UPS to change surcharge system in June

NEW YORK (Reuters) - Package delivery company United Parcel Service Inc. (UPS.N: Quote, Profile, Research, Stock Buzz) will change the way it passes on rising fuel costs to customers as of June, the company's top executive said on Monday.

"We're taking the cap off in June because (the price of fuel) has increased significantly since we put the cap on," Chief Executive Mike Eskew said at the Reuters Manufacturing and Transportation Summit in New York.

The world's largest package delivery company will switch to an index-based fuel surcharge from a cap-based system as of June 5, Eskew said.

UPS' fuel surcharge cap for airborne packages is 12.5 percent and the charge for ground delivered packages is 3.75 percent, Eskew said.

Shippers throughout the United States have tried passing on fuel surcharges to customers, some more successfully than others.

Atlanta-based UPS is the world's largest package delivery company, moving more than 14 million packages a day.

Eskew said UPS is lobbying the U.S. government for more flights to Japan, where the company lags the number of flights provided by its main rival FedEx Corp. (FDX.N: Quote, Profile, Research, Stock Buzz)

"We're working with our government to get more flights to Japan," Eskew said. "We're working very hard to get those flights."

UPS' CEO also said the company will continue to buy back shares, keep increasing its dividend and look for acquisitions.

UPS' drivers for its ground delivery service are unionized, but those of less-than-truckload company Overnight are not. UPS bought Overnight last year and renamed it UPS Freight as of May 1. Eskew said that in the future it is up to those truck drivers whether they will unionize, but added that driver surveys indicate "they are very happy" with the status quo.

Less-than-truckload companies consolidate small loads from customers into a single truck.