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FedEx Corp. announced late Thursday a 6.9% general rate increase (GRI) for 2023, the largest year-over-year increase in its history.
The increase will apply to all FedEx services except for its less-than-truckload service, FedEx Freight. Increases there will range between 6.9% and 7.9%, depending on the customer’s transportation rate scale, the company said.
Typically, FedEx raises its annual tariff rates 4.9% and 5.9%. Analysts were expecting a 2023 GRI increase of 6% or more to offset the impact of cost inflation.
On one level, GRIs, which apply to non-contract shipments, are symbolic because virtually all parcel deliveries move under contract. However, the level of contract rate increases, and the discounts granted from those increases, are pegged to actions that parcel carriers take with their GRIs. As a result, GRIs are a key barometer of what rates and discounts shippers can expect in their contracts.
Along with the GRI increase, FedEx said it plans to save between $2.2 billion and $2.7 billion during the current 2023 fiscal year through cost reductions at its FedEx Express air and international unit and its FedEx Ground U.S. delivery unit. The company said it would reduce the number of FedEx Express flights and temporarily park an undetermined number of aircraft. Those moves will save between $1.5 billion and $1.7 billion, the company said.
FedEx said it will save $300 million to $500 million at its FedEx Ground unit by closing certain sortation operations and suspending some Sunday delivery operations. It did not shutter virtually all of its Sunday delivery networks as some have advised.
UPS and other competitors are expected to follow with rate increases before the end of the year. While not publicly advertising current freight volumes, it is widely expected they are dealing with the same volume concerns.
