UPS Set to Increase Rates
Amid Higher Labor Costs

United Parcel Service Inc., facing higher labor costs from its new contract with the Teamsters union, said it plans to raise rates for most shipments by at least 2.9%, including the biggest jump in ground-delivery prices in at least seven years.

The size of the increases was larger than many analysts expected, indicating the delivery giant expects many customers to put up with the higher expense despite the stubbornly weak economy and growing competition that includes an aggressive ground-delivery expansion by rival FedEx Corp., Memphis, Tenn.

The rate rise also will help UPS offset annual wage and benefit increases of about 4% under last summer's six-year contract agreement with the Teamsters, which represents about 230,000 drivers, package sorters and other UPS workers. Christine McManus, a UPS spokeswoman, said the new contract was just one of "hundreds of factors" that contributed to the coming rate raises, which take effect Jan. 6.

The higher rates at UPS are likely to trigger similar moves during the next few weeks by FedEx and Seattle-based Airborne Inc., since they typically follow UPS's lead on prices for ground deliveries, said Doug Caldwell, an analyst at AFMS Transportation Management Group, a Portland, Ore., consulting firm that helps negotiate delivery contracts. FedEx usually tends to roughly match UPS on rate increases for faster-moving air shipments.

UPS said it will boost prices for ground deliveries an average of 3.9%. Such shipments generate about half the company's revenue. Rates for overnight deliveries will climb 3.2%. International rates on shipments from the U.S. will rise 2.9%.

The unusually big increase in ground-delivery rates and the smallest rise in the price of air shipments since 1999 "indicate to some degree where management expects the most robust growth to be" next year, said James Winchester, an analyst at Lazard LLC. Many delivery clients have responded to the economic downturn by shifting packages from planes to trucks, cutting their shipment costs in half or more. Such penny-pinchers aren't likely to switch back because of the coming 4% rise on ground items.

Last summer's double-digit price jump by the U.S. Postal Service on Priority Mail shipments also gave UPS extra room to boost its ground-delivery rates. The Postal Service said it hopes to put off the next increase in postage rates until 2006.

UPS also announced plans to raise several add-on fees that don't fall under normal delivery pricing. But the number of extra fees being raised is smaller than that of a year ago, said Satish Jindel, a transportation consultant at SJ Consulting Group Inc., with the charge for a Saturday delivery climbing for the first time since 1992, to $12.50 from $10.


I wouldn't be surprised to see a higher premium on the rural package and less of an increase on the commerical package. I would then expect an aggressive effort to discount the higher profit packages and cut into Fedex's already slim profit margins. Just my opinion


I hope so. It seems so costly to drive 5 miles 1 way for a 1 pound ground from an ASO (who already charges a premium for using them!)or customer counter. Bring back remote deliveries or let the USPS have them.



Though we have our petty differences, it's good to know that we are on the same team on one important issue.... "SCREW FEDEX !!"

(well, at least "I" think it's good to know)

(enuff bashing ok?)


A motorcycle dealer on my route told me yesterday that he will continue to use UPS no matter what the rate increase is. His problem with FedEx (A problem shared by many) has to do with getting three deliveries a day. FedEx Priority shows up around 930 am, FedEx regular shows up around 1030 am, and FedEx Ground makes an appearance sometime during the afternoon. I arrive at about 10 AM with everything.

Some of those former UPS supervisors and managers that have migrated to FedEx must have taken our Methods with them. The FedEx guys Ive talked to are complaining about Stops on Road and such. One driver told me that he had a whopping 70 stops a day, and FedEx wants it done in 8 hours! Poor Baby! I think his jaw is still on the floor from me telling him that I run about 130 a day in 8 and a half hours.

Go FedEx!!!!! LOL!


While I am sure there are more folks who know more than me lets not forget the little people who made us number one on the ground when noone else cared about them. fedex is just now trying to steal the ground folks. the advantage we have is once they tell them no they give up! at least UPS stays on top of them. Lets never forget to dance with the ones who brung us!


Nice.....a positive thread.

I hope we don't go back to remote. Raising the prices for those packages would be tricky, but it could probably be done through technology. I hate "saving" packages for delivery just to save a trip. Those people expect us to deliver on time. How would we do remote with everything guaranteed?


Upsidedown remotes are a bad idea.First remotes were abused by drivers and managment. Need to to get out early..just remotem. No place for that split..add it on and remote the whole thing. I also noticed during remotes that my miles stayed up. You save your runners then have air in the same sections and you save nothing. Plus customers dont understand them. All they know is that a package should have beeen delivered that day and wasnt. I can remember many of a customer saying that our company was going down hill or they would have Fedex make their deliveries from now on.Customers also dont know the rules of remotes. They think that if my ground package is remoted then so will the air. Why pay for a nextday air if its going to be remoted. Its a matter of perception. Any time you lowwer your sevice for the same money the customer feels slighted.


I think you hit the nail on the head the service or lack of service was difficult to explain or defend.


A disappointment for me has been the continuing drop in volume levels despite hitting best-ever service levels. I guess is takes a better economy and maybe some time to make the customer more sensitive to the difference between UPS and Fedex on service. Total time in transit of over 99.0%...who woulda thunk it? Look for 99.5% next year.

But will it get us the increase in business we think it will? Hope so...