analyst says UPS’s announced 2010
rate hikes may not tell the tale
UPS Inc.’s announcement Nov. 20 of rate increases for 2010 has understated the actual increases, which in many cases will be higher than the
company has publicly disclosed, according to an analysis by a leading
parcel consulting firm.
The new rate structure, which takes effect Jan. 4, calls for an average
increase of 4. 9 percent over 2009 rates on UPS’s ground parcel shipments, and an average increase of 6. 9 percent on air-express and U.S.
export shipments, minus a 2-percent reduction in the fuel surcharges for
air and international export shipments, resulting in a net increase of 4. 9
percent. The increases apply to UPS’s “list” or retail rates. Shippers who
use UPS through contracts will generally receive substantial discounts
off list prices, depending on the product chosen.
TranzAct Technologies, a consultancy in Elmhurst, Ill., told DC
VELOCITY that list rates will rise by 6. 4 percent for the average UPS
ground package weighing one to five pounds, and 6.0 percent for the
typical package weighing six to 10 pounds. Rates will rise, on average, by
4. 9 percent for packages shipped by ground that weigh 11 to 25 pounds,
according to the TranzAct analysis.
In addition, list rates on four of UPS’s six tiers of air and international products will rise more than the 6.9-percent average increase for air
and export deliveries, according to the TranzAct analysis. The largest
increase is expected on UPS’s next-afternoon delivery product, with an
average 8.24-percent increase from 2009 list rates. That is followed by
rates for next-day air and second-day air deliveries, with each rising, on
average, by 7. 9 percent. Rates for packages shipped for second-day
morning delivery will increase by 7. 58 percent, TranzAct said.
Rates for air shipments delivered by 8 a.m. the next day will increase
by 6. 64 percent, while rates for packages moving in three-day transit
times—known in UPS lingo as “Three-Day Select”—will rise by 6. 9 percent, according to the TranzAct analysis.
UPS will also adjust on Jan. 4 its mechanism for calculating fuel surcharges, the first such adjustment the company has made in several
years. Without elaborating, UPS said fuel surcharges applied to air and
international services will rise more slowly in 2010 than in prior years if
applicable fuel prices increase. In addition, if diesel prices fall below
$1.75 per gallon, UPS will not apply a fuel surcharge on its ground services. That is a higher threshold than the $1.50 a gallon currently in place.
UPS, the nation’s largest transportation company by revenue with nearly $52 billion in 2008 sales, will also roll out several new products in 2010.
Among them will be a “day-specific” pickup service where a shipper can
arrange a specific day (or days) for a pickup. Another is called “On-Route
Pickup,” where a driver will make a pickup at a location each business day
while also making deliveries in that area, even if the customer is not receiving any packages. Both services are known as “accessorials” and are subject
to charges beyond UPS’s billings for regular pickups and deliveries.
The UPS announcement comes two months after its chief rival, FedEx
Corp., announced a 5.9-percent increase in 2010 list prices for its air
services. FedEx has yet to announce 2010 rates for its ground delivery
products. Like UPS’s rate hikes, FedEx’s changes take effect Jan. 4.
go figure …
$114.56
The all-time high for Burlington Northern
Santa Fe’s stock, reached in June 2008.
Berkshire Hathaway Inc., the holding
company controlled by Warren Buffett,
plans to buy BNSF for $100 a share in
cash and stock. Some analysts believe
the deal price is too low based on historical valuations of rail transactions.
SOURCE: PUBLIC INFORMATION
Cass shipping index slips in
October
A key monthly index of U.S. shipping activity
turned down in October after rising in
September. But the keeper of the index said
October’s results do not necessarily foreshadow a weakening of freight volumes.
The index, published by freight audit and
payment firm Cass Information Systems, is
based on the expenditures and shipments of
Cass’s clients. In October, the freight expenditure index came in at 1. 52, down from 1. 55
in September but up from 1. 47 in August. The
shipment index came in at 0.92, down from
0.97 in September and 0.94 in August.
Thomas M. Zygmunt, who manages the
index for Cass, said the decline might be more
a reflection of the past than a window on the
future. The October shipment index has
dropped below September’s results for the
past three years. In fact, Zygmunt said he
wouldn’t be surprised if the index shows
declines in November and December, as that
has also been the case for the last three years.
Since the start of 2009, the Cass index has
fluctuated wildly. Shipment activity in
February rose over January levels. The index
then declined in March and April, increased in
May and June, and declined in July, only to
rise again in the next two months.
In a sobering reminder of how volumes
have declined since 2006 and 2007, the shipment index stayed consistently in the 1. 2 to
1. 3 range during those two years, Zygmunt
said. The index has not exceeded 1.0 since
November 2008.
