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 The rate increase is for FedEx Freight shipments within the United
States including Alaska and Hawaii, as well as Puerto Rico and the
Virgin Islands, Canada and within Mexico.
The world's second biggest parcel delivery company after United
Parcel Service Inc <UPS.N>, FedEx had last year raised rates by 3.9
percent for its domestic express shipping unit, effective Jan 6.
The increase is smaller than last year's, when FedEx increased
freight rates by 4.5 percent, effective July.
The freight segment contributes about 12 percent to FedEx's overall
revenue. Freight is a more competitive market than the ground and
express businesses, where FedEx and UPS are the only two big
players.
"Freight operates in a more highly fragmented space with many
competitors. This can lead to irrational pricing during tough
markets, as other carriers will continue to bid down rates to
maintain asset utilization," analyst Keith Schoonmaker of
Morningstar said.
Schoonmaker said he expects FedEx to raise rates regularly as the
shipper covers inflating costs, and said increases in the range of
4-6 percent is "normal".
The FedEx Freight segment includes FedEx Freight, which is a
provider of less-than-truckload freight services, FedEx Freight
Canada and FedEx Custom Critical.
Less than truckload is the shipping of relatively small loads of
freight, and customers use this method because it costs less than
hiring an entire truck for an exclusive shipment.
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While FedEx and UPS revise their shipping rates every year, the rate
increase comes at a time when both companies have been trying to
adjust to changes in shipping patterns, as many customers move
towards cheaper shipping services, especially internationally.
UPS said late last year the company planned to raise rates across
the board on an average of 4.9 percent within and between the United
States, Canada, and Puerto Rico.
FedEx shares were trading down 0.4 percent at $132.78 Monday on the
New York Stock Exchange.
(Reporting by Nivedita Bhattacharjee in
Chicago and Sagarika Jaisinghani in Bangalore; editing by Nick Zieminski and Meredith Mazzilli)
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