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 (NYSE: FDX) 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 between 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 noncontract 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 on what rates and discounts that 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 costly Sunday delivery network as some have advised.
In addition, FedEx plans to cut $4 billion of costs by fiscal 2025, which starts June 1, 2024. The company said it will stick with its plan, announced in late June, to realign its network and end the siloed operations among its three business units.
The company also officially published its fiscal first-quarter results, which were a de facto formality in light of its pre-announcement last Thursday of a 69% year-over-year decline in operating income at FedEx Express.
FedEx blamed the massive drop at the unit on sudden weakness in trans-Pacific air volumes that hit in the final weeks of the quarter. Cost measures lagged the declines in volume, and operating expenses remained high relative to demand, the company said.
The stunning pre-announcement caught everyone by surprise and sent FedEx shares down more than $40 a share during last Friday’s trading.
Jen
Express has also implemented a stop routing program. E star.
June 1 was the roll out
What a coincidence that’s when they started tanking
E star has created more overtime , more fuel costs.
There is no more, each driver has a route, customers know their driver! Their service commitments are no longer being met.
Yet fedex blames everything else.
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Concerned Citizen
Sunday delivery service needs to be shut down immediately by FXG. The service is not expected or desired by customers, most could care less about receiving a box on Sunday. It comes at to great of a cost to FXG and it is an absolute financial burden to the contractors who are all ready dealing with lighter package volume than expected. Sunday delivery service not only make Sunday’s a financial loser but it creates inefficiencies for Monday and Tuesday’s as well. There is not enough weekly package volume in the network to warrant 7 days of delivery operation…delivery and service goals could easily be met with a 6 days delivery service. Shutting down Sunday’s would show strength, boost confidence, make FXG and it’s Contractors more efficient and profitable.
Eric
All valid points. But it has always been about making the world’s largest retailer, Wal-Mart happy. Particularly since the world’s second largest retailer offers Sunday delivery through their delivery network…Amazon.
Secondly, FedEx is not going to shutter more Sunday service this close to peak. I would hope they give it a fresh look post Christmas season and we may see more Sunday station closures then I hope.
Gary
From what I gather the stations that ended Sunday service, or at least some, plan to reinstate Sunday service for peak before ending it again after peak.
Russ J. Alan
Why FedEX is in trouble?Here’s a website you need look at:
http://fedex-sucks.net/
Russ J. Alan
You sell apples. You have two major competitors in the apple selling sector who are selling lotsa apples cheaper than you and you’re not even trying to compete. Your sales are way down and your losing money so you brilliantly decide to raise your prices to make up the difference. What an ingenious masterstroke
Eric
Well beside being wrong a lot…sales are not down now. This news is from the summer. Package volume is ahead of projection at the moment. And as far pricing it all depends on the product. Sometimes UPS is higher and sometimes FedEx is higher. Secondly after this UPS new contract or strike or whatever happens there…will they take a profit margin hit or raise rates? One or the other will have to happen with what the Union is asking for its a tough world economy right now…not just for FedEx. Like talk Brown in early 2023 particularly if they strike and see who is hunting box volume.
Kyle
Negotiations haven’t even started, and the Teamsters can’t strike until after July 31st, 2023.
R Labrum
They can add all the rate increases that they want too but bottom line is that don’t give a rats behind about the conditions of its contractors and all those that work in the Ground and Home Delivery services that department really sucks
Ed A Caruso
New leadership just can’t stop showing off their arrogance. Should do wonders to gain back the package count loss reported in their 3rd qtr.
actual logistics pro
Ed. Please examine what has happened to Diesel and freight rates in the past year and come back to us. Im living freight, basically the truckers have called this the great trucker depression but most people don’t understand it and it definitely is not going to be accurately reported on.
James Jay
In Europe, 35-40% of customers accounts have been locked / frozen over the past 2 weeks, and continues to go. The reason for this is because their credit control deptartments are not functioning and payments made against invoices are not being applied to those accounts. Nobody is on the other end of the credit control emails. Our FedEx driver in Dublin says his daily volumes are down 40% .
Eric
The freight is already back…you realize quarterly news lags right? Most sortation facility buildings in FedEx are exceeding projected package count revenue at the moment and have been since the summer.
Thomas J
it seems to me that there is more going on here that has yet to be disclosed.