UPS, FedEx see shipping recovery as holiday season loads set to start
By Meena Rupani
Following a tough holiday season in 2009, parcel shippers are beginning to witness a recovery.
In the first quarter of this year, "UPS handled 940 million packages in the US, up 3% from March 2009," said Susan Rosenberg, company public relations manager.
"Last year, because of the uncertainty of the economy, retailers put as much of a delay as they could on stocking their inventory," she said. "Usually retail stores replenish their stock just before the holidays. If they ran out, they didn't bother ordering more."
Experiencing a similar increase in business is FedEx. According to the corporation, revenue from March 2009 to March 2010 is $8.7 billion, up 7% from $8.14 billion measured from March 2008 to March 2009.
FedEx has handled 949 million packages from March 2009 to March 2010, up from the 909 million packages it handled from March 2008 to March 2009.
Also, from March 2009 to March 2010, FedEx increased its quarterly operating profit to $416 million. From March 2008 to March 2009, FedEx had a quarterly operating profit of $182 million.
Companies like UPS and FedEx undergo two shipping cycles. First, products are shipped to retail stores in summer in preparation for the holidays. Then, during the holiday season, customers are shipping out holiday gifts.
Average revenue of daily packages also increased for both companies from the end of March 2009 to the end of March 2010.
UPS reported that the average revenue from daily package shipments had increased by 14%, from $14.54 million to $14.93 million, according to the corporation.
FedEx experienced a similar jump in the average revenue of daily packages, increasing 10%, from $10.02 million to $11.4 million.
Although UPS encourages customers to ship early, there are ways around it.
"Some use air freight so they can ship later and it will still get into the retail channel on time for the holidays," Ms. Rosenberg said. "Businesses are also using multiple modes of transportation to have their product delivered in one or two days."
Some progress is also coming in fuel prices. In 2008, both corporations were applying a 9.5% fuel surcharge on ground services. As of April, the fuel surcharge is only 6%.
Also in 2008, oil shot up to $140 a barrel. As of last week, the figure was $72.
"We are seeing a recovery in fuel prices as well," Ms. Rosenberg said. "However, we are still implementing environmental initiatives in order to cut down the amount of fuel used on the ground and in the air."
UPS navigation systems show drivers the shortest routes. In addition, drivers are asked to minimize left turns, which use more fuel, and trucks' tire pressure is checked regularly.
With air delivery, "UPS is waiting on receiving approval from more airports to implement a concept called continuous descent arrivals," Ms. Rosenberg said. "This would help significantly decrease the fuel we use for air shipping."
In 2003, UPS began testing the effectiveness of continuous descent arrivals. With this, planes glide down under idle power, which makes less noise, burns less fuel and creates fewer emissions.
Tests suggest continuous descent helps cut landing noise 30% and nitrous oxide emissions 34% and saves 40 to 70 gallons of fuel per approach.
Continuous descent arrival experiments have been tried at airports in Louisville; Sacramento; East Midlands, United Kingdom; Cologne, Germany; and Warsaw.
UPS profits have jumped, Ms. Rosenberg said, but the upcoming months will indicate how the economy will hold up during the holidays for retail stores and shipping groups.
"Our operating profit was $562 million, according to first quarter results ending in March, up 46%, from $384 million from last quarter, ending in December. I have seen an increase in all modes of transportation. However, the back-to-school season will help us predict how the holiday season will be."