FedEx Corp. (FDX) announced a number of pricing changes that it plans to implement in coming months, including an increase in shipping rates for U.S. domestic and export services, saying the adjustments are needed to "provide industry leading service and shipping solutions."
The package-shipping giant said the full average rate will increase 5.9% for U.S. and export services early next year, which will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing that charge by two percentage points.
In addition, FedEx Express and FedEx Ground will implement a change to the dimensional weight volumetric divisor from 194 to 166 for domestic services. Additional details on the changes can be found at
www.fedex.com/us/2011rates.
Mike Glenn, chief executive of FedEx's services division, said the change in the dimensional weight calculation is designed to ensure that FedEx is receiving appropriate prices for large but light-weight packages that have been among its least profitable.
"If you don't price them accordingly...then you're really losing out," said Glenn, speaking Wednesday during FedEx's investors and lenders meeting in Memphis, Tenn.
He also reiterated a message delivered by several FedEx executives Wednesday that the company is committed to increasing its overall package yields in the wake of the broad economic downturn that sapped pricing power and profits in recent years.
"We're willing to put market-share at risk and sever relationships [with customers] if required" to make price increases stick and boost yields to appropriate levels, Glenn said.
He added that he expects such instance to be relatively rare, however, saying FedEx can continue to gain market share with strong service offerings and competitive rates.
Meanwhile, FedEx announced plans for its freight and national less-than-truckload segments to implement 6.9% general rate increases effective Nov. 1. Those rates affect interstate and intrastate less-than-truckload shipments, as well as hauls between the U.S. and Canada. Earlier this year, FedEx's freight and less-than-truckload segments implemented a 5.9% general rate increase, which became effective in February.
FedEx two weeks ago announced plans to restructure its freight business and cut capacity, marking another positive turn for truckers that carry smaller freight, as the industry climbs back from last year's brutal price war.
The company on Wednesday said ground and SmartPost pricing changes for 2011 will be announced later this year.
Rival shipping giant United Parcel Service Inc. (UPS) has yet to announce rate changes for 2011.
