FedEx Corp. (NYSE: FDX), following rival UPS Inc.’s lead from earlier this week, said Friday that it will restore money-back guarantees for its second-day morning air service in the domestic U.S.
UPS (NYSE: UPS) said on Wednesday that it would reinstate refunds for its second-day morning service, which calls for packages and documents to be delivered by 10:30 a.m. on the second day. FedEx’s actions follow suit.
The carriers did away with all money-back guarantees — known in the parcel-delivery trade as guaranteed service refunds — when the pandemic hit the U.S. in the spring of 2020. Both eventually restored the refund feature for their various next-day air delivery products. Refunds remain suspended for the carriers’ respective ground services.
Josh Taylor, senior director of professional services for consultancy Shipware LLC, said the moves are unlikely to signal a return of broader money-back guarantees from the carriers. Second-day air morning services are used infrequently, so there is little downside risk for the carriers to reinstate them, especially when it sends a favorable message to the slice of the shipping public that does use those services, Taylor said.
At UPS, because the scheduled delivery times for second-day air is earlier in the day, those shipments are loaded into the same package cars that deliver next-day air service, which is already guaranteed, Taylor said.
The moves by the carriers generate favorable publicity, without them making any operational changes or taking any risks, Taylor said.
Scott Lord
2D AM represents a fraction of a fraction of Air volume. The service level is also notoriously poor so while GSR claims will likely be paid at a high frequency, this is really a non-event.
James Matthews
I agree with Josh’s assessment that there was little downside for UPS to reinstate the guarantees for 2nd Day A.M., but I disagree that it isn’t a signal of more to come. Aside from its potential positive impact on reputation, UPS didn’t stand to gain much from it either; however, at UPS “Reputation” (with a capital ‘R’) is huge. Although perhaps not imminent, I believe it’s only a matter of months (maybe weeks for 2nd Day Air) before UPS decides to strengthen its reputation by resuming its guarantees for all services again, especially if the parcel market remains soft.
I also feel that UPS missed an opportunity by not resuming all guarantees a year ago when FedEx was struggling badly with on-time performance. Doing so would have forced FedEx’s hand to follow suit and take a bigger financial hit than they did in the second half of the year.