March 3 FedEx Corp said on Monday it
will raise shipping rates at its freight business by 3.9
percent, effective March 31.
The rate increase is for FedEx Freight shipments within the
United States including Alaska and Hawaii, as well as Puerto
Rico and the Virgin Islands, Canada and within Mexico.
The world's second biggest parcel delivery company after
United Parcel Service Inc, FedEx had last year raised
rates by 3.9 percent for its domestic express shipping unit,
effective Jan 6.
The increase is smaller than last year's, when FedEx
increased freight rates by 4.5 percent, effective July.
The freight segment contributes about 12 percent to FedEx's
overall revenue. Freight is a more competitive market than the
ground and express businesses, where FedEx and UPS are the only
two big players.
"Freight operates in a more highly fragmented space with
many competitors. This can lead to irrational pricing during
tough markets, as other carriers will continue to bid down rates
to maintain asset utilization," analyst Keith Schoonmaker of
Schoonmaker said he expects FedEx to raise rates regularly
as the shipper covers inflating costs, and said increases in the
range of 4-6 percent is "normal".
The FedEx Freight segment includes FedEx Freight, which is a
provider of less-than-truckload freight services, FedEx Freight
Canada and FedEx Custom Critical.
Less than truckload is the shipping of relatively small
loads of freight, and customers use this method because it costs
less than hiring an entire truck for an exclusive shipment.
While FedEx and UPS revise their shipping rates every year,
the rate increase comes at a time when both companies have been
trying to adjust to changes in shipping patterns, as many
customers move towards cheaper shipping services, especially
UPS said late last year the company planned to raise rates
across the board on an average of 4.9 percent within and between
the United States, Canada, and Puerto Rico.
FedEx shares were trading down 0.4 percent at $132.78 Monday
on the New York Stock Exchange.