FedEx says UPS’s losses during union talks were its gains. Could its wages rise too?

FedEx Corp. executives expect to keep most of the shipping business the company picked up after rival United Parcel Service Inc.’s labor negotiations and Yellow’s bankruptcy earlier this year. But in the wake of the UPS deal, they also expect “an increase in labor rates,” according to BofA analysts.

The analysts, led by Ken Hoexter, said in a note dated Tuesday that the remarks by the FedEx executives were made during an investor lunch that same day. FedEx said it had “built an increase into its annual wage-growth expectations,” the analysts said.


has said it gained around 400,000 packages a day out of the 1.2 million that UPS

lost, and it expects to hold on to most of those shipments, the analysts said. However, Hoexter noted: “This is in contrast to UPS’s commentary that it expects to win back a majority of its business, and is willing to pay customer penalties.”

Executives at FedEx also expect to retain around 5,000 shipments a day in extra less-than-truckload freight — generally, smaller shipments that only take up a portion of a trailer — following Yellow’s chapter 11 filing in August, according to the analysts.

FedEx, when reached for comment, referred back to its quarterly earnings call in September. As shipping demand remains soft, FedEx is trying to cut billions of dollars in costs by cutting flights and executive roles, closing offices and bumping prices higher.

The BofA analysts said FedEx told them the business it won from UPS was “mostly on fixed-term contracts with penalty break fees.” The company also told the analysts that it sees the peak holiday delivery season as consistent with what it saw last year.

UPS reached an agreement with the Teamsters union in July, following the threat of a strike. FedEx in September said it had gained “upside” from the often contentious negotiations between UPS and the union, as well as from Yellow’s troubles.

UPS last month said it expected costs related to the deal with the Teamsters to rise at a rate of 3.3% over the contract’s five-year lifespan. But the company said it “retains flexibility to implement technology to further drive productivity inside our buildings.”

Trucking company J.B. Hunt Transport Services Inc.

on Tuesday said it was not yet out of the current freight “recession” that came after the pandemic package-delivery boom fizzled. But the company’s president, Shelley Simpson, said “we are seeing signs of things moving in a positive direction.”

Shares of FedEx fell 1.8% on Wednesday, while UPS fell 2.1%.

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