Transportation and logistics: UPS follows FedEx with 2009 rate increases

MEMPHIS and ATLANTA??As 2008 nears an end, both FedEx and UPS have announced 2009 rate increases.

When announcing its fiscal first quarter earnings in September, FedEx said its Express rates would increase by an average of 6.9 percent for U.S. and U.S. export services, effective January 5, 2009. FedEx added that the rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points.

The 4.9 percent net average shipping rate for FedEx Express matches last year??s rate increase for the company. According to its Web site, FedEx Ground and FedEx Home Delivery rates for 2009 have increased by an average of 4.9 percent.

??FedEx is being squeezed on both margins and volumes on the Express side, a trend that has accelerated with rising fuel costs and a secular shift from air to ground,?? said Doug Caldwell, executive vice president of ParcelPool, an Orem, Utah-based small parcel delivery consultancy and services provider.

Caldwell also noted that the 6.9 percent rate increase along with rolling two percent of fuel expenses into the base rate is in line with last year??s increase and is at the high end of historical increases, with 2009 being the fourth consecutive year FedEx has rolled two percent of fuel expenses into its base rates.

UPS price hikes: Last week, UPS rolled out its 2009 rate increases. UPS Ground packages will increase by 5.9 percent on average, with an average net increase of 4.9 percent on all air, express, and U.S. origin international shipments. And rates at its less-than-truckload subsidiary, UPS Freight, will also rise 5.9 percent for 2009.

UPS said in a statement that the rate increase for air express and international shipments is based on a 6.9 percent increase in the base rate, minus a two percent reduction in the air and international fuel surcharge index. All of UPS?? rate increases will take effect January 5, 2009.

No news from DHL yet: A DHL spokesman told L M that 2009 rates have not been announced yet, adding that the company typically announces them in the late November, early December timeframe. Last November, DHL increased the net average shipping rate for DHL Domestic Air Express and International Express by 4.9 percent.