UPS Will Raise Delivery Rates in January, Following FedEx

Mailing those holiday packages may seem like a relative bargain come January: UPS on Friday announced 2006 delivery rate increases similar to those that rival FedEx unveiled last month.

Atlanta-based United Parcel Service Inc. said it would raise rates for air and international deliveries by 5.5%. The world’s largest package-delivery company also said it would reduce by 2% the index used to set fuel surcharges for air shipments because prices have declined recently.

Rates for ground shipments will rise by 3.9%, with no change in the fuel surcharge, UPS said. The new rates begin Jan. 2.

FedEx Corp. said in October that it would increase its prices for air and international shipments by 5.5% on Jan. 2 and reduce fuel surcharges by 2%. FedEx hasn’t announced 2006 rates for ground deliveries, but analysts expect the rates to match those at UPS.

The U.S. Postal Service board of governors voted Monday to raise rates for the first time since 2002, boosting the price of a first-class stamp to 39 cents, up 2 cents, or 5.4%. The increase goes into effect Jan. 8.

UPS spokeswoman Susan Rosenberg said the increases reflected higher fuel prices and other costs, including installation of a more sophisticated online package tracking system. The UPS ground rate increase of 3.9% is the company’s biggest since 2003 and affects 80% of the products it ships.

The decision by UPS not to undercut its rival “indicates to us that the pricing skirmish that broke out between UPS and FedEx earlier this year has likely subsided,” Morgan Stanley analysts James Valentine and Kevin Carr said in a report to investors.

UPS shares rose $1.33 to $78.15. FedEx was up $2.06 to $97.80.