updated 10/5/2005 6:29:55 PM ET 2005-10-05T22:29:55

FedEx will raise rates for overnight shipping by 3.5 percent beginning next year, FedEx Corp., the corporate parent of the world’s largest cargo airline, said Wednesday.

The higher rates come from a rate-chart increase of 5.5 percent coupled with a cut of 2 percent in the airline’s fuel surcharge. That leaves a net increase felt by customers that is the largest since 2001, said company spokeswoman Lourdes Pena.

The higher rates “allow us to invest in our business,” Pena said, adding that FedEx expects shipping volumes to remain strong.

FedEx reported last month that shipping volumes grew by double-digits in the first quarter of the fiscal year.

Shipping rival UPS Inc. did not return calls Wednesday about its plans.

In 2001, FedEx raised overnight rates by 4.9 percent. Last year the increase was 4.6 percent coupled with a 2 percentage point reduction in the fuel surcharge. That meant a net increase of 2.6 percent, “and that’s the real difference for our customers,” Pena said.

The rate changes follow increased spending announced by FedEx for two new around-the-world flights and the expansion of automated and Internet services. The company declined specifics on the effects of rising fuel prices.

“Every year, we basically review our rates based on the cost of operations,” Pena said. “With the cost of operations is also fuel, of course ... We’re not breaking it out, but that’s part of it.”

FedEx Corp. also announced other pending rate changes, including delivery surcharges for FedEx Express shipments in selected ZIP codes and higher counter rates for walk-in customers of FedEx Kinko’s.

The higher rates for overnight shipments take effect Jan. 2.

The new counter rates, which will be disclosed next month, take effect Nov. 7 at Kinko’s and other shipment locations staffed by company employees. Those changes will not affect customers who use FedEx drop-off boxes or those with company accounts.

Delivery surcharges for FedEx Express shipments to selected ZIP codes will increase by 10 cents a package. The delivery surcharge at residential locations will rise to $2.10 a package and to $1.30 at businesses.

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