Carriers impose surcharges, rate increases

By Staff -- Logistics Management, 8/1/2000

A t a time when many carriers are reporting record revenues, fuel costs and low capacity are prompting them to impose fuel surcharges and rate hikes on shippers.

LTL carrier Pitt Ohio Express led the pack, with a 5.9-percent rate hike that it announced in May.

Overnite Transportation Co., the nation's sixth largest LTL carrier, will raise rates 5.5 percent this month on all non-contractual shipments in the United States and Canada. That increase will apply to minimum charge, LTL, and truckload rates. Yellow Freight System will increase its rates this month by 5.9 percent for non-contractual customers, and Consolidated Freightways will increase rates 5.85 percent. On Sept. 1, Con-Way Transportation Services' operating components (Con-Way Western Express, Con-Way Central Express, Con-Way Southern Express, and Con-Way Canada Express) will follow suit and raise their base rates by 5.9 percent. (For more on the upcoming LTL rate increases, see the "Bohman on Pricing" column on Page 34.)

In the meantime, both United Parcel Service and FedEx have announced fuel surcharges of 1.25 percent that take effect this month on all ground services in North America.

Northwest Airlines Cargo is one carrier that is bucking the trend, canceling its planned fuel-surcharge increase on shipments from North America to Asia. The freight carrier currently has a 10-cents-per-kilo surcharge for that route and had planned to raise that rate another nickel this month, but it ran into stiff opposition from shippers.

United Airlines says it will raise cargo rates next month by 5 to 10 percent on imports from Europe and Asia. The airline will also increase its fuel surcharge to 15 cents per kilo on bulk export cargo this month. American Airlines Cargo is increasing its surcharge this month from 10 to 15 cents per kilo.

Emery Worldwide may have to take steps soon to offset increased costs for fuel and maintenance. Emery, a subsidiary of CNF Inc., has reported gains in international airfreight tonnage of 10 percent, with revenues up 14 percent in that sector. But its North American tonnage fell 5 percent and that revenue is down 3 percent. Gregory L. Quesnel, president of CNF, says Emery is reducing expenses by tightening capacity, making higher-yielding premium and guaranteed shipments a larger part of its volume, adding some DC-10s to its fleet, and returning some aircraft that had required heavy maintenance to service. The last two actions will enable the company to reduce its reliance on higher-cost contract aircraft, according to Quesnel. Whether the belt-tightening will offset Emery's losses remains to be seen.

On the fuel front, distillate retail prices for on-highway diesel fuel dropped slightly in July for most areas, except California, which saw an increase from 156.8 to 158.0 cents per gallon, according to figures released by the U.S. Department of Energy's Energy Information Administration. But even with the decline, prices are still up sharply from last year. The U.S. average of 142.4 cents per gallon compares with last year's 113.7, up about 25 percent.

East Coast prices ranged from a low of 139.3 to 153.8 cents, compared with last year's 108.0 through 119.8 cents. The Midwest's current price of 140.7 compares with 110.5 cents last year. The Gulf Coast has the lowest price, 138.0 cents, compared with last year's 110.1. The Rocky Mountain region's price stands at 145.2 cents, up from last year's 120.8. The West Coast price is 151.3 cents, compared with last year's 131.4, while California's 158.0 cents compares with last year's 141.9.

To check the latest information on fuel prices, log onto our home page, www.logisticsmgmt.com.