UPS to Hike Rates

Rates will go up next year by an average of 4.9% for both ground and air-express shipments.
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UPS

(UPS) - Get Report

said it will raise rates next year by an average of 4.9% for both ground and air-express shipments.

The overnight package carrier said the increase for air-express shipments, including U.S.-originating international shipments, is based on a 6.9% boost in the base rate, minus a 2% reduction in the fuel surcharge. The new rates will take effect on Jan. 1, after the 2006 holiday shipping season.

Rival

FedEx

(FDX) - Get Report

said two weeks ago that it would raise next year's air-express rates by 3.5%, including a 5.5% average increase in standard rates and a 2% deduction in the fuel surcharge.

The company said it would also hike ground rates, but it didn't specify the extent or the date.

After the FedEx increase, Banc of America Securities analyst Scott Flower wrote in a research report that the company would "adjust its ground rate according to its view of UPS' competitive response." Banc of America Securities has financial relationships with both companies.

UPS spokesman Steve Holmes said Friday that despite the higher percentage for air express, his company's air rates will remain lower than those charged by FedEx.