UPS Adjusts Air Fuel Surcharges a Second Time this Year

August 15, 2019


Following a successful second quarter that included profit gains in all divisions, the company is increasing its base-levels for its air fuel surcharge table for a second time this year. Effective August 26, 2019, the International Air-Import Fuel Surcharge will increase by 1.0% for all thresholds. Previously, UPS had announced it would increase its International Air-Export Fuel Surcharge by 0.5% for all thresholds.

While no reason was given for either of these adjustments, a look at the average U.S. Gulf Coast Jet Fuel Price finds that it is trending lower year-over-year as compared to 2018.For July it is down 8.8% and for June it is down 13.1%.

Year-to-date through the end of June, UPS’ international average daily volumes have slipped just less than 1% while average revenue per package has declined also less than 1%. Despite the declines and uncertain macro-environment, UPS remains positive on air growth by announcing UPS Worldwide Economy, a lower-cost cross-border service targeting small to medium-sized businesses. The tradeoff for the lower cost is a longer delivery period. The introduction of this air service comes as UPS also plans to introduce eleven 747 and 767 into its fleet this year. A total of 44 aircraft are expected to be added between 2017 and 2022.

In addition, with just a few months left in 2019, it is likely an agreement between the U.S. and the Universal Postal Union may not be reached. In October 2018, The U.S. announced it would adopt "self-declared rates for terminal dues as soon as practical, and no later than January 1, 2020.”

The Universal Postal Union (UPU), is a 192-country organization that sets shipping rates from country to country, often favoring developing economies with lower rates. According to Bloomberg, The UPU specifically gives favorable terms to items shipped from developing countries weighing under 4.4 pounds, which has filled sites like eBay and Amazon with cheap clothing and other light-weight items at low prices with free shipping. The result is that it's often cheaper for a Chinese retailer, for example, to ship a product to a customer in the United States than it would be for an American competitor to ship to that same customer.

The rates set by UPU can put U.S.-based companies like FedEx and UPS at a disadvantage and be costly to the U.S. Postal Service. According to UPS CEO, David Abney, “We do believe the administration took the right step to address the UPU terminal due system of inequities. Foreign postal operators should not have any kind of government-approved advantages in a competitive market. It’s one of the reasons we’ve been advocating for the administration to impose self-declared rates. And self-declared rates would mean that the foreign shippers would have to pay the same rates once the package entered into the US that domestic small and mid-sized shippers have to pay. And we really believe that’s leveling the playing field for them and we think it’s a step in the right direction.”

As described above, a number of factors may be playing into UPS’ decision to adjust, once again, its air fuel surcharges.

To learn more how this latest increase may impact your bottom line, please contact us at 404.902.5390

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UPS Adjusts Air Fuel Surcharges a Second Time this Year

August 15, 2019


Following a successful second quarter that included profit gains in all divisions, the company is increasing its base-levels for its air fuel surcharge table for a second time this year. Effective August 26, 2019, the International Air-Import Fuel Surcharge will increase by 1.0% for all thresholds. Previously, UPS had announced it would increase its International Air-Export Fuel Surcharge by 0.5% for all thresholds. While no reason was given for either of these adjustments, a look at the average U.S. Gulf Coast Jet Fuel Price finds that it is trending lower year-over-year as compared to 2018.For July it is down 8.8% and for June it is down 13.1%. Year-to-date through the end of June, UPS’ international average daily volumes have slipped just less than 1% while average revenue per package has declined also less than 1%. Despite the declines and uncertain macro-environment, UPS remains positive on air growth by announcing UPS Worldwide Economy, a lower-cost cross-border service targeting small to medium-sized businesses. The tradeoff for the lower cost is a longer delivery period. The introduction of this air service comes as UPS also plans to introduce eleven 747 and 767 into its fleet this year. A total of 44 aircraft are expected to be added between 2017 and 2022. In addition, with just a few months left in 2019, it is likely an agreement between the U.S. and the Universal Postal Union may not be reached. In October 2018, The U.S. announced it would adopt "self-declared rates for terminal dues as soon as practical, and no later than January 1, 2020.” The Universal Postal Union (UPU), is a 192-country organization that sets shipping rates from country to country, often favoring developing economies with lower rates. According to Bloomberg, The UPU specifically gives favorable terms to items shipped from developing countries weighing under 4.4 pounds, which has filled sites like eBay and Amazon with cheap clothing and other light-weight items at low prices with free shipping. The result is that it's often cheaper for a Chinese retailer, for example, to ship a product to a customer in the United States than it would be for an American competitor to ship to that same customer. The rates set by UPU can put U.S.-based companies like FedEx and UPS at a disadvantage and be costly to the U.S. Postal Service. According to UPS CEO, David Abney, “We do believe the administration took the right step to address the UPU terminal due system of inequities. Foreign postal operators should not have any kind of government-approved advantages in a competitive market. It’s one of the reasons we’ve been advocating for the administration to impose self-declared rates. And self-declared rates would mean that the foreign shippers would have to pay the same rates once the package entered into the US that domestic small and mid-sized shippers have to pay. And we really believe that’s leveling the playing field for them and we think it’s a step in the right direction.” As described above, a number of factors may be playing into UPS’ decision to adjust, once again, its air fuel surcharges. To learn more how this latest increase may impact your bottom line, please contact us at 404.902.5390

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