FedEx to raise ground parcel rates 4.9 percent; increase matches UPS' parcel hike

FedEx Corp. announced late Friday that its ground-parcel unit, FedEx Ground, will increase its 2013 noncontract rates by a net average of 4.9 percent, effective Jan. 7.

The increase matches the tariff rates announced in mid-November by UPS Inc., FedEx's chief rival. The two companies have a near-duopoly on the U.S. ground parcel market for business-to-business traffic.

Tariff rates on FedEx's home delivery unit will rise by the same amount, it said. Rates on its FedEx SmartPost service, handled in conjunction with the U.S. Postal Service will also increase, but the company didn't provide details in its announcement.

The full increase of 5.9 percent on FedEx Ground and FedEx Home Delivery will be partially offset by reducing by 1 percentage point the applicable fuel surcharge on the services, Memphis-based FedEx said.

FedEx had earlier announced 5.9-percent rate increases for its FedEx Express air and international services, offset by a 2-percentage-point reduction in fuel surcharges. FedEx Freight, the company's less-than-truckload unit, had implemented a 6.9-percent general rate increase in July.

FedEx Ground has been a stellar performer for the company as it has capitalized on a secular shift by U.S. shippers to lower-cost ground services and away from airfreight. In FedEx's fiscal first quarter, which ended Aug. 31, the unit reported an 8-percent year-over-year increase in revenue and a 9-percent gain in operating income.

As part of a major company revamp announced in October, FedEx Ground's network capacity will be expanded to enable it to accommodate 45 percent more shipments by 2018 than it does today.

In mid-November, UPS announced a 4.9-percent net increase for 2013 on its ground parcel services and a 4.5-percent increase on its air letter, air package, and all U.S.-origin international services, effective Dec. 31.

Additionally, UPS announced a 4.9-percent tariff rate increase on airfreight shipments moving within and between the United States, Canada, and Puerto Rico. It also declared a 4.9-percent tariff rate increase on its three-day delivery services—much of which moves on intermodal services—within and between the same points.