May 2 (Reuters) - FedEx Corp, the world's second largest parcel delivery company, said FedEx Freight would raise fuel surcharge by 3 percent next month, aiming to offset an increase in costs from rising fuel prices.
The company also said FedEx Ground would start applying dimensional weight pricing to all shipments from January next year. Dimensional weight pricing is currently applied only to packages measuring three cubic feet or greater.
"They are raising their fuel recovery. It will increase the cost to shippers," said David Vernon, an analyst at Sanford Bernstein.
The move comes after FedEx reported a lower-than-expected quarterly profit and cut its full-year forecast in March due to higher costs related to rising fuel prices and the winter storms in the United States.
Fuel costs at FedEx Freight rose 3 percent in the third quarter ended Feb. 28. The business contributed about 12 percent to the company's total revenue in the quarter.
Both FedEx and larger rival UPS raised shipping rates for their freight units in March.
Freight is a more competitive than the ground and express businesses, where FedEx and UPS are the only two big players.
The FedEx Freight business includes FedEx Freight Canada, FedEx Custom Critical and FedEx Freight, which is a provider of less-than-truckload freight services.
Less-than-truckload is the shipping of relatively small loads of freight, and customers use this method because it costs less than hiring an entire truck for an exclusive shipment.
FedEx Ground ships small packages throughout the United States and Canada and also delivers low-weight packages through a partnership with the U.S. Postal Service.
(Reporting by Sweta Singh and Ankit Ajmera; Editing by Savio D'Souza)
- Professional Services
- FedEx Ground
- fuel prices