With volumes increasing and demand high, FedEx said it is raising prices in 2006 by as much as 5.5% to create more revenue for investment in its market share war with rival UPS. On the bright side, shippers will see a lower fuel surcharge in 2006 from FedEx, which will offset some of the costs. FedEx Express service rates will climb by an average of 3.5% effective January 2, comprised of an average increase in standard list rates of 5.5%, offset by a decrease in its overall fuel surcharge of 2%, down from its current 15.5% to 13.5%. The ground delivery services at FedEx recently began charging a 3.5% fuel fee in October—up a full point higher compared with July. Delivery surcharges for FedEx Express shipments to selected ZIP codes will increase by 10¢ a package. Rival UPS recently increased its fuel surcharge from 9.5% to 12.5%

In its most recent earnings statement, FedEx said its ground average daily package volume grew 6% year over year in the first quarter and "yield improved 6% primarily due to higher extra service revenue, the January 2005 general rate increase and re-implementation of a fuel surcharge."

dhannon@reedbusiness.com