FedEx will not charge extra for most holiday home deliveries

(Reuters) - FedEx Corp FDX.N said on Thursday it will not charge customers extra fees for most packages delivered to homes during the peak holiday shopping season this year, challenging rival United Parcel Service, which plans more widespread peak-season surcharges.

A trader works by the post that trades FedEx on the floor of the New York Stock Exchange April 7, 2015. REUTERS/Brendan McDermid

FedEx's holiday pricing strategy steps up the Memphis-based company's battle with UPS, the world's largest package delivery company, for a greater share of e-commerce business driven by retailers like Inc AMZN.O and Wal-Mart Stores Inc WMT.N.

UPS and FedEx have spent billions of dollars on upgrading their networks to handle rapidly rising e-commerce package volumes, particularly in the weeks leading up to Christmas.

Atlanta-based UPS has charted a different course for pricing this holiday season. Parcels delivered to residences, as well as large packages and those exceeding system weight limits, would face surcharges of up to 97 cents for two-day air services to residential addresses from Dec. 17-23, UPS said.

A 27-cent surcharge per package will apply to UPS’ ground service from Nov. 19 to Dec. 2 and between Dec. 17 and Dec. 23, UPS said.

UPS declined to comment on FedEx’s surcharges, but said its own peak-season pricing makes sure its “appropriately compensated for the high value we provide at a time when the company must double daily delivery volume for six-to-seven consecutive weeks to meet customer demands.”

Baird Equity Research analyst Colin Sebastian said usually large shippers such as Amazon negotiate their own rates, so the impact from this would likely be limited.

A spokeswoman for Amazon did not immediately return a request for comment.

FedEx and UPS shares dipped slightly in trading on Thursday.

FedEx Express and FedEx Ground in the U.S. and Canada will increase holiday surcharges for additional handling by $3 per package and for oversized goods by $25. FedEx will charge an extra $300 for parcels that exceed its maximum weight limit.

FedEx said the new surcharges on oversize packages hit roughly 10 percent of its ground-shipping volume during the holiday rush and will be in place the week leading up to Black Friday through Christmas Eve.

Amit Mehrotra, an analyst at Deutsche Bank in New York, said UPS and FedEx “aren’t that far off from each other.”

“FedEx will not be matching UPS as far as a blanket surcharge, but it is taking equal steps to manage its higher costs associated with oversized or extraordinary packages, things that are huge to push through their facilities.”

Reporting by Eric M. Johnson in Seattle, Jeffrey Dastin in San Francisco, and Rachit Vats in Bengaluru; Editing by Sai Sachin Ravikumar, Shounak Dasgupta and Bernard Orr