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August 18, 2020 10:30 AM, EDT

FedEx Joins UPS, USPS in Adding Fees as Holiday Delivery Surge Looms

FedEx said on Aug. 18 it would add a surcharge ahead of the holiday season.A worker unloads packages from a FedEx delivery truck in New York. The company joins UPS and USPS in adding a delivery surcharge ahead of the holiday season. (Michael Nagle/Bloomberg News)

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FedEx Corp. is joining a rush to apply extra holiday fees on high-volume shippers as couriers brace for a new jump in residential deliveries during the year-end peak season.

Surcharges on regular shipments to homes will range from $1 to $5 from Nov. 2 to Jan. 17, FedEx said on its website Aug. 18. That marks the first time since 2016 that the company has applied special peak-season fees, and the move follows similar efforts by UPS Inc. and the U.S. Postal Service.

“As the impact of the virus continues to generate a surge in residential deliveries, we are entering this holiday peak season with extremely high demand for capacity and are experiencing increased operating costs across our network,” FedEx said. “We anticipate residential volume to continue to surge into the new year.”

Demand for residential deliveries has soared since mid-March when the coronavirus pandemic drove U.S. consumers to stay home and order online. FedEx’s ground deliveries rose about 20% for its quarter running through May, similar to UPS’s second-quarter increase, and the Postal Service saw a 50% increase in packages for its quarter ending in June.

 

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Capacity Concerns

FedEx was little changed at $206.49 at 9:31 a.m. in New York on Aug. 18. The shares rose 37% this year through Aug. 17, with UPS posting a similar gain. A Standard & Poor’s index of U.S. industrial companies fell 5.3%.

With people making more purchases online than ever, the holiday delivery surge will likely be historic, raising concerns among shippers over package-handling capacity. Meanwhile, the spike in package volume has handed couriers pricing power.

Both FedEx and UPS introduced surcharges earlier this summer, in part to make up for some of the extra cost to keep workers safe while operating during a pandemic. This latest move isn’t a surprise. FedEx Chief Marketing Officer Brie Carere said in June there would be surcharges this peak season.

Still, in the case of UPS, shippers hadn’t expected the hefty size of the surcharges, which are aimed at large shippers that send 25,000 packages a week or more. Depending on the volume above February levels, the UPS surcharges could rise to $3 for ground packages and $4 on air deliveries.

The Postal Service joined in last week with its first peak-season surcharges on packages, ranging from 24 cents to $1.50 on express deliveries.

FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 15 on the Top 50 list of the largest logistics companies in North America.

UPS ranks No. 1 on the for-hire list and No. 2 on the logistics list.

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