Originally created 11/25/03

UPS announces 2004 rate increases

ATLANTA -- United Parcel Service Inc. is raising its ground shipping rates 1.9 percent effective Jan. 5.

The rate increase announced Friday is lower than in previous years - 3.9 percent in 2003 and 3.5 percent in 2002.

While some analysts said the lower rate increase reflected the level of industry competition, UPS officials noted there have been larger increases for distant deliveries and deliveries to uncommon destinations.

The new rates include a dollar delivery charge for commercial shipments headed for remote ZIP codes. There also are increases on the company's C.O.D. and Saturday pickup charges, said spokeswoman Susan Rosenberg.

"The real issue is density of delivery. The more we go into more remote areas ... the costs are greater," Rosenberg said. "We still think across the board ... the rate structure is relatively in line with what we've had in years past."

However, Mark Davis, an analyst with Cleveland-based FTN Midwest Research, said the new rates do reflect a move on the part of the company to better compete against rival DHL. Express-mail company DHL took over certain operations of Seattle-based Airborne Express - including its extensive ground delivery network - in a billion-dollar deal in August.

The rates, combined with UPS's integrated delivery network, also will put "a lot of pressure" on FedEx, which has established separate networks for its delivery services. A better U.S. economic outlook has also influenced UPS' rates, by creating optimism among delivery rivals, Davis said.

"There's kind of a land grab going on here," Davis said. "They're trying to get as much business as they can with the most advanced network. For UPS, it's all a volume game."

FedEx and DHL have not yet announced their rates for 2004.

In addition, UPS will increase its U.S. air and worldwide express service rates by an average of 2.9 percent and the fee for residential deliveries will rise by a quarter, to $1.40.

The new rates will be available on the company's Web site on Dec. 5.

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