FedEx Freight lowers fuel surcharge by 25 percent
With its eye on improving market share and staying ahead of pack in a crowded less-than-truckload (LTL) marketplace, FedEx Freight said today it has reduced its standard LTL fuel surcharge by 25 pct.
The company added that FedEx National LTL, its newly-formed long-haul LTL unit (as a result of FedEx’ acquisition of Watkins Lines in 2006) will also reduce its standard LTL fuel surcharge to levels commensurate with FedEx Freight.
Another reason for this decision, Duncan said, is that many shippers are claiming that energy prices are hurting business, and fuel surcharges continue to get steeper. “We felt this was the best place to give back to the customer.”
This decision, he added, reflects how FedEx has continued to make investments in its value proposition to drive market share growth. An example of this, Duncan said, is that FedEx was the first company to introduce a money-back guarantee, which was investment-driven.
With the fuel surcharge being reduced by 25 pct, the FedEx Freight fuel surcharge has dropped from 19.7 pct as of Friday, July 20 to 14.8 pct today.
A report published today by Bear Stearns said that this fuel surcharge cut will impact both FedEx’ regional and recently-acquired long-haul operations, adding that FedEx Freight’s total LTL revenue of USD 4.9 billion represents approximately 14 pct of the total market.
In regards to how the competition may react, the Bear Stearns report said that a “competitive dynamic” in the LTL industry has been accelerating, and this fuel surcharge reduction is the “most overt sign of price competition in the LTL market since the mid 1990’s.” As a result, the report indicated it is likely that other LTL providers may follow FedEx’ lead and subsequently lower fuel surcharges as well.
