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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.
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.
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