Fedex Plans to Raise Rates Next Year To Counteract Falling Profits

From Business Pundit:

Does this headline make any more sense than a headline:

Fedex Plans to Lower Rates Next Year To Counteract Rising Profits?


Fedex Management to run its company hoping for a gift of golden parachutes from shareholders?

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UPS and FedEx raise their rates every year. Last year they raised them 6.9% with a 2% decrease in the fuel surcharge. Both companies get their inflationary increase whether we have inflation or not.

It makes sense but there are

It makes sense but there are indeed way too many shortcuts in the headline.

There is lower demand for Fedex services. Depending on how Fedex costs depend on volume delivered, there will be different strategies. Let's say most of Fedex cost scale with demand, for example it's oil. In this case, lower demand will not reduce the margin but will reduce overall profits. If they lower their price, they'll lower their margin but increase demand, if they increase their price, they'll increase their margin but concentrate on a smaller number of customers. If volume has fallen because many business went under, there is not a large market to capture by lowering rates, however, many customers may be very inelastic and ready to pay a lot for fedex, in which case, raising prices to counteract falling profits makes sense.