UPS Announces 2006 Rate Hikes

Nov 22, 2005 4:17 AM  By

United Parcel Service announced rate hikes for most of its U.S. small-package services, effective Jan. 2. The new rates include a 3.9% increase in commercial ground services and a 5.5% increase in air and international services.

Last year UPS increased its ground and air rates a more modest 2.9%. But, spokesperson Susan Rosenberg points out, “it’s important to remember that we’re reducing the rate index by 2 percent points when determining the air fuel surcharge.” By factoring in that 2% reduction, the index pushes the air fuel surcharge below the current 12.5% cap. UPS plans to maintain that 12.5% cap, she adds, even though jet fuel prices have increased as much as 68% this year.

“Despite all the volatility in fuel prices, things seem to be trending in the right direction,” Rosenberg says. “We are hoping that our customers will see the benefits of a dropping index as soon as February 2006.” The air fuel surcharge applies to UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select, and international services. The surcharge index calculation for UPS Ground, which is pegged to fluctuations in the U.S. Energy Department’s On-Highway Diesel price, is not changing.

Other pricing changes include a $0.25 increase in residential ground surcharges and a $0.35 increase in residential air surchages. A fee will also be added on packages that have undergone three failed delivery attempts. Packages requiring a signature will incur an additional charge of $0.25; if an adult signature is acquired, the rate rises by $0.50.

Regarding ground and air rate increases, Rosenberg says that UPS is usually the first of the major parcel carriers to announce rates, with competitors applying comparable rates shortly thereafter. This year however, FedEx announced a 5.5% rate increase back in October. In the meantime, impacts on fuel volatility all over the world remain the highest in recent memory.