Regional parcel carrier LSO to freeze express rates at 2017 levels

Regional parcel carrier LSO said it will freeze rates at 2017 levels during 2018 for virtually its entire product line, a move its executives said will further undercut the big two parcel carriers on shipments within LSO's service area.

The price freeze will apply to all LSO express shipments, which are one- to two-day deliveries with a time-definite commitment, the Austin, Texas-based company said. LSO serves every address in Texas and Oklahoma, major commerce centers in Arkansas, Mississippi, Alabama, Tennessee, and southeastern New Mexico, and multiple points in Mexico.

LSO said its rates on express shipments can be between 23 to 30 percent less than comparable published rates from Memphis-based FedEx Corp. and Atlanta-based UPS Inc. on the most common shipment weights and distances. Given LSO's rate freeze and the imminent 2018 price increase imposed by the two giants, that rate differential will widen further, the regional carrier said.

LSO also said it will keep its dimensional divisor, which is used to calculate ground rates on packages priced by their dimensions instead of their actual weight, at its current threshold of 166. A package's dimensional rate is determined by multiplying its length, width, and height in cubic inches, and then dividing the total either by 139 or 166. Packages are priced by the higher of either their dimensions or their actual weight. The higher the divisor, the lower the dimensional rate. The divisor used by FedEx and UPS is currently set at 139.

In addition, LSO said it has frozen its "accessorial" fees—charges for services not related to the basic line-haul—at 2017 levels on its express shipments. Other than the U.S. Postal Service, all parcel carriers impose varying numbers of accessorial charges to compensate themselves for the cost of providing extra services. However, the increasing cost and quantities of accessorial charges have led some to wonder if they aren't more a way of fattening the carriers' top and bottom lines than a proffer of fair value for what would be considered additional services.

LSO, like other regional parcel carriers, is considered a cost-effective value for shippers in its region because it isn't burdened with the enormous overhead that comes with running a national network. LSO, which is owned by private equity firm Eagle Merchant Partners, ships, on average, more than 82,000 parcels a day. The company said it grew its 2017 volumes by double-digit amounts over 2016 levels.