FedEx Express, owner of the world's largest cargo airline, will increase average shipping rates by 3.5 percent next year. A FedEx employee makes a delivery in midtown Manhattan.
FedEx Corp. will raise air shipping rates 5.5%
FedEx Corp., the largest air-cargo carrier, will raise 2007 rates for U.S. air shipments an average 5.5 percent, a move analysts said signaled the company won't start a price war that might hinder profit growth.
The increase, the same as the FedEx Express unit adopted for this year, will take effect Jan. 1, the company said yesterday. United Parcel Service Inc., the largest package-shipping company, probably will adopt a similar price change, said Thomas Wadewitz, a New York-based J.P. Morgan Securities analyst.
FedEx and UPS adjust rates late each year for the following 12 months. A major change in rates by either could trigger a price war and slow profit growth in the shipping industry. FedEx Express, which moves shipments by air, accounted for 66 percent of Memphis, Tenn.-based FedEx's revenue in its past quarter.
"This is a positive signal that the pricing environment is stable and that FedEx expects UPS to follow its lead in the air," William Greene, a Morgan Stanley analyst in New York, said in a report to investors.
FedEx Express also will reduce the trigger point for a surcharge to help cover fuel costs by 2 percentage points, Howard Clabo, a FedEx spokesman, said in an interview. Part of the fuel fee, which varies, will be shifted into the permanent FedEx Express base rate, he said.
In October 2005, FedEx raised U.S. air-cargo rates for this year an average 5.5 percent, while reducing the fuel fee by 2 percentage points.
FedEx Express also said yesterday it's extending the fuel fee to additional services such as deliveries to residences and some remote areas. The surcharge is adjusted monthly to reflect changes in fuel prices.
The company plans to change other FedEx Express surcharges for next year.
FedEx Ground, which delivers shipments by truck, will adjust its 2007 shipping rates later this year, the company said. FedEx said it is changing the way it charges for oversized FedEx Ground shipments to account for the size of such shipments instead of the weight. The change takes effect Feb. 5.
FedEx shares fell 2 cents to $112.07 yesterday in New York Stock Exchange composite trading. They have gained 8.4 percent this year.