UPS hikes 2016 tariff rates 4.9 percent on ground service; 5.2 percent on air, international

UPS Inc. said late today it will raise its 2016 tariff, or noncontractual, rates by 4.9 percent on its domestic ground parcel services, effective Dec. 28. The move matches the increase announced in mid-September by archrival FedEx Corp.

Atlanta-based UPS' air and international tariff rates will rise by 5.2 percent, also effective Dec. 28. In addition, UPS Freight, UPS' less-than-truckload (LTL) unit, will hike its tariff rates by 4.9 percent, effective Oct. 26.

UPS' increases on its air and international services will exceed the 4.9-percent increase Memphis-based FedEx announced on similar services. FedEx's increases will take effect a week after UPS's. FedEx has not yet announced rate increases for its LTL unit, FedEx Freight.

UPS also said it is increasing its fuel surcharges, effective Nov. 2. On that date, the current 4.75-percent surcharge for ground services will increase to 5.25 percent. The current 3-percent surcharge on air and international shipments will rise to 4.5 percent, sUPS said in a note on its web site.

Last month, FedEx announced an increase in its fuel surcharge, also effective Nov. 2, that would have brought it close to parity with UPS, whose surcharges have been higher in recent years. However, today's announcement by UPS continues to keep its surcharges higher than its rival's. The firms have a virtual duopoly on U.S. business-to-business parcel traffic, and have a strong position in the business-to-consumer market, though they face competition from the U.S. Postal Service in that space.

The increase in fuel surcharges comes amid a steep and protracted decline in oil, diesel, and jet fuel prices. The companies have said the rapid growth of e-commerce transactions requires them to make more residential deliveries, which increases the number of delivery stops and the distance between those stops. In addition, many residential deliveries involve one package, whereas a business-to-business delivery could be transporting multiple packages to a location. The cost of making multiple stops to deliver one package per residence adds to the carriers' fuel and operating costs, they say.

Frederick W. Smith, FedEx's chairman, president, and CEO, said at the JOC Inland Distribution 2015 conference in Memphis earlier this month that the company is experiencing an increase in the size and weight of online shipments, which also raises its delivery costs.