U.S. revenue increases 5.0% in the quarter as demand grows for delivery to consumers from online retailers.

Package shipments in the United States via United Parcel Service Inc.’s Ground service increased 2.3% year over year in the first quarter ended March 31, the carrier reported Thursday.

Ground volume—Ground is UPS’s largest category—averaged 13.014 million packages daily in Q1 compared with 12.725 million packages in the year-ago period, UPS said.

Next Day Air shipments grew 3.9% with average daily volume of 1.316 million packages compared with 1.266 million in Q1 2016. Deferred Air average daily volume rose 4.1% to 1.245 million from 1.196 million a year ago. Deferred air freight is used for lower-priority packages that can ship on a space-available basis and it costs less than standard air freight.

As demand increases from online retailers, UPS earlier this month began Saturday pickup and delivery service for Ground parcels in 15 metropolitan areas, including New York City and Chicago, following test operations last year in Atlanta (UPS’s hometown) and Los Angeles. By peak holiday season in November, 4,700 cities and towns will be part of the service area, growing to 5,800 in 2018, UPS said.

The carrier also continues to expand and upgrade its facilities to better handle e-commerce growth. UPS says it has 17 projects underway that total more than 5 million square feet “to create capacity and efficiency to support further B2B and B2C growth.” Those initiatives increased operating costs by $35 million in Q1, UPS said.

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“We are accelerating investments to create the industry’s leading smart global logistics network and value-creating portfolio,” CEO David Abney said. “UPS customers are benefiting from expanded capacity, choice and improved time-in-transit, while technology solutions continue to deliver efficiencies.”

Revenue per package increased across all products, up 2.4% in total, UPS said, helped by rate increases that took effect after the 2016 holiday season. The 4.9% average increase took effect Dec. 26 for UPS Ground service in the U.S. and U.S. Air and International delivery.

International parcel delivery also helped boost total revenue for UPS. “The International segment generated strong topline growth with increased demand for cross-border shipments,”Abney said. “Export shipment growth was strong across all UPS regions, as customers took advantage of our expanded portfolio and industry-leading customs brokerage solutions.”

For the first quarter ended March 31, UPS also reported:

  • Total revenue rose 6.2% to $15.32 billion from $14.42 billion in the first quarter of 2016. On a currency-neutral basis, revenue increased 7.5%, UPS said.
  • U.S. domestic revenue increased 5.0% to $9.535 billion from $9.084 billion.
  • U.S. ground shipment revenue grew 4.7% to $6.901 billion from $6.594 billion.
  • Deferred Air revenue increased 6.0% to $970.0 million from $915.00 million.
  • Next Day Air revenue was up 5.7% to $1.664 billion from $1.575 billion.
  • International revenue increased 4.9% to $3.058 billion from $2.914 billion.
  • Net income of $1.158 billion, up 2.4% compared with $1.131 billion.
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