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FedEx’s 2024 rate increase below prior-year levels

August 30, 2023

FedEx’s 2024 rate increase was announced on Tuesday its plan to increase noncontractual rates for most U.S. services by 5.9% in 2024. This is a slight reduction from the 6.9% hike in 2023 and could be a strategic move to capture more market from its competitor, UPS Inc. (NYSE: UPS). UPS is currently grappling with elevated labor costs in the inaugural year of its five-year agreement with the Teamsters Union.

This rate adjustment will be relevant for both FedEx Ground and FedEx Express services, including domestic and international shipments to and from the U.S. The company also revealed hikes ranging from 5.9% to 6.9% for its FedEx Freight less-than-truckload offerings within the U.S. and its connections to Canada. Individual customer rate scales will determine exact rate increments.

FedEx Economy’s more affordable deferred delivery service will experience a price jump, though the exact percentage remains undisclosed.

These rate alterations, effective from January 1, were made public ahead of the typical schedule. These General Rate Increases (GRI) often initiate contract rate discussions, which are standard in the parcel delivery sector. The actual costs for most shippers usually exceed the GRIs once all rate changes and additional delivery surcharges are considered.

FedEx’s decision is likely a strategic play to challenge UPS, especially after UPS’s expensive dealings with Teamsters. FedEx is capitalizing on its strengthened ties with customers, forged during the tumultuous UPS-Teamsters contract discussions.

Traditionally, both carriers’ GRIs have been aligned. Given the financial implications of their new contract, UPS will have to strategize to counterbalance the initial year’s expenses to remain competitive with FedEx.

On a related note, FedEx disclosed its peak season surcharges. Starting October 9, shippers’ weekly volumes will dictate residential delivery surcharges. From this date until January 14, these charges will be imposed three weeks after volume computations. Enterprises dispatching more than 20,000 residential and Ground Economy packages weekly during any “calculation weeks” from October 9 will incur these surcharges.

For the FedEx Ground Economy service, a surcharge of $1.60 will be applicable from October 30 to November 26. This will escalate to $2.60 from November 27 to December 10 and revert to $1.60 until January 14. These fees mark a 10-cent increment from the previous season’s charges.

Moreover, FedEx will impose surcharges for other services: $6.95 for extra handling, $73 for oversized packages, and $410 for “unauthorized” ground packages (those unfit for regular delivery, which FedEx prefers not to handle). These increased charges, from October 2, 2023, to January 14, 2024, surpass last year’s rates.

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