Oct. 13 2009 02:25 PM

On September 17, FedEx announced their Fiscal Q1 results. In addition, they also posted their 2010 Express Rate Preview. On their website they state, "FedEx package and freight rates will increase an average of 5.9% for U.S. and U.S. export services. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharges begins, reducing the fuel surcharge by 2 percentage points."

First, to understand the impact of the fuel surcharge (FSC) adjustments take the latest Kerosene-Type Jet Fuel numbers reported by the Energy Information Administration. The August Gulf Coast number o f 188.47 will be used to set the October FSC at 7.5%. So if fuel costs were to stay flat, the 2 point reduction would translate to a 5.5% FSC with the new index. (Note: FSC for express is 5.5% this month, was 6.5% in August and 2.5% in July.)

Now, onto the announced average rate increase:

The charts in the attached PDF titled "Rate Changes" show the 2010 preview rates compared to the actual 2009 published rates.

As you can see, the smallest rate increases look to be occurring in the Express Saver and First Overnight services. The Express, Standard and 2-Day services appear to have increases greater then the announced average.

Rates are only half the story as you also need to take changes to accessorials into consideration. And according to the list in our PDF, there will be further increases to many of the commonly assessed surcharges.

But that's not all. Two-weeks after the annual rate increase goes into effect there will be some new charges coming into play. An additional Delivery Area Surcharge to select remote zip codes for residential shipments as well as some new Minimum Billable Weight charges on select FedEx provided packaging will occur. For those of you who are in engineering and use the tri-tube, if your current weight is in the 2-3 lb. area you may be surprised by the 6 lb. minimum weight charge you will be assessed starting January 18th.

Check out the PDF for the full list of changes that will take effect January 18, 2010. 

The devil as always is in the details so I encourage you to take a close look at your actual shipping pattern. Determine the specific service levels you use, the weight-zone distribution and identify the specific impact this rate announcement will have on your business. Don't trust an announced average in setting your shipping budgets for next year.

Finally, you'll notice that FedEx did not announce any Ground increase. I expect that UPS will make that announcement and FedEx will follow suit in this important mode of service. Stay tuned, there's more to come.

Rate Changes PDF: /file-145-Rate-Changes.pdf

Check out this PDF for a full preview:  /file-146-2010_FedEx_Express_Rates_Preview_0.pdf 

Doug Kahl is Vice President, Strategic Initiatives for TranzAct Technologies, a logistics management solutions company that helps shippers reduce their transportation spend while providing the tools necessary to remain in control and make better business decisions on an ongoing basis. Contact him at KahlDouglas@tranzact.com