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FedEx Raises Rates, Citing Covid-Related Trends

FedEx Corp. is tacking some new surcharges on select services.

Citing ongoing disruption resulting from the coronavirus pandemic and an upswell in online shopping, the parcel giant pointed to high demand for capacity and elevated package flows as increasing operating costs across its network.

“To provide our customers with the best possible service during this challenging time, we are implementing an increase to the peak surcharges on some services effective June 21,” the company said in announcing the increased shipping costs.

From June 21 onward, FedEx’s residential delivery surcharges on domestic air and ground deliveries will double to 60 cents per package from 30 cents. FedEx will also raise the surcharge on its newly named Ground Economy service to $1 per parcel from 75 cents. The service was formerly known as SmartPost before FedEx ended its last-mile delivery partnership with the U.S. Postal Service and took all of that business in-house.

In addition, FedEx said it will increase its “additional handling” surcharge to $3.50 per parcel from $3 on domestic air and ground deliveries, and international ground deliveries. The company said it will keep its $30 per piece surcharge on oversized shipments delivered in its U.S. air and ground services, and international ground deliveries that went into effect in January.

While some logistics analysts contend that carriers are increasing rates to pad their bottom lines, they might also be doing so in a bid to improve performance.

In a Convey study released last month, 89 percent of on-time performance (OTP) issues in April caused carriers to still not have caught up to pre-pandemic levels if April 2019.

UPS and the U.S. Parcel Service (USPS) were stable month-over-month, while FedEX performed significantly lower than other carriers–71 percent OTP compared to 88 percent for UPS and 90 percent for USPS, with its cheapest service levels hit hardest.

“FedEx recently announced significant open positions for its Ground service, so we will continue to monitor and see if these new hires positively impact their OTP,” Convey said.

On April 12, UPS raised its international freight rates in a range of 11 cents per pound to 34 cents per pound depending on the specific service. Higher rates were put on shipments from China and Hong Kong as of May 23, ranging from $1.36 per pound to $2.15.