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September 21, 2021 9:30 AM, EDT

FedEx Sets Rate Increase, Cites Challenging Operating Environment

FedEx truck David Paul Morris/Bloomberg

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FedEx Corp. plans to raise its delivery rates in 2022 by the most in at least a decade as the courier shoulders rising costs in what it called a “challenging operating environment.”

The average cost of package delivery will rise 5.9% at the Express and Ground units beginning Jan. 3, FedEx said in a statement. Rate increases in the freight business range from 5.9% to 7.9%, depending on the delivery zone, the company said. A fuel surcharge at all three units will kick in Nov. 1.

“These changes reflect incremental costs associated with the challenging operating environment, while enabling FedEx to continue investing in service enhancement, fleet maintenance, technology innovations and other areas to serve customers more effectively and efficiently,” FedEx said.

 

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The increased cost for delivery will contribute to U.S. inflation in 2022, which is expected to cool to an average of 3% next year from an estimated 4.3% in 2021, according to economists surveyed byBloomberg. That still is higher than had been typical in recent pre-pandemic years. Transportation costs have been rising because of strong demand coupled with increased wages for drivers and warehouse workers.

The last time FedEx raised rates more than 4.9% for either of its two largest units was a 5.9% increase for Ground announced in 2011 for the following year. At that time, Express’ average prices were scheduled to rise only 3.9%. Ground made up 38% of revenue last year and Express accounted for 52%.

READ MORE: FedEx to Spend $100 Million on Improving Delivery Vehicle Safety

FedEx also plans to add several surcharges beginning in January including for oversize items, some return packages and parcels that are out of the company’s normal pickup or delivery area, the company said.

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

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