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November 13, 2006
Fuel surcharge down, prices up, Mon., Nov. 13, 2006, 7:48 AM
Customers who need to ship products (like flowers from Hawaii, "Kaimu") cannot seem to get ahead. When surcharges on fuel get lowered, the shipper simply moves the "surcharge" from one pocket to the other.
One of the keys to the economy is the health of the Transports. Whenever consumers buy, products must be shipped. This report from Merrill Lynch will help assess the current situation. Download ML Nov 10 report on Transports.
With respect to the key company in this sector that I ask readers to keep an eye on, Fedex (FDX), this is what ML has to say:
"FedEx posted an annual base rate increase for 2007 of 5.5% for Express, in line with the increase for 2006 (above the 4.6% increase in 2005, 2.5% in 2004, and 3.5% in 2003 and 2002), as it continues to lock increased fuel costs into its base rate while lowering its fuel surcharge by another two percentage points. The resulting net rate increase is 3.5% (in line with 2006). FedEx noted that 2007 increases to its Ground rates will be announced later this year. In addition, the company plans to add a new dimensional weight system for oversized (3 cubic feet +) Ground shipments, effectively increasing rates on lighter-weight, yet bulkier freight. Separately, FedEx will acquire 15 new Boeing 777 Freighter aircraft with options to purchase an additional 15 aircraft. The company cancelled its order with Airbus for 10 A380-800Fs."
No position.
Posted by Posted by Bill Cara on November 13, 2006 07:48:20 AM | Category: 20 Industrials
Discourse
Kaimu - I used to work for DHL, and wonder whether (under deutsche post) they haven't brought in some price competition to Fedex. Also, doesn't UPS' presence in the overnight business help, or is it just one cozy oligopoly?
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ALOHA !!
Okay ... FedEx is a money machine that passes out rate increases as fast and furious as Congress votes themselves more pay!
We ship a lot with FedEx, enough that they used to give us a "free" computer and printer. Now they just give you "free print labels" and software and you use your own computer and printer for reports(label printer is still "free"). I make every attempt to keep our pricing low and competitive and still make a decent profit. There are two different components to my business retail and wholesale. On the retail side I can increase costs at will yet on the wholesale side prices for orchids have been fixed for many years. I have yet to determine how hardly any farmers raise wholesale prices even in the face of rising costs for fuel and chemicals and labor. I have guessed that many smaller farmers struggle financially and will sell at just about any cost just to get a steady income.
In 2003 I could ship a FedEx Tube from Hawaii to the mainland(the right 48)for around $6. It depends on what state and if the address was rural as to how much higher the rate would be. Now I ship the same FedEx Tube for over $9. Plus FedEx has added in new "surcharges" like an added $2 charge for a residential delivery versus a business address and another added $2 if you want a signature. Your base rates also vary depending on how much you ship. Many variables ... it all works out to benefit FedEx in the end, like Bill says. I have always had a "love-hate" relationship with FedEx, they provide a valuable service to me where I can now compete with FTD and the big AG corporations. With the advent of the internet the "playing field" is leveled even more, but the big guys, like FTD, will collude and outbid you on important "flower days" like Valentines and Mothers Day by bidding up the per click rate on Google/Yahoo to $3-$4 per click, where I only bid up to $0.50 per click. Even selling a lousy orchid stem you face collusion by corporate giants! Then there is the US government ... a few weeks ago I was standing in line at Bank Of Hawaii and I saw a guy I did not know by name but knew was a farmer with a check in his hand from the US Deptartment Of Agriculture, he gets paid not to plant! Our Founding Fathers would be very proud!
Aside from union construction jobs here in Hawaii being a FedEx driver is a highly valued job since they pay a good wage with good benefits, but not as good as a government worker!
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November 13, 2006 10:49 AM [link]