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FedEx hikes rates for 2018

FedEx is giving its shippers the benefit of a few extra months to budget for their cost increases in 2018, pre-empting the roll-out with an early announcement of their general rate increase, effective January 1st, 2018.

The 4.9% stated increase applies across the board to all their tariffs, from Domestic Air to Ground to International shipments. Compared to 2017, when FedEx raised Ground and Home Delivery by 4.9% but Domestic and Int’l Air by 3.9%, 2018 represents a heftier increase.

As seasoned shippers and GRI veterans, you should know that a 4.9% stated increase will often mean higher rate increases in certain areas, as both carriers selectively apply higher percentages to targeted weights, zones, and services. For Ground and Home Delivery, we can see in the below table that FedEx is using lower increases at the higher weight ranges, less common among shippers, to balance out rate increases up to 5.69% in the low and mid-level weight ranges.

The FedEx Ground Minimum increases from $7.25 in 2017 to $7.58 in 2018, an increase of 4.6%. Through 2017, UPS has maintained a higher Ground minimum of $7.32, so time will tell whether they will match FedEx’s 2018 minimum rate when they make their rate announcement. It should be noted, too, that shippers who have the benefit of a minimum net charge reduction will take an even greater proportional hit to their spend increase.

The rate increases are highly varied on Air services, with certain targeted services showing more significant increases. The below table shows the average increase for each Domestic Air service from letters up to 20lbs. You can see for lighter weight shipments; FedEx 2 Day takes the most dramatic hit.

The next table further breaks down the average increase for 0-20lbs shipments per service across the 8 continental US zones. The results vary by service, but the general pattern is that the higher zones (5-8) are seeing the higher increases.

Along with tariff increases, FedEx has also increased most of their accessorial fees. You can see some of the more commonly incurred fees below. Dovetailing with the strategy of the new peak-season fees of both carriers, some of the highest increases come for Additional Handling and Oversize Fees, as both carriers continue to punish and disincentivize shippers of heavier and bulkier freight. Residential surcharges for Express shipments also show a disproportionate spike.

Source: LJM Consultants