Customers angry as 'capacity-hobbled' UPS quietly pushes up fuel surcharges

UPS has denied claims it has been forced to increase fuel surcharges to offset costs associated with wet leases as it struggles for capacity amid surging e-commerce volumes.

This week the US integrator was accused of not properly informing customers it had split its domestic and international air freight fuel surcharges.

Chief executive of Spend Management Experts John Haber said the Export index is almost 18% higher than the US Domestic Air Index.

“Talking to many of our customers, we found they were not formally notified of the fuel surcharge change/increase,” Mr Haber told The Loadstar.

“We understand costs are rising in the shipping world, but we’d like an explanation on why there is such a difference between export and domestic air in order to logically explain to our clients.”

A graph seen by The Loadstar shows UPS’s fuel surcharge on domestic services for the week commencing 2 April was 7%, with imports at 10% and exports at 8.25% compared with 5.75% for FedEx and 5.5% for DHL. 

The head analyst at Logistics Trends & Insights, Cathy Morrow Robinson, told The Loadstar the increase left her believing the company may be “struggling” to cope.

“It was a real eye-opener when it [UPS] split the surcharge pricing,” she said, “and it does look like UPS is struggling with air volumes, perhaps on the transpacific lane in particular.

“My thinking is that air volumes are becoming too much for UPS to handle… it may not be the only one either, I would not be surprised if FedEx or DHL also ran into problems.”

She said the decision to increase the surcharge would not have been made lightly, adding it would have been because UPS “flat out” needed to do it to offset the wet lease costs.

Recently, Western Global Airlines added UPS to its customer list, but a spokesperson would not confirm to The Loadstar that this was one of the integrator’s wet lease suppliers.

“We recently separated our fuel surcharge tables for domestic and international air freight products to better monitor these costs,” said the UPS spokesperson. “But these changes have nothing to do with expenses incurred by our recent aircraft order, nor the costs linked to our wet leases – which is just wild speculation.”

UPS recently placed an order for 35 new aircraft, including 32 B747-8Fs and the spokesperson added that the company was facing grievance from its pilots over a perceived “failure” to order new aircraft soon enough.

“Under this expedited settlement, the pilots are claiming the lack of aircraft caused them harm by preventing them from flying,” said the spokesperson.

“However, we don’t make investments lightly – we have placed an order, but we are bound by lead times, during which time we have faced additional volumes leaving us in need of wet leases.”

The new aircraft, which include three 767Fs, will increase UPS airlift by some 30%.