Consultant’s Insight: FedEx announces 2024 GRI earlier than usual

FedEx is getting a head start in announcing upcoming rate and surcharge increases as perhaps a way to keep hold of parcel volumes it gained from UPS during that company’s negotiations with the Teamsters . FedEx announced a 5.9% general rate increase (GRI) for 2024 last week and said it will announce additional rate details later. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] UPS and the Teamsters reached an agreement in late July, and the new five-year contract went into effect Aug. 25. The contract is pricey for UPS, with an estimated $30 billion in new money over the next five years, according to the Teamsters. It’s doubtful that UPS will have any appetite for a rate battle with its closest competitor, FedEx. UPS acknowledged it lost more parcel volumes than expected during the second quarter and estimated that one-third of the diverted packages went to FedEx, one-third to the U.S. Postal Service and one-third to regional carriers. “We are now laser-focused on executing our win-back initiatives and pulling through the more than $7 billion of opportunity in our sales pipeline,” UPS Chief Executive Carol Tome said in an August earnings call. “To do so, we will leverage our superior service and capability and our investments in the digital customer experience.” However, word on the street is that UPS is cutting rates and offering financial incentives to win back lost volumes. It’s also rumored that shippers that shifted volumes to FedEx had to sign a two-year contract that included financial penalties if the contract was broken. Perhaps UPS can offer lower rates and financial incentives thanks to the company’s technology investments, which improved operational efficiencies. Regardless, FedEx announced the 5.9% GRI for 2024 last week, the earliest such an announcement has been made in recent memory and lower than this year’s GRI of 6.9%. Typically, additional rate details are provided with such an announcement, but not this time. According to FedEx’s website, “Detailed rates and surcharges will be available on fedex.com on Sept. 7.” Surcharges for holiday season FedEx also announced its demand surcharges for the peak season, which will be in effect from Oct. 2 through Jan. 14. These surcharges will impact Express, Freight and Ground services. FedEx will again use its dynamic pricing tool for its residential delivery surcharge. The tool automatically adjusts the surcharge if a shipper surpasses a volume threshold. Last year, FedEx earned $150 million from its dynamic pricing tool. Typically, FedEx and UPS announce similar rates and surcharge increases. But with $30 billion in new costs hanging over UPS, will UPS be able to afford to match FedEx? To further cut costs, UPS is offering a voluntary severance package for 167 pilots amid a slump in airfreight volume. FedEx and UPS have reported year-over-year declines in volumes since last year, which appear to be normalizing to pre-pandemic levels. As a result, expectations for a strong peak season are muted. “Peak will be 21 days this year, the same as last year,” Tome told analysts in August. “We expect [volume] to surge in the 60% area this year. So, it’s still going to pick up. It’s just from a different volume level.” Join Air Cargo Next for its second annual Air Cargo Tech Summit on Sept. 18-19 in Brussels, sponsored by Unisys and Brussels Airport and featuring a fireside chat with Brian Hodges, managing director, American Airlines Cargo. For more details and to register, click here .

Consultant’s Insight: FedEx announces 2024 GRI earlier than usual

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