UPS 2009 Annual Report Download - page 38

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Volume trends improved in the fourth quarter, largely as a result of overall economic improvements, as
average daily volume for Next Day Air and Deferred products increased 2.8% and 4.3%, respectively, over 2008
levels. Ground volume demonstrated an improving trend over the previous quarters despite a 2.9% decline in the
fourth quarter compared with 2008.
2008 compared to 2007
U.S. Domestic ground and air volume declined primarily as a result of the recession in the U.S. economy.
Relatively high energy costs during most of 2008, combined with the deepening recession and weak output
within the industrial production and retail sales sectors, adversely affected the small package market, which
placed additional pressure on our domestic package volume. These declining volume trends worsened through
the year with Next Day Air, Deferred, and Ground volume declining 8.6%, 3.5%, and 2.1%, respectively, during
the fourth quarter.
Revenue Per Piece
2009 compared to 2008
Revenue per piece for our air products was negatively affected in 2009 by a decline in the fuel surcharge
rate for air products. Additionally, the revenue per piece decline for our air products was impacted by lower
average package weights and a mix shift toward lower yielding products, reflecting the economic recession in the
United States. The decline in revenue per piece for our ground products was primarily due to a decrease in the
fuel surcharge rate, but was also impacted by lower average package weights.
The factors decreasing revenue per piece for our ground and air products were partially offset by an increase
in base rates that took effect on January 5, 2009. We increased the base rates 6.9% on UPS Next Day Air, UPS
2nd Day Air, and UPS 3 Day Select, and 5.9% on UPS Ground. Other pricing changes included an increase in the
residential surcharge, and an increase in the delivery area surcharge on both residential and commercial services
to certain ZIP codes. These rate changes are customary and occur on an annual basis.
The trend towards lower package weights began to stabilize in the fourth quarter, however product mix
within our air and ground services continued to adversely impact revenue per piece, as the lower-yielding
products within those categories represented a larger share of our overall package volume.
2008 compared to 2007
Revenue per piece for our air products increased primarily due to a base rate increase and a higher fuel
surcharge rate for air products. This increase was adversely impacted by lower average package weights, a mix
shift toward lower yielding products, and hedging losses. Revenue per piece for our ground products increased
primarily due to the base rate increase, as well as a higher fuel surcharge rate.
A base rate increase became effective on December 31, 2007, which increased the base rates 6.9% on UPS
Next Day Air, UPS 2nd Day Air, and UPS 3 Day Select, and 4.9% on UPS Ground. Other pricing changes
included an increase in the residential surcharge, and an increase in the delivery area surcharge on both
residential and commercial services to certain ZIP codes.
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