TransImpact says there will be virtually no difference in rates in 2023 between FedEx and UPS.
Shippers using FedEx Corp. and UPS Inc. can expect 8% to 10% price increases in 2023 once rate and various “accessorial,” or add-on, charges are factored in, according to an annual forecast published Monday by consultancy TransImpact LLC.
Though the rates will differ depending on specific products, the all-in result is there will be virtually no discrepancy between the carriers, the consultancy said. Both have announced record 6.9% general rate increases (GRIs) for 2023. However, virtually all parcel traffic moves under contract.
For example, UPS’ (NYSE: UPS) rates for three-day deliveries will be about 15% below those of FedEx, (NYSE: FDX) as has been the case for years. UPS will also underprice FedEx on second-day morning service in the U.S. and on most international routes.
FedEx will underprice UPS on the carriers’ slowest and least expensive ground services, TransImpact said. UPS’ SurePost service is managed in conjunction with the U.S. Postal Service, which delivers UPS’ parcels the last mile to residences. FedEx, which once had a similar service called SmartPost, took that business in-house to form a service called Ground Economy.
FedEx’s pricing advantage on the product — which focuses on parcels weighing 1 to 13 pounds — will be the most significant that FedEx holds among all the offerings of both carriers, TransImpact said.
FedEx will also come in cheaper on its next-morning and next-afternoon deliveries, though the differential shrinks at higher weight breaks, TransImpact said. FedEx will also have lower domestic minimum charges than UPS.
There will also not be much total difference in the delivery surcharge increases of the two carriers, though there will be some variance depending on the specific surcharges, TransImpact said.
According to TransImpact, both carriers will retain per-pound international delivery surcharges in 2023, even though the main reason they were first implemented — to create a margin buffer that would overcome the impact of declining air cargo capacity during the first two years of the pandemic — is no longer the case as more cargo lift comes back online.
The lack of any net price gap between the two carriers should not come as much of a surprise. FedEx and UPS move nearly in lockstep on pricing matters, though each faces unique challenges and produces radically different financial results.
FedEx has been buffeted by high double-digit labor cost increases at its FedEx Ground unit since 2021. By contrast, UPS has been shielded from the surge in labor cost inflation because its 2018 contract with 380,000 members of the Teamsters union locked in relatively modest annualized increases over the past five years.
However, UPS faces a significant cost adjustment starting in 2023 when the next Teamsters contract comes up for renewal at the end of July. Led by Teamsters General President Sean O’ Brien, who has a well-earned reputation as a hardliner, UPS Teamsters are expected to ask for significant wage increases to make up for lost ground.
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