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UPS hikes 2001 rates
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December 28, 2000: 11:17 a.m. ET
World's largest transportation firm's hike is smaller than FedEx's hike
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NEW YORK (CNNfn) - United Parcel Service Inc. Thursday announced a rate hike for next year that was lower than the increase announced by its competitor FedEx, but which may still be ambitious in the face of flat freight demand.
UPS, the world's largest transportation company, will increase rates on domestic express shipments an average of 3.7 percent. FedEx announced on Wednesday an average 4.9 percent hike on express shipments. UPS' lower-price deferred-ground-service rates will increase 3.1 percent across all weights and distances. FedEx has yet to announce its change of rates for ground service.
 UPS' export shipments rates from the United States will increase 2.9 percent, the same as FedEx's rate hike for those shipments.
On Dec. 14 both UPS and FedEx warned that earnings would be hurt due to flat shipment volumes in December, rather than anticipated increases in shipments.
Analysts question whether the carriers will be able to win the rate hikes from major business customers, given the current levels of demand. Ed Wolfe, analyst for Bear Stearns Wednesday called FedEx's rate hike "pie in the sky" and predicted that UPS would come in with a rate hike in the 2 to 3 percent range.
UPS said it believes it will not loose business due to a rate hike, despite slowing demand.
"The weaker-than-expected shipments we saw we believe were based on the slowing economy," said Steve Holmes, a UPS spokesman. "We also believe our services are in high demand and very valuable to customers. I think we'll remain in good shape as far as our competitive situation."
UPS' announcement said a 1.25 percent fuel surcharge will remain in effect, and that a $1 surcharge on residential deliveries will be increased to $1.05. The new rates will take effect Feb. 5, four days after the new FedEx express rates take effect.
Shares of UPS (UPS: Research, Estimates) gained 31 cents to $57.63 in trading Thursday, while shares of FedEx (FDX: Research, Estimates) lost 14 cents to $38.65. 
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United Parcel Service
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