FedEx Express rates to rise most since 2001

Business Materials 28 October 2007 06:34 (UTC +04:00)

Package delivery company FedEx Corp said on Friday that net average rates at its express delivery unit would rise 4.9 per cent in 2008, which analysts said was the biggest hike since 2001.

The company raised rates by a net of 3.5 per cent for 2007 and for 2006.

Rates at FedEx Express will rise by 6.9 per cent in 2008, but will be partially offset by a two percentage point reduction in the fuel surcharge FedEx charges customers.

"FedEx's 4.9 per cent effective list rate increase at its flagship Express division signals that domestic parcel pricing remains firm despite economic concerns," Morgan Stanley analyst William Greene wrote in a research note. "In fact, this is the largest rate increase for domestic express shipments since 2001."

The new rates will be effective as of January 7 and will apply to US and US export express packages and freight shipments.

Rates and surcharges at ground delivery unit FedEx Ground are also set to increase. Those changes will be announced later this year, the Memphis-based company said.

FedEx also said that as of 2008 FedEx Express customers importing goods to the United States will pay US dollar rates to avoid exposure to currency fluctuations.

Main rival United Parcel Service Inc usually raises rates for its ground delivery service in November. Both companies are seen as bellwethers of US econ-omic health, based on the simple premise that in a faster growing economy package volumes rise.

The FedEx Express announcement came just over a month after FedEx reported a four per cent increase in fiscal first-quarter net profit but warned that slower US economic growth would act as a drag on earnings in the coming quarters.

"We believe the stronger than anticipated increase in net shipping rates is a result of softer volumes," Citigroup analyst John Kartsonas wrote in a research note, "and represents an attempt by the company to manage its revenues for next year in a way that the effect of the weaker volumes could be minimised." ( Gulf )