According the latest Shipper Survey from Bear Stearns, rates and charges from FedEx are becoming more favorable. For example, about 19% of respondents indicated that they have already begun receiving either lower LTL fuel surcharges or lower LTL base rates over the past few months as a result of FedEx Freight's surcharge reduction on July 23, 2007. Nine percent of our shippers polled are paying a smaller proportion of existing fuel surcharges with other carriers, and 5% are paying the same fuel surcharges but reported lower negotiated base rates as a result of FedEx Freight's surcharge reduction. Separately, 12% of respondents have already diverted a modest amount of unionized LTL freight prior to the March 31, 2008 Teamsters contract expiration.

More than one-third of shippers polled haven't and don't expect to pay any express/parcel rate increase in 2007. For FedEx, this is a big drop-off from a year ago, when less than one-quarter of our respondents did not expect to pay any of the 2006 rate increase. Our survey was conducted prior to FedEx's announced historically high-end list rate increase for January 2008 (after a historically large list rate increase in 2007), but is evidence, in our view, that FedEx needs to receive higher rates from residential customers, since large contractual customers are increasingly resistant to rate increases.
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