FedEx Follows UPS with 3.5% Rate Hike

Less than three weeks after United Parcel Service announced that it would raise its rates 3.5% on Jan. 7, rival carrier Federal Express made the identical announcement.

The increase for FedEx’s premium air services (overnight, one-day, and two-day delivery), announced Nov. 20, includes a $1.35 per-package residential delivery charge for nonfreight (document) shipments. In addition, the diesel fuel surcharge for FedEx’s ground Home Delivery service, which is geared toward consumer catalogers, will increase from $1.05 to $1.10 per package. FedEx Ground, a service used primarily by business-to-business marketers, will increase its surcharge for shipments to residences from $1.30 to $1.35.

FedEx spokesperson Carla Boyd Richards characterizes the latest rate hike as a “regular increase to offset inflationary pressures the company faces.” The carrier last raised its rates in February 2001. In February 2000, the carrier initiated a 3% fuel surcharge on most FedEx premium air services (and added another 1% that April) rather than implementing a full-blown rate hike.

The rate hike announcement follows a bit of good news. On Nov. 5, FedEx shifted away from a flat 4% fuel surcharge on air shipments to one that is adjusted monthly based on the U.S. Gulf Coast Fuel Index, a government-provided national average of fuel prices. As a result, the rate dropped to 3% in November and will fall to 2% in December.

Following FedEx’s announcement, UPS said on Dec. 4 that it would also begin adjusting its fuel surcharge each month, based on the U.S. Energy Department’s On-Highway Diesel Fuel Prices. UPS, which had been tacking on a 1.25% fuel surcharge, decreased the charge to 0.75% through Feb. 3.