Consultant’s Insight: Express volumes pressured, but rates go up in 2024

Despite air express volumes declining throughout most of the year, rates and surcharges for 2024 will increase an average of 5.9% for DHL , FedEx and UPS customers in the United States. Effective dates are Dec. 26 for UPS and Jan. 1 for DHL and FedEx. However, effective Dec. 3, UPS airfreight within and between the United States, Canada and Puerto Rico will increase by an average net of 6.3%. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] “The average annual rate increases are one percentage point lower than last year’s general rate increase ,” FedEx said in an August statement. “The price adjustments reflect incremental costs associated with the current operating environment while enabling FedEx to continue investing in service enhancement, fleet maintenance, technology innovations and other areas to serve customers more effectively and efficiently.” Surcharges rise for additional handling DHL announced that a limited number of services and surcharges will also be adjusted. FedEx and UPS list a number of surcharges that will be impacted, such as an address correction fee, delivery area surcharge, oversize fee and more, including new ones. For example, UPS is extending its additional handling to international packages weighing 55 pounds or more, effective Dec. 26. FedEx is also changing its additional handling surcharge from per shipment to per eligible package for international multi-piece shipments. According to FedEx, the affected surcharges are the additional handling surcharge based on dimension, weight, packaging, freight and nonstackable, and the oversize charge. This surcharge will go into effect Jan. 15. The additional handling surcharge is among several nebulous surcharges, often applied at the carrier’s discretion. A recommendation for shippers is to review invoices carefully. Mistakes can occur and may be costly. Fuel surcharges likely to increase Fuel surcharges are typically announced throughout the year and depend on jet fuel price. The carriers typically base these surcharges on the most recent U.S. Gulf Coast price for kerosene-type jet fuel released by the U.S. Energy Information Administration (EIA). Fuel surcharges have remained above their January 2019 levels, partly due to the rise in jet fuel prices since Russia’s invasion of Ukraine. However, jet fuel prices and cargo surcharges have dropped close to levels in early 2022, according to a WorldACD August note. While we might see a brief reprieve in fuel surcharges, they will likely increase in 2024. The EIA’s short-term forecast is for U.S. jet fuel consumption to increase by 6% in 2024 from 2023. The growth mainly reflects strong consumer demand for air travel, which has returned to pre-pandemic levels. The outlook continues to be described as “normalization” by most carriers and analysts, but where the bottom is for normal is still unknown. FedEx Chief Financial Officer John Dietrich told analysts in September that the company’s international service mix “continues to shift toward deferred offerings,” while UPS Chief Financial Officer Brian Newman told analysts in June that international volumes in the second half of the year will be “similar to what it saw in the second quarter and revenue-per-piece growth [will] be flattish compared to the same period last year.” Regardless of lower volumes, shippers will pay more in 2024.

Consultant’s Insight: Express volumes pressured, but rates go up in 2024

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