air.)

Forward Air reported a 13.7% increase in its annual revenue, albeit just shy of analysts’ predictions. Its airport-to-airport core business, which makes up about 85% of the company’s total revenue, remains strong.

Ironically, the very reason Forward Air may have fallen short of analyst expectations is also their next would-be competitor. Kitty Hawk Cargo, an air cargo concern based in Dallas, severed its ties with Forward Air to try its hand at “in-sourcing” the less-than-capacity operation. The loss of Kitty Hawk translated to an 11% drop in logistics revenue for Forward Air last year. The parting wasn’t easy on Kitty Hawk’s bottom line, either—the in-sourcing move caused a $3.8 million profit loss for the company in 2005. With its time as a customer done, Kitty Hawk assumes the more antagonistic role of competitor. Though anything is possible, the past suggests the next road kill for the Forward Air juggernaut may have assumed its position in the middle of the road.

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