NEW YORK (CNNfn) - Federal Express Corp. announced Thursday it is raising the price of shipments within or from the United States by 3 percent through a temporary fuel surcharge that takes effect Feb. 1.|
The express delivery company took a $55 million hit in the fiscal second quarter, ended Nov. 30, due to the increased cost of aviation fuel. The company projected that higher fuel may cost it $200 million during the fiscal year that ends May 31. It warned it was looking at a fuel surcharge when its parent company, FDX Corp. (FDX), announced its second-quarter results earlier this month.
"We can't speculate how long it will be in place," said Greg Rossiter, company spokesman. "Given current trends with fuel, it'll be natural to believe it'll be in place for some time."
The company's statement said it held off on the surcharge to let customers make it through the peak delivery season.
FedEx is also raising the rates of its less service intensive international airport-to-airport and express freight shipments by 10 cents a kilogram.
FDXís ground parcel carrier RPS hasnít announced a fuel surcharge, although a number of other trucking companies have been seeking surcharges for the last quarter. A number of air carriers, such as United Airlines and American Airlines, are also trying to impose fuel surcharges on the cargo shipments.
FDX's major competitor, United Parcel Service (UPS), isnít implementing a fuel surcharge, although it announced a series of rate increases Wednesday that take effect Feb. 7 and range from 2.6 percent to 3.9 percent.
The rate increase for UPS's air shipments, which compete most directly with FedEx, average 3.5 percent. That should stop FedEx from losing too much business due to the surcharge, according to an analyst who follows both companies.
"The sales people can probably represent to customers that the surcharge is temporary," said Paul Schlesinger of Donaldson, Lufkin and Jenrette Securities. But Schlesinger said the surcharge would be an issue with small and medium customers that FedEx officials said it wants to concentrate on attracting in the coming year.
"Neither of FDX's two major units is experiencing the revenue growth they had hoped and planned on," said Schlesinger. "If they're not getting the shipment growth, the rates are something they have to look at."
FDX stock fell 5/8 to 41-5/8 at midday Thursday.