Management's Discussion and Analysis of Financial Condition and Results of Operations (referred to as "Management's Discussion and Analysis") is intended to assist in a historical and prospective understanding of Con-way's financial condition, results of operations and cash flows, including a discussion and analysis of the following:

· Overview of Business

· Results of Operations

· Liquidity and Capital Resources

· Critical Accounting Policies and Estimates

· New Accounting Standards

· Forward-Looking Statements

Con-way provides transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers. Con-way's business units operate in regional and transcontinental less-than-truckload and full-truckload freight transportation, contract logistics and supply-chain management, multimodal freight brokerage and trailer manufacturing. For the periods presented, Con-way is divided into the following four reporting segments:

· Freight. The Freight segment consists of the operating results of the Con-way Freight business unit, which provides regional, inter-regional and transcontinental less-than-truckload freight services throughout North America.

· Logistics. The Logistics segment consists of the operating results of the Menlo Worldwide Logistics business unit, which develops contract-logistics solutions, including the management of complex distribution networks and supply-chain engineering and consulting, and also provides multimodal freight brokerage services.

· Truckload. The Truckload segment consists of the operating results of the Con-way Truckload business unit, which provides asset-based full-truckload freight services throughout North America.

· Other. The Other reporting segment consists of the operating results of Road Systems, a trailer manufacturer, and certain corporate activities for which the related income or expense has not been allocated to other reporting segments.

The results of Con-way's primary business units generally depend on the number, weight and distance of shipments transported, the prices received on those shipments or services and the mix of services provided to customers, as well as the fixed and variable costs incurred by Con-way in providing the services and the ability to manage those costs under changing circumstances. Con-way's primary business units are affected by the timing and degree of fluctuations in fuel prices and their ability to recover incremental fuel costs through fuel-surcharge programs and/or cost-recovery mechanisms, as more fully discussed in Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Fuel."

Con-way Freight transports shipments utilizing a network of freight service centers combined with a fleet of company-operated line-haul and pickup-and-delivery tractors and trailers. Con-way Truckload transports shipments using a fleet of long-haul tractors and trailers. Menlo Worldwide Logistics manages the logistics functions of its customers and primarily utilizes third-party transportation providers for the movement of customer shipments.

                             Results of Operations


The overview below provides a high-level summary of Con-way's results for the
periods presented and is intended to provide context for the remainder of the
discussion on reporting segments. Refer to "Reporting Segment Review" below for
more complete and detailed discussion and analysis.

                             Continuing Operations

(Dollars in thousands except per share         Three Months Ended               Nine Months Ended
amounts)                                          September 30,                   September 30,
                                              2009            2008            2009             2008

Revenues                                   $ 1,133,441     $ 1,370,169     $ 3,152,706      $ 3,911,435
Costs and expenses
Loss from impairment of goodwill                    --              --         134,813               --
Other operating expenses                     1,092,307       1,291,252       3,061,105        3,683,650
                                             1,092,307       1,291,252       3,195,918        3,683,650
Operating income (loss)                         41,134          78,917         (43,212 )        227,785
Other expense                                   16,110          15,169          48,204           43,247
Income (loss) before income tax
provision                                       25,024          63,748         (91,416 )        184,538
Income tax provision                            11,532          23,264          14,402           71,136
Net income (loss)                               13,492          40,484        (105,818 )        113,402
Preferred stock dividends                           --           1,655           3,189            5,028
Net income (loss) from continuing
operations
applicable to common shareholders          $    13,492     $    38,829     $  (109,007 )    $   108,374

Diluted earnings (loss) per share          $      0.27     $      0.81     $     (2.32 )    $      2.26
Effective tax rate                                46.1 %          36.5 %         (15.8 %)          38.5 %

Con-way's consolidated revenue for the third quarter of 2009 decreased 17.3% from the third quarter of 2008 and, in the first nine months of 2009, decreased 19.4% from the same prior-year period, reflecting competitive industry pricing and difficult economic conditions.

Con-way's third-quarter consolidated operating income decreased 47.9% to $41.1 million in 2009 from $78.9 million in 2008. In the year-to-date periods, Con-way's operating results consisted of an operating loss of $43.2 million in 2009 and operating income of $227.8 million in 2008, primarily reflecting Truckload's $134.8 million first-quarter goodwill-impairment charge in 2009. Excluding the impairment loss more fully discussed in Note 2, "Goodwill and Intangible Assets," of Item 1, "Financial Statements," consolidated third-quarter and year-to-date operating income in 2009 declined due primarily to the net effect of lower operating income at the Freight and Truckload segments partially offset by higher operating income at the Logistics segment. For the comparative periods presented, the effects of adverse industry and economic conditions were partially mitigated by cost-reduction measures.

In the third quarter and first nine months of 2009, non-operating expense increased $0.9 million and $5.0 million, respectively, due primarily to lower investment income and higher interest expense. Non-operating expense also reflects variations in foreign exchange transactions, which improved comparative operating results by $0.6 million in the third quarter, but lowered comparative operating results by $1.8 million in the year-to-date period.

Con-way's third-quarter and year-to-date effective tax rates in 2009 were 46.1% and -15.8%, respectively. In the third quarter and first nine months of 2008, the effective tax rates were 36.5% and 38.5%, respectively. Excluding the effect of various tax adjustments, Con-way's third-quarter and year-to-date effective tax rates in 2009 were 37.0% and 37.4%, respectively, and in 2008 were 39.6% and 39.4%, respectively. The effective tax rate in 2009 primarily reflects the non-deductible goodwill impairment charge in the first quarter, and discrete tax items, including the reversal of a portion of Con-way's accrued liability for uncertain tax positions and the establishment of a valuation allowance related to an operating-loss carryforward. The effective tax rate in 2008 also reflects less material discrete tax adjustments. Excluding the effect of various tax adjustments described above,

the effective tax rates in 2009 are lower compared to 2008 due primarily to lower income before income taxes, which increases the percentage effect of tax credits and other permanent items.

In response to economic conditions, in March 2009 Con-way announced several measures to reduce costs and conserve cash. These measures substantially consist of the suspension or curtailment of employee benefits and a reduction in certain employees' salaries and wages, as detailed in Note 7, "Employee Benefit Plans," of Item 1, "Financial Statements." The measures were projected to save between $100 million to $130 million during 2009. Since April 1, 2009, approximately $40 million of estimated quarterly savings have been realized. The cost-reduction measures announced in March 2009 are in addition to the actions Con-way took in the fourth quarter of 2008, which included workforce reductions, network re-engineering, suspension of merit-based pay increases, reduction in capital expenditures and other spending cuts.

Savings associated with the cost-reduction measures are expected to be lower in periods beyond 2009, reflecting the reinstatement of certain of the suspended benefits and the reversal of salary and wage reductions. Effective January 3, 2010, Con-way plans to reverse one-half of the salary and wage reductions that were implemented for corporate and shared-service employees and those at the Con-way Freight and Road Systems business units. Additionally, one-half of the reductions implemented for Con-way Inc. Executive Vice President and Chief Financial Officer Stephen L Bruffett and Con-way Freight President John G. Labrie will be reversed effective January 3, 2010. The reversal of the remaining one-half of the salary and wage reductions is contingent upon the achievement of specified financial metrics. Con-way Freight and Menlo Worldwide Logistics currently plan to reinstate their compensated-absences benefits effective in April 2010. The reinstatement of Con-way's basic and transition contributions to the defined contribution plan to their prior levels is contingent upon the achievement of specified financial metrics.

                            Reporting Segment Review

Freight

The following table compares operating results, operating margins, and the
percentage change in selected operating statistics of the Freight reporting
segment:

                                                Three Months Ended                  Nine Months Ended
(Dollars in thousands)                             September 30,                      September 30,
                                                2009             2008             2009              2008
Summary of Segment Operating Results

Revenues                                   $       692,750     $ 808,326     $     1,890,434     $ 2,375,654
Operating Income                                    22,816        61,107              48,423         174,559
Operating Margin                                       3.3 %         7.6 %               2.6 %           7.3 %

                                            2009 vs. 2008                     2009 vs. 2008
Selected Operating Statistics
Revenue per day                                      -15.2 %                           -20.3 %
Weight per day                                        +5.1 %                            -4.5 %
Revenue per hundredweight ("yield")                  -19.4 %                           -16.6 %
   Shipments per day ("volume")                       +4.5 %                            -4.4 %
Weight per shipment                                   +0.7 %                            -0.1 %

Freight's revenue in the third quarter of 2009 decreased 14.3% from the third quarter of 2008. Revenue per day decreased 15.2% in the third quarter due to a 19.4% decrease in yield, partially offset by a 5.1% increase in weight per day. The 5.1% increase in weight per day reflects a 4.5% increase in shipments per day and a 0.7% increase in weight per shipment. In the first nine months of 2009, Freight's revenue declined 20.4% from the prior-year period due to lower revenue per day and a 1.5-day decline in the number of working days. In the first nine months of 2009, revenue per day decreased 20.3% due to a 16.6% decrease in yield and a 4.5% decline in weight per day. The 4.5% decline in weight per day reflects a 4.4% decrease in shipments per day and a 0.1% decline in weight per shipment.

In the third quarter and first nine months of 2009, the decline in yield was due primarily to decreases in fuel surcharges and base freight rates. Freight volumes and yield reflect a competitive pricing environment that is primarily the result of excess capacity in the less-than-truckload market and adverse economic conditions. The sequential monthly increases in weight per day experienced in the first six months of 2009 continued in the third quarter. Higher weight per day in the third quarter of 2009 reflects efforts to

improve asset utilization and increase market share by utilizing competitive pricing and Freight's relative position in the less-than-truckload market in terms of service reliability, transit times and scope of operations.

Yields were also adversely affected by declines in fuel prices, which contributed to lower fuel-surcharge revenue. Excluding fuel surcharges, yields in the third quarter and first nine months of 2009 decreased 10.5% and 7.5%, respectively. In the third quarter, Freight's fuel-surcharge revenue decreased to 11.3% of revenue in 2009 from 20.6% in 2008, and in the first nine months, decreased to 10.0% of revenue in 2009 from 19.4% in 2008. Due to the market conditions noted above, the declines in fuel-surcharge revenue have not been offset by equivalent increases in base freight-rate revenue. Since its fuel-surcharge program has historically enabled Freight to more than recover increases in fuel costs and fuel-related increases in purchased transportation, these declines in fuel-surcharge revenue have had an adverse effect on operating results.

Freight's operating income in the third quarter of 2009 decreased 62.7% over the same period of 2008 and, in the first nine months of 2009, decreased 72.3% from the same prior-year period. The decline in operating income resulted from revenue that declined at a faster rate than operating expenses, due in part to the high level of fixed costs in Freight's network, which is designed to provide geographic coverage and consistent on-time performance. However, 2009 results benefited from cost-reduction measures implemented in April. Since April 1, 2009, approximately $37 million of estimated quarterly savings related to salaries, wages and other employee benefits have been realized. The cost-reduction measures are more fully discussed above in "- Overview."

In the third quarter and first nine months of 2009, expenses for salaries, wages and other employee benefits decreased 9.6% and 13.3%, from the same periods in 2008. Base compensation in the third quarter and first nine months of 2009 decreased 1.2% and 7.1%, respectively, due to lower average employee counts and the cost-reduction measures. In the third quarter of 2009, incentive compensation expense decreased $6.7 million and, in the first nine months of 2009, decreased $17.6 million due to no incentive compensation being earned during 2009. Employee benefits expense decreased 23.0% and 22.1% in the third quarter and first nine months of 2009, respectively, due to lower expense for compensated absences, employer contributions to the defined contribution plan and workers' compensation claims, partially offset by increased pension expense for defined benefit pension plan. In 2009, lower expense for compensated absences and employer contributions to the defined contribution plan reflect Con-way's cost-reduction measures. In the first nine months of 2008, higher expenses for compensated absences were also due in part to a non-recurring adjustment for a benefit plan change associated with a restructuring initiative. Expenses for salaries, wages and other employee benefits were adversely affected in 2009 due to lower productivity associated with new employees. Although average employee counts declined in 2009, accelerating shipment volumes during 2009 resulted in additional hiring throughout the year.

Expenses for fuel and fuel-related taxes decreased 39.6% in the third quarter of 2009 due primarily to the decline in the cost of diesel fuel, partially offset by an increase in miles driven. In the first nine months of 2009, expenses for fuel and fuel-related taxes decreased 46.5% due primarily to declines in the cost of diesel fuel and miles driven. Expense for purchased transportation increased 5.5 % in the third quarter of 2009 and decreased 5.6% in the first nine months of 2009. Purchased transportation expense benefited from fuel-related rate decreases and lower negotiated base rates, but was adversely affected by an increase in freight transported by third-party providers.

Other operating expenses decreased 8.2% and 11.8% in the third quarter and first nine months of 2009, respectively, reflecting decreased administrative corporate allocations and decreases in cargo-loss and damage expense. Lower corporate allocations in 2009 were due in part to cost-reduction measures. Depreciation and amortization expense declined 8.5% and 8.0% in the third quarter and first nine months of 2009, respectively, due primarily to a change in the estimated useful life for most of Freight's tractor fleet.

Comparative operating results in the periods presented were affected by costs incurred for Freight's re-branding initiative and restructuring activities. Under the re-branding initiative, which was completed in the second quarter of 2008, Freight incurred $4.9 million of costs in the first nine months of 2008. In connection with its restructuring activities, Freight recognized $0.5 million of net adjustments that reduced expense in the first nine months of 2009, compared to $5.2 million of first-quarter charges in the first nine months of 2008. For additional information concerning Freight's restructuring activities see Note 3, "Restructuring Activities," of Item 1, "Financial Statements."

In 2009, Freight's third-quarter and year-to-date results were adversely affected by a change in the accounting estimate for revenue adjustments, as more fully discussed in Note 1, "Principal Accounting Policies," of Item 1, "Financial Statements." The change in accounting estimate lowered Freight's revenue and operating income by $5.4 million in the third quarter and first nine months of 2009.

Logistics

The table below compares operating results and operating margins of the Logistics reporting segment. The table summarizes the segment's revenue as well as net revenue (revenue less purchased transportation expense). Carrier-management revenue is attributable to contracts for which Menlo Worldwide Logistics manages the transportation of freight but subcontracts to third parties the actual movement and delivery of products, which Menlo Worldwide Logistics refers to as purchased transportation. Menlo Worldwide Logistics' management places emphasis on net revenue as a meaningful measure of the relative importance of its principal services since revenue earned on most carrier-management services includes the third-party carriers' charges to Menlo Worldwide Logistics for transporting the shipments.

                                              Three Months Ended             Nine Months Ended
(Dollars in thousands)                           September 30,                  September 30,
                                              2009           2008           2009           2008
Summary of Segment Operating Results

Revenue                                    $  344,361     $  419,896     $  987,793     $ 1,138,494
Purchased transportation                     (215,048 )     (291,964 )     (606,544 )      (757,923 )
Net revenue                                   129,313        127,932        381,249         380,571

Operating income                                9,532          3,678         22,305          14,895
Operating margin on revenue                       2.8 %          0.9 %          2.3 %           1.3 %
Operating margin on net revenue                   7.4 %          2.9 %          5.9 %           3.9 %

Logistics' revenue in the third quarter and first nine months of 2009 decreased 18.0% and 13.2%, respectively, due to decreases in carrier-management services that were partially offset by increases in warehouse-management services. In 2009, revenue from carrier-management services in the third quarter and first nine months decreased 24.4% and 17.9%, respectively, while revenue from warehouse-management services increased 3.5% and 0.3%, respectively. Lower revenue from carrier-management services was due primarily to lower fuel-surcharge revenue due to lower fuel prices and changes to certain carrier and customer contracts, which resulted in revenue being recorded on a net basis under generally accepted accounting principles. Lower revenue was partially offset by revenue from new customers, including the Defense Transportation Coordination Initiative ("DTCI"), which contributed revenue of $59.9 million and $143.6 million in the third quarter and first nine months of 2009, respectively, and $21.1 million and $26.0 million in the third quarter and first nine months of 2008, respectively.

Logistics' net revenue in the third quarter and first nine months of 2009 increased 1.1% and 0.2%, respectively, when compared to the prior-year periods. Higher net revenue was due to an increase in revenue derived from warehouse-management services. Purchased transportation expense declined 26.3% and 20.0% in the third quarter and first nine months of 2009, respectively, due primarily to lower carrier-management volumes and fuel-related rate decreases. Lower purchased transportation expense also reflects the changes to certain carrier and customer contracts discussed above.

Logistics' operating income in the third quarter and first nine months of 2009 increased 159.2% and 49.7%, respectively, reflecting improved margins on both warehouse-management and carrier-management services. Improved margins on warehouse-management services were due primarily to lower purchased labor expense, which decreased 15.8% and 16.4%, respectively, due primarily to efficiency initiatives at Logistics-managed warehouses. Improved margins on carrier-management services were due largely to the recognition of revenue under gain-sharing arrangements. Under gain-sharing arrangements, revenue is recognized upon the achievement of contractually specified performance measures typically without an associated increase in operating expenses. Margins on carrier-management services were adversely affected by the DTCI contract, which did not have a significant effect on Logistics' operating income during the periods presented. Additionally, comparative operating results in 2009 benefited from cost-reduction measures, discussed more fully above under "- Overview."

Salaries, wages and other employee benefits increased 8.0% and 2.8% in the third quarter and first nine months of 2009, reflecting increases in incentive compensation and higher costs for employee benefits, partially offset by lower expenses for other employee-related costs. In the third quarter, incentive compensation increased $4.8 million and, in the first nine months of 2009, increased $6.3 million based on variations in performance measures relative to incentive-plan targets. Employee benefits expense increased 2.9% and 7.4% in the third quarter and first nine months of 2009, respectively, due primarily to increased expenses related to Con-way's defined benefit pension plan and share-based compensation awards. Since April 1, 2009, Logistics has realized estimated quarterly savings of approximately $1.5 million for cost-reduction measures related to the defined contribution plan and compensated absences. Other employee-related costs decreased 34.6% and 34.7% in the third quarter and first nine months of 2009, respectively, due primarily to lower travel costs.

Expenses for rents and leases increased 5.5% and 14.2% in the third quarter and first nine months of 2009, respectively, due primarily to the addition of new warehouse-management services customers and a transaction in which two of Logistics' warehouses were sold and leased back in June 2008.

In the third quarter and first nine months of 2009, other operating expenses declined 11.7% and 5.1%, respectively. Lower other operating expenses were due primarily to lower administrative corporate allocations and a decrease in cargo-loss claims expense. Lower corporate allocations in 2009 were due in part to cost-reduction measures. In the first nine months of 2008, cargo-loss claims expense included adverse customer-specific issues. In the first nine months of 2009, lower other operating expenses were partially offset by an increase in expenses for outside services relating primarily to legal matters and the DTCI contract.

Truckload

The table below compares operating results, operating margins and the percentage change in selected operating statistics of the Truckload reporting segment. The table summarizes the segment's revenue as well as freight revenue, which represents revenue excluding fuel surcharges, inter-segment eliminations, and other non-freight revenue. Truckload's management places emphasis on freight revenue as a meaningful measure to evaluate results from the core truckload freight operation. The table also includes operating income and operating margin excluding the loss from impairment of goodwill. Truckload's management believes these measures are relevant to evaluate its on-going operations.

                                                 Three Months Ended                 Nine Months Ended
(Dollars in thousands)                              September 30,                      September 30,
                                                 2009             2008             2009              2008
Summary of Segment Operating Results

Freight revenue                             $       122,801     $ 129,934     $       369,651     $  374,481
Fuel-surcharge revenue                               17,986        50,664              43,672        131,709
Other revenue                                         5,464         3,064              11,009         10,147
Revenue before inter-segment eliminations           146,251       183,662             424,332        516,337
Inter-segment eliminations                          (50,570 )     (42,730 )          (152,842 )     (122,073 )
Revenue from external customers                      95,681       140,932             271,490        394,264

Operating income (loss)                              10,620        15,195            (115,179 )       37,907
Loss from impairment of goodwill                         --            --             134,813             --
Operating income excluding impairment                10,620        15,195              19,634         37,907
Operating margin excluding impairment                  11.1 %        10.8 %               7.2 %          9.6 %

                                             2009 vs. 2008                     2009 vs. 2008
Change in Selected Operating Statistics
Total Miles                                            -3.8 %                            +0.6 %
Freight Revenue per Total Mile                         -1.7 %                            -1.9 %

Truckload's revenue from external customers in the third quarter of 2009 decreased 32.1% from the same period of 2008, reflecting a 20.4% decline in . . .