*FedEx Adds 1 Percent to Fuel Surcharge

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Federal Express Corp., Memphis, TN, said yesterday that it will add 1 percent to its 3 percent fuel surcharge on most domestic and international services -- bringing the package express company's surcharge to 4 percent, effective April 1.


The surcharge will extend through FedEx's fiscal year, which ends May 31, and possibly beyond.


On Dec. 30, FedEx announced the 3 percent fuel surcharge, effective Feb. 1, to offset fuel costs. At the time, FedEx indicated that fuel prices could negatively impact expenses in fiscal year 2000 by more than $200 million, compared with fiscal year 1999. FedEx is currently paying about 83 cents per gallon for fuel, up from 51 cents a year ago, and the company expects fuel costs to remain in the 80-cents-or-higher level for the next several months.


FedEx also will increase is surcharge of 10 cents per kilo to 15 cents on FedEx International Airport-to-Airport and FedEx International Express Freight shipments. The surcharge will apply to all shipments tendered within the United States and all U.S. export shipments, where legally permissible.


"The continuing rise and sustained high levels of fuel prices have nearly doubled our aircraft fuel costs compared to the levels of a year ago," said Alan Graf Jr., FedEx's chief financial officer. "In order to continue providing the unparalleled service and reliability our customers expect, we must adjust our existing fuel surcharge by 1 percent."


Airborne Express, Seattle, a FedEx air express competitor that also implemented a 3 percent fuel surcharge on all domestic and international express services in February, said it is concerned about high fuel prices in general and is aware of FedEx's move, "but we have not made a decision about whether we are going to increase our current fuel surcharge," said Camille Pitre, an Airborne spokeswoman. Pitre also said the company will continue monitoring fuel prices.


Meanwhile, United Parcel Service, Atlanta, FedEx's chief competitor, said high fuel costs were a contributing factor to the 3.5 percent rate increases it implemented in February for UPS Next Day Air, 2nd Day Air and 3-Day Select Commercial air express rates. But high fuel prices "were not the driving force," said UPS spokeswoman Susan Rosenberg.


Rosenberg also said that UPS still has no plans to add a fuel surcharge to its rates -- as it announced earlier this year.


"We are still monitoring what's happening with fuel prices, but our approach -- which is short-term and long-term hedging -- meets requirements for us to keep our operating costs in check, and we can manage any variabilities right now with fuel prices," said Rosenberg.


The U.S. Postal Service, Washington, another air express competitor, cannot add a fuel surcharge or raise its rates as a result of the rising fuel costs.


"The only way we can increase rates or add surcharges at all at the postal service is to go through the Postal Rate Commission, and the process takes 10 months plus an additional couple of months," said Greg Frey, a USPS spokesman.
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