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Additional detail on our transformation costs and initiatives, as well as a reconciliation of non-GAAP adjusted amounts to GAAP financial results is available in today's webcast material. These materials will also be available on the UPS investor relations website. Following our prepared remarks, we will take questions from those joining us via the teleconference. [Operator instructions].

Please ask only one question so that we may allow as many as possible to participate. You may rejoin the queue for the opportunity to ask an additional question. And now I'll turn the call over to Carol.

Carol Tome -- Chief Executive Officer

Thank you, PJ, and good morning. On our last earnings call, we said that the second quarter would not only be the bottom, but a turning point for our performance and that we would return to revenue and profit growth in the third quarter, which we did. I would like to recognize and thank UPS service for their hard work and efforts. Their relentless focus on driving productivity while ensuring excellent customer service allowed us to deliver these results.

In the third quarter, we faced a macro environment that was slightly worse than we expected. In the U.S., online sales slowed and manufacturing activity was lower than we anticipated. This slowdown in manufacturing activity was also true outside of the U.S. as we continue to see lower industrial production weigh on volume in certain geographies.

But the macro environment didn't prevent us from growing revenue and profit. As we leaned into the parts of the market that value our end-to-end network, and we drove expense leverage through ongoing productivity initiatives. In the third quarter, our consolidated revenue was $22.2 billion, an increase of 5.6% versus last year. Consolidated operating profit was $2 billion, up 22.8% from last year and consolidated operating margin was 8.9%.

In the U.S., this was the second consecutive quarter of average daily volume growth and it was our highest year over year ADV growth rate since the first quarter of 2021. In international, average daily volume growth finished flattish and continue the upward momentum we've seen since the first quarter of this year. And in SCS, air and ocean forwarding contributed to strong revenue growth. Looking at the U.S.

During the quarter, we focused on growing certain pockets of commercial business and grew B2B volume by nearly 1% compared to last year. One of the areas of commercial focus was retail B2B. Our B2B roots are in retail. In fact, we deliver merchandise to over 20,000 retail outlets across the country.

To serve these customers, we offer a store replenishment with delivery windows solution that provides retailers daily inventory replenishment within a two-hour window. Within this solution, we also provide visibility to the number of packages scheduled to be delivered. Our store replenishment solution, along with our RFID technology, enables retailers to reduce stock outs and more efficiently run their receiving operations. This is just one example of how our customer-focused capabilities are enabling us to win new commercial volume.

Now, that U.S. volume is flowing back into our network, we have heightened our attention to revenue quality with a focus on the segments of the market we want to serve. You will recall that in the second quarter, we saw an unexpected surge of short zone, lightweight e-commerce packages flow into our network. In the third quarter, we responded strategically adjusting our pricing and optimizing our operating plans on a portion of this business.

Further, we increased our focus on matching our pricing to the quality and attributes of the service we provide. We did this by leveraging the power of pricing science through our pricing architecture of tomorrow or AOT technology. Our revenue per piece growth rate improved in the third quarter from what we reported in the second quarter, and we expect this trend to continue. On the cost side, our team did an excellent job of managing expenses across the board.

As it relates to our two major cost-out initiatives, we are continuing to deliver solid results. Fit to serve, which was designed to optimize and rightsize our management structure is slightly ahead of forecast. And with Network of the Future, so far this year, we've completed 45 operational closures, including nine full buildings that have been shut down. I'd like to give you a brief update on our customer-first people-led innovation-driven strategy, starting with customer first.

As we discussed, we have a goal to become the No. 1 complex healthcare logistics provider in the world. To that end, we said we would pursue certain inorganic opportunities and we have. Last month, we entered into an agreement to acquire Frigo-Trans, a move that will enhance our end-to-end temperature-sensitive healthcare capabilities across Europe.

Today, 80% of pharmaceuticals in Europe require temperature-controlled transportation. Frigo-Trans offers pan-European cold chain transportation, as well as temperature controlled and time-critical freight forwarding capabilities. Plus Frigo-Trans has temperature-controlled warehousing capabilities with every temperature from cryopreservation, which is minus 196 degrees Celsius to ambient, which is about 25 degrees Celsius. We are targeting to close the Frigo-Trans acquisition in first quarter of next year.

Complex Healthcare Logistics is a growing business for us and we're continuing to invest in the capabilities needed to accelerate growth. We have dedicated healthcare facilities in 36 countries and provide specialized handling and visibility to our customers through our UPS Premier product. In the third quarter, we generated $2.5 billion in consolidated healthcare revenue which contributed to revenue growth across all three segments. Shifting to international.

In time for the holidays, we've made several enhancements. In September, we expanded residential Saturday delivery to the eight largest markets in Europe without an additional charge. This enhancement meets our customers' need for speed and we now provide a superior service offering. Further, we sped up deliveries to over 35 countries across Asia, Africa and the Middle East.

And to meet the expected demand for this year's peak holiday season, we added over 200 flights connecting Asia to Europe and the U.S. Quickly touching on DAP, our digital access program. DAP continues to deliver strong SMB growth in both B2B and B2C segments. In the first nine months of this year, we generated $2.3 billion in global DAP revenue and we expect to deliver over $3 billion in GAAP revenue for the full year.

As you know, we have been onboarding our new air cargo business with the United States Postal Service. During the third quarter, our network planning team worked closely with the USPS to ensure the transition progressed smoothly and it did. As of October 1, all contracted USPS air cargo business has been fully onboarded. And we expect this business to deliver strong, consistent revenue at an attractive margin.

Moving to people led. Since our founding, we've had a culture of driving safe work practices. And by using new technology and tools, we've seen a dramatic improvement in the number of injuries and accidents. For example, in the U.S., this year, we've had our best auto safety results in 10 years.

The advances in safety were achieved through innovative driver education and training, like our Integrad driver training schools. This focus on safety enables driver achievements like our Circle of Honor which recognizes drivers with 25 years or more of driving without an accident. Today, our Circle of Honor has grown to nearly 10,000 drivers. Now, let's turn to innovation driven which for this call is all about the peak holiday season.

This year's holiday season has only 17 shipping days between Black Friday and Christmas Eve. We haven't seen such a compressed peak since 2019. We do peak better than anyone. And with six years in a row of industry-leading service, we're confident our plans and execution will make that seven.

To prepare, we've been collaborating with our customers on daily volume expectations and the timing of their promotions. While our customers are still expecting a good holiday selling season, Recently, shippers have tempered their volume expectations. In any case, we'll be ready to deliver and will leverage our network planning tools and other proven technologies to control first how the volume comes in; second, how to flow more volume to our automated facilities; and third, how to adjust the network to operate as efficiently as possible. And talking about efficiency, this year on our peak day, which is December 18.

In the U.S., we expect to deliver 2 million more packages than we did on peak day last year but we'll do it at a higher productivity rate. This will be possible due to efficiency improvements we've made over the years and the use of seasonal support drivers, many of which are experienced part-time UPSers who work inside our facilities. To sum it up, we're ready to deliver another successful peak. Moving to our financial outlook.

We continue our better, not bigger approach, enhanced by some bold moves. The addition of the USPS Air Cargo business and the divestiture of Coyote, are recent examples. With these moves, we eliminated a highly volatile truckload brokerage business and added air cargo volume that is predictable and margin positive. Looking at our consolidated revenue outlook.

In the third quarter, we increased our emphasis on revenue quality, resulting in a guide down of certain volume, which we expect will continue into the fourth quarter. Given our third quarter results, our latest peak volume expectations and adjusting for the impact of the Coyote decision. We now expect consolidated revenue of approximately $91.1 billion for the year and are lifting our consolidated operating margin target to approximately $0.9. Brian will provide more details.

So with that, thank you for listening. And now I'll turn the call over to Brian.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Thank you, Carol, and good morning, everyone. This morning, I will cover our third quarter results, review our capital allocation for the year, and then I'll wrap up by providing additional detail for our fourth quarter and full year financial outlook. Starting with our results. In the third quarter, we returned to revenue and profit growth the first time in two years.

Looking at our consolidated performance. In the third quarter, we generated $22.2 billion in revenue, an increase of 5.6% compared to the third quarter of last year, with all three of our business segments delivering revenue growth. Consolidated operating profit was $2 billion, an increase of 22.8% versus the third quarter of 2023 and consolidated operating margin was 8.9%, an increase of 120 basis points compared to the third quarter of last year. Diluted earnings per share was $1.76, up 12.1% from the third quarter of 2023.

Now, let's look at our business segment. In the U.S. Domestic segment, our performance in the third quarter was driven by two factors: first was strong volume growth the highest growth rate we've seen in more than three years. And second was excellent cost management, which resulted in a year-over-year decrease in cost per piece of 4.1%.

The U.S. average daily volume, or ADV, increased 6.5% compared to the third quarter of 2023. Looking at product mix in the third quarter, Ground average daily volume increased 8.9% and total air average daily volume was down 6.3%. We continue to see customers shifting down from air to ground and some ground volume is shifting down to SurePost.

Within ground, SurePost volume levels rightly compared to the second quarter, driven by growth in our digital access program. While SurePost volume comes at a lower revenue per piece, given the enhancements we've made to our matching algorithm, we were able to redirect more SurePost packages into our network, driving delivery density. For the quarter, B2B average daily volume was up 0.8% year over year, increasing for the first time in two years. Growth was driven by SMBs, which had an increase in B2B average daily volume of 3.8%.

B2C average daily volume increased 11% year over year and made up 58.3% of our volume, a slight downward shift from the second quarter. In terms of customer mix, we saw ADV growth from both enterprise and SMB customers. SMBs made up 29.4% of total U.S. volume in the third quarter.

For the quarter, U.S. domestic generated revenue of $14.5 billion, up 5.8% compared to last year, driven by strong volume growth. As expected, U.S. domestic revenue per piece was down year over year.

In the third quarter, revenue per piece declined 2.2% year over year but showed a 40 basis point sequential improvement from the second quarter. Breaking down the components. First, we took actions to address revenue quality which translated into higher base rate. In the quarter, base rates increased the revenue per piece growth rate by 170 basis points.

Second, the combination of product mix, lighter weights and shorter zones decreased the revenue per piece growth rate by 300 basis points. And finally, we experienced a 90 basis point decline in the revenue per piece growth rate due to the combination of changes in customer mix and fuel. Turning to costs. As you will recall, the cost of our new labor contract was front-end loaded.

As of the end of July, we lapped the first year of the contract and for the quarter, union wage rate growth slowed to 5.2% year over year. Productivity is a virtuous cycle at UPS, and in the third quarter, we took several actions to drive productivity. Through our Network of the Future initiative, this year, we've completed 45 operational closures, contributing to an 8% improvement in pieces for workforce hour. While 8% might not seem like a big number, that translated into an efficiency gain of 11 million hours.

Production improvements, including total service plan, offset 50% of the union wage increase, and we continue to see positive trends in our safety performance, which contributed to lower expense. The U.S. Domestic segment delivered $974 million in operating profit a 46.5% increase compared to the third quarter of 2023, and the operating margin was 6.7%, a year-over-year increase of 180 basis points. Moving to our International segment.

In the third quarter, our international business grew revenue and operating profit and expanded operating margin for the first time in nearly three years. This performance was driven by strength in exports in 13 of our top 20 export countries. Total international average daily volume growth continued its sequential improvement trend from the second quarter and was about flat to last year. In the third quarter, International revenue was $4.4 billion, up 3.4% from last year, with all regions growing revenue year over year.

International revenue per piece increased 2.5%, driven by strong base pricing and the positive impact of region and product mix. Touching on costs. Total international expense was relatively flat year over year, which was achieved by optimizing our network and our ongoing cost management efforts. Operating profit in the International segment was $792 million, an increase of 17.3% year over year.

Operating margin in the third quarter was 18%, ending 220 basis points from a year ago. Moving to Supply Chain Solutions. In the third quarter, revenue was $3.4 billion, up 8% year over year. Looking at the key drivers.

Air and ocean forwarding revenue was up 15.1% driven by strong market demand out of Asia. Logistics delivered revenue growth, driven primarily by the impact of the MNX acquisition and onboarding of USPS Air Cargo contributed to revenue growth in SCS. Partially offsetting these gains was weaker performance at Coyote, our truckload brokerage business and the completion of the sale in mid-September. In the third quarter, Supply Chain Solutions generated operating profit of $217 million, down $58 million year over year, primarily driven by our efforts to configure our air network as we onboarded the USPS Air Cargo business.

Now, that we have fully onboarded this volume, we expect it to generate consistent revenue and we expect an attractive margin on a consolidated basis. For SCS, operating margin in the third quarter was 6.4%. Walking through the rest of the income statement. We had $230 million of interest expense.

Our other pension income was $68 million, and our effective tax rate for the third quarter was approximately 21%. Now, let's turn to cash and capital allocation. So far this year, we generated $6.8 billion in cash from operations and free cash flow of $4 billion, including our annual pension contribution of $1.4 billion. We refinanced $1.5 billion in current maturities year-to-date, and we finished the quarter with strong liquidity and no outstanding commercial paper.

So far this year, UPS has paid $4 billion in dividends. And lastly, we've completed our targeted $500 million share repurchase program in the third quarter, which brings us to our outlook. In July, we provided an update to our full year financial targets based on global economic forecast and our performance in the first half of the year. Now, looking ahead at the full year, we have updated our outlook to reflect three things.

First, our third quarter results and a focus on revenue quality; second, the sale of Coyote and finally, new softer peak volume forecast from our customers. At the consolidated level, we now expect full year revenue of approximately $91.1 billion. Due to our focus on revenue quality, coupled with the efficiency of our integrated network and our ability to manage costs, we are lifting our consolidated operating margin expectation to approximately 9.6% to align with these new volume and revenue expectations. Now, looking at the segments in the fourth quarter.

Starting with U.S. domestic. We expect the combination of both volume and revenue per piece growth to increase revenue by 1.5% in the fourth quarter. We expect to generate a fourth quarter operating margin of approximately 9.5% and we now expect the operating margin in semi slightly higher than 10%.

Looking at international, we expect the positive volume momentum we've experienced throughout the year will continue. With that in mind, we expect fourth quarter revenue growth to be up mid-single digits year over year, and we still expect around a 20% operating margin in the fourth quarter. In Supply Chain Solutions, we expect revenue in the fourth quarter of around $3.3 billion, which takes into consideration the disposition of Coyote, and we expect to generate an operating margin of approximately 9%. Turning to capital allocation.

For the full year in 2024, we expect free cash flow to be around $5.1 billion after the $1.4 billion pension contribution we made to fund annual service costs. Capital expenditures are expected to be about $4 billion. We plan to pay around $5.4 billion in dividends, subject to board approval, and lastly, we expect the tax rate for the full year to be between 23% and 23.5%. With that, operator, please open the lines for questions.

Questions & Answers:

Operator

Thank you. We will now conduct a question-and-answer session. Our first question comes from the line of David Vernon from Bernstein. Please go ahead.

David Vernon -- Analyst

Hey. Good morning, everyone, and thanks for taking the time and taking the questions. So when we think about the ramp here from 3Q into 4Q, the operating profit guidance sort of suggests close to a 50% bump from 3Q to 4Q. Brian, maybe can you walk us through some of the drivers of what makes that look realistic? And then, as you think about those drivers taking hold, how does that affect sort of the shape of profitability as we carry into 2025?

Brian Dykes -- Executive Vice President, Chief Financial Officer

Sure. Thank you, David, and I appreciate the question. And yes, we do have an increase from Q3 to Q4 on the profit side. And really, it's driven by a couple of things.

One, as we mentioned, this focus on revenue quality and the moves that we've made to drive revenue both through pricing policy, as well as the take rates that we're seeing on HIF coupled with the acceleration of Fit to Serve and Network of the Future and just the productivity initiatives give us the incremental bump over the normal seasonality. We feel very confident in both of those, and we're seeing them actually start to come through in the third quarter and early in the fourth quarter on the revenue side. And you can see from our cost performance, we feel that Fit to Serve and NOS is sticking very well.

David Vernon -- Analyst

And how that could affect sort of into 2025?

Brian Dykes -- Executive Vice President, Chief Financial Officer

Yes, yes. And so, as we roll through '24, you can see that we've raised the consolidated margin. We do expect the domestic margin to be around 9.5%. And now we do expect to exit the year higher than slightly higher than the 10% that we guided to before.

We'll come back to you as we get through peak on '25, but we want to close our peak first.

David Vernon -- Analyst

All right. Thank you.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Brian Ossenbeck from J.P. Morgan. Please go ahead.

Brian Ossenbeck -- Analyst

Hey. Good morning. Thanks for taking the questions. Maybe can you expand a little bit more on the softness you're seeing into peak season? What type of themes and concerns maybe you're hearing from the customers as they sort of dialed down their expectations on volume? And maybe within that, a broader comment on the pricing and the surcharges thinking if you're getting more pushback on that or seeing more trade downs at this point?

Carol Tome -- Chief Executive Officer

Well, I'll start with the customer feedback. We work with a little over 100 of our customers who represent 60% of the volume in our network, but 85% of the peak surge. So we develop operating plans for each of these customers, and these plans have been in process now for months. As the year has progressed, they continue to tighten up their forecast, and we just received their last forecast on October 2.

And their forecasts have been tempered and we believe it's driven by a couple of factors. First, external forecast for the holiday season have come in. In fact, the forecast for ESMO in the fourth quarter is now about 3%. Early in the year, it had been about 5%.

If you look at just the peak part of the holiday season, forecast are all over the board, candidly, from a low of 2% to a high of 11%, and SMB Global has been at about 3.5%. Part of this, we believe, is influenced by the tight compressed peak period. There are only 17 shipping days between Thanksgiving and Christmas. And what forecasters and some of our customers are saying is because of the tightness of the shipping season that many customers will go into a store to complete their holiday purchases.

The consumer actually is in pretty good shape but we think there'll be some dynamics in how the consumer shops during the peak season. So it will still be a good peak. In fact, in our prepared remarks, called out that our peak day, we'll deliver 2 million more packages than we did last year. It'll still be a good peak, but just not as dynamic as people thought at the beginning of the year.

Whatever happens, we're prepared to handle the volume. And then, on the pricing surcharge. We were seeing real good take rate on the pricing charge for the holiday, I should say. And maybe Matt Guffey is here, Matt, perhaps you want to comment on the holiday surcharge.

Matt Guffey -- Executive Vice President, Chief Commercial and Strategy Officer

Yes, absolutely. So first off, we're working closely in collaboration with all of our customers. Carol talked about the top 100, which are extremely important just due to the peakiness that they bring during the season. But we've really worked -- again, we've got a good structure and a process in place where we can manage our holiday demand surcharge at the customer level, and we have a lot more flexibility to work with them as we go through the peak season.

Look, at the end of it, it's all about us creating -- continuing to drive value with our customers. and to deliver a great peak. So we're staying close on the forecast, but also working very closely with them on this holiday demand surcharge.

Carol Tome -- Chief Executive Officer

And we're seeing a good keep rate on --

Matt Guffey -- Executive Vice President, Chief Commercial and Strategy Officer

Yes. Very, very good keep rate, probably one of the best keep rates we've seen.

Brian Dykes -- Executive Vice President, Chief Financial Officer

And Brian, I would just add that we're on our plan. If you remember, there were changes because of the compressed peak that opened the peak -- the holiday demand surcharge to a larger set of volume right? And that's what drives some of the incremental outperformance year over year that you're seeing.

Brian Ossenbeck -- Analyst

OK. Thank you very much.

Operator

Your next question comes from the line of Chris Wetherbee from Wells Fargo. Please go ahead.

Christian Wetherbee -- Analyst

Hey. Thanks. Good morning. I wanted to drill down a little bit on the cost improvement on a per-piece basis in domestic, so down about four -- it was better than what we were looking for.

I guess maybe -- two pieces to the question. How do you think about that progress potential in the fourth quarter and then maybe widening out a little bit with some of the initiatives that you're working on a bigger picture about managing the footprint, as well as maybe the headcount. How do we think this can trend as we move into 2021?

Carol Tome -- Chief Executive Officer

So why don't you take the fourth quarter question, and we'll turn to Nando for some thoughts.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Great. Yes. Thank you. And yes, it's a great question because the cost performance in the third quarter was outstanding, right? And I think there's a couple of dynamics that are going on.

As we said in our earlier remarks, we lapped the contract at the end of July, right? So you start to see that high wage inflation that we talked about in the second quarter as being 12% now coming down to 5.2%. And we will now get a full clean quarter of wage inflation at a normalized level in Q4. But also as we mentioned, we're -- we've exited it to serve and are now outperforming our forecast, as well as you'll see from the network of the future discussion that we've closed more stores and we closed more buildings. So we're pulling that forward helps in the cost performance.

As we carry into Q4, we do expect to have strong cost performance. We'll probably be up about 1% per piece which is still going to be less than our reprice growth rate, so we'll maintain a positive spread, but it will be a little bit more normal as you go through it. Nando, do you want to talk a little bit about network in the future and we're looking forward?

Nando Cesarone -- Executive Vice President and President, U.S.

Yes. Thanks, Brian. And look, you may be asking how are we able to have 45 operational closures and nine buildings that we've closed. We are moving much more volume about 5% through our automated facilities.

And we're also making sure that our legacy production indices are performing the way we expect them to perform. The teams are doing an excellent job allowing us to really shrink the network and be a lot more productive. Safety, of course, helped -- and at the end of the day, it comes down to hours and people, and we were down about 11 million hours compared to the last year. So really just an excellent job all around.

And the last thing I would say is there's nothing that we're overlooking. So every piece of our business from car wash to automated dispatching we are prepared for all of it and looking and scrutinizing all of that cost and finding some good improvements there.

Carol Tome -- Chief Executive Officer

All the while maintaining outstanding service levels, which is job No. 1 for UPS. And just to put the 5% number that Nando mentioned into perspective, is talking about automated volumes through our hubs, right? And we now process 63% of the volume in our hubs in some sort of an automated way. That's up 5 percentage points from a year ago.

That's pretty good.

Nando Cesarone -- Executive Vice President and President, U.S.

Absolutely. And look, we've got 21 active projects here in this quarter. You would think it's peak season. Why would we take that undertaking? We have full confidence that that's going to provide very good productivity improvements.

And then, next year, we're accelerating and pulling in the number of projects that we can execute in 2025.

Operator

Your next question comes from the line of Tom Wadewitz from UBS. Please go ahead.

Thomas Wadewitz -- Analyst

Yes. Good morning and congratulations on the strong results. I wanted to ask a bit about -- Carol, you started the call, I think you commented about some industrial economy weakness. You're clearly doing some idiosyncratic things that are going well.

How do you think about as we go into 2025, how much of margin improvement would be in your control? And if you don't see improvement in macro, is it reasonable to translate improvement in revenue per piece and network of the future, those things to margin expansion? Thank you.

Carol Tome -- Chief Executive Officer

Well, I think our team has done a masterful job of managing a very choppy environment over the past several years, actually. And as we think about our business outside the United States, we saw improvement in every quarter this year. In fact, our export business grew in the third quarter and domestic was down just slightly. So Kate, maybe you want to talk about how you would manage the business outside the United States if the industrial production remains softish.

Kathleen M. Gutmann -- Executive Vice President and President, International, Healthcare, and Supply Chain Solutions

Yes, absolutely. And I think the quarter was a good example of that. The macro indicators have come down, but yet we've expanded the revenue profit and margin in the international business and posting an 8% margin. We intend to continue to run those same plays.

Let me go into a few just as Nando indicated on the domestic side, 60% of our volume goes through automated hubs. And that's for the domestic and transporter of all of our large international volume market. And then, on the air side of the house, we continue to show that revenue quality matters, especially when you have expensive assets and we align with demand. So we had strong rev per piece.

For international, we held our cost CPP flat and so delivered operating leverage. We would continue to do that into the next year.

Carol Tome -- Chief Executive Officer

And in markets that are soft to win, you gain share and you gain share by dropping price, but by actually increasing your capability. And our Saturday delivery is one example of that. We are the only carrier that offers standard Saturday delivery and no charge in these eight markets. And that's driving some nice performance isn't it, Kate? We started it.

Kathleen M. Gutmann -- Executive Vice President and President, International, Healthcare, and Supply Chain Solutions

It really is in Europe and Canada exceeding expectations unlocking more of the customer share of wallet and in the premium spaces, too. So cross-border trade. We're seeing growth with the expansion of our service out of Asia to Europe, as well as throughout Intra Asia. We've made the lanes faster and as a result, that premium unlock and by the way, with record fees growing.

So we feel good about the equation, and we'll definitely continue it.

Thomas Wadewitz -- Analyst

I don't think I asked the question well. I actually was thinking a little bit about domestic in terms of the margin.

Carol Tome -- Chief Executive Officer

So I think in the domestic side, productivity is a virtuous cycle here. And as Nando pointed out, there's nothing that's not under review, right? Everything under review, and we continue to drive productivity that exceeds our expectations. Brian, anything you want to?

Brian Dykes -- Executive Vice President, Chief Financial Officer

Yes. I would just say, so if you remember, look, we've got a contract that locked up that we have known cost for the next four years for 60% of our domestic cost structure with a focus on revenue quality and our ability to win more and win new and the places where we really want to, like you saw in the third quarter, with commercial and SMB commercial growing -- starting to grow again. We do think we have the ability to, one, continue to take action to drive up repeats ourselves, as well as, as Carol said, productive virtuous cycle with a known cost structure as we go into '25.

Carol Tome -- Chief Executive Officer

And we like that commercial business. We -- it's got a more dense delivery metric associated with that in other words more packages per delivery. And one way we can win commercial is with new capabilities. We had a big win in the third quarter and the determining factor for this customer to come into our network for our RFID labels.

So that's a new capability that we didn't have before.

Thomas Wadewitz -- Analyst

Great. Thank you.

Carol Tome -- Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Conor Cunningham from Melius Research. Please go ahead. Conor Cunningham, your line is open. Check your mute button.

OK. We'll move on. We'll go to the line of Jordan Alliger from Goldman Sachs. Please go ahead.

Jordan Alliger -- Goldman Sachs -- Analyst

Hi. Good morning. Question for you. So a little bit more on the U.S.

postal onboarding, if I could. Maybe if you could share some of the experience, I know you had the upfront step-up costs, but as it's still a few weeks in, perhaps talk about how the operations are going there? Is it delivering on the profit levels that you had talked about? And just any general thoughts around how that's going to contribute going forward?

Carol Tome -- Chief Executive Officer

Well, as you point out, Jordan, we did have a bit of a transition in the third quarter, the USPS contract with their previous carrier expired October 1. And we didn't want to wait until October 1 to onboard that volume because peak is right around the corner. So we agreed with the USPS that we would operationalize this service to them, while over time, they onboarded their volume. And it was over time, actually, we didn't get much wait until September.

So there was a mismatch between our operational model and the volume. But now the volume is all in. So the fourth quarter is going to look a lot different than the third quarter did. And from a performance perspective, Nando you just met with the Postmaster General and so tell us what he said.

Nando Cesarone -- Executive Vice President and President, U.S.

Sure. So as early as yesterday, we meet face-to-face. And yesterday, the purpose was peak planning. So both teams face-to-face in DC.

And we're working really well. professionals on both sides that have executed a very difficult plan and made it look very, very simple. Feedback from the Postmaster General himself has been positive. And we see the resources that we've applied are in line with what we had modeled when we have accepted the business and the contract was negotiated with the USPS.

So good things ahead for that contract.

Carol Tome -- Chief Executive Officer

And I just can't overemphasize the heavy lift here. And in fact, it was over 50 million cubic feet that we had to take into our network in the third quarter, and there'll be more obviously in the fourth. So job well done by our team and working with the USPS as well.

Jordan Alliger -- Goldman Sachs -- Analyst

Thank you.

Operator

Your next question comes from the line of Bascome Majors from Susquehanna. Please go ahead.

Bascome Majors -- Analyst

Thanks for taking my questions. Just to follow up on another piece of the postal service relationship. Can you talk about where you are in negotiating the delivery service agreement that enables SurePost and Sunday delivery with their effort to renegotiate some of those contracts? And maybe along with that, what challenges does that create either on us to serve or Sunday delivery operations, but also what opportunities might that create for your own trucks to deliver more packages in the marketplace in a world where the post office is seeking to retain more upstream business and push customers into that?

Carol Tome -- Chief Executive Officer

Well, thanks for the question. And Matt, why don't you take on this question?

Matt Guffey -- Executive Vice President, Chief Commercial and Strategy Officer

Yes. So first off, so we -- to Nando's point, we had an opportunity to meet with the PMG yesterday. We continually work to find a mutually agreeable agreement for both USPS and UPS. More work to be done, but we are moving very, very quickly.

And hopefully, we'll have this to a close in very short order.

Carol Tome -- Chief Executive Officer

And to your question about what challenges and what opportunities, I think it's some and some. And so, once we get this contract agreed to, we'll show you what those some and some are, but we're confident we can work through this.

Bascome Majors -- Analyst

In the exploration, I believe you've said before it's at year-end, can you confirm roughly when we should hear more on that and what the go-forward relationship will be?

Carol Tome -- Chief Executive Officer

Yes, you should hear something about it in our fourth quarter earnings.

Matt Guffey -- Executive Vice President, Chief Commercial and Strategy Officer

Yes. No impact in the fourth quarter. We'll tell you more about it when we come back with the fourth quarter earnings in January.

Bascome Majors -- Analyst

Thank you.

Operator

Your next question comes from the line of Ari Rosa from Citigroup. Please go ahead.

Ari Rosa -- Citi -- Analyst

Hi. Good morning. I was wondering if you could give us a sense of how much excess capacity you see in the network right now? Just trying to understand how you're thinking about planning kind of given the weaker outlook in terms of both customer demand and also industrial production and some of the weakness in the macro. How do you think about kind of matching resources to that lower volume -- and do you think you're carrying excess resources right now?

Carol Tome -- Chief Executive Officer

So I think our team has done an excellent job of taking capacity out of the market. In fact, the 45 million -- 45 operational closures, it's about 1 million ADV per day of capacity that we've taken out of the market, and we see capacity rationalization happening in other parts of the market as well. Clearly, it's peak time. So we're all adding resources to handle the surge in the holiday, but capacity is coming in.

Operator

Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Scott Group -- Analyst

Hey. Thanks. Good morning. So how much, if any, does the new USPS contract helped the fourth quarter U.S.

margin, just with the cost allocation? And then, I don't -- Carol, just big picture, right? You're now saying margins in the U.S. in Q4 are going to be -- they'll be slightly positive. We've now lapped the Teamster contract. Yields are now turning positive, that's good peak season surcharges.

Just big picture, when do we start to see more meaningful margin improvement? Does that start right away in '25 or does that take some more time?

Carol Tome -- Chief Executive Officer

Well, first why don't we address the impact to the fourth quarter?

Brian Dykes -- Executive Vice President, Chief Financial Officer

Sure. Sure. So Scott, thank you for the question. So on the USPS contract, so we put a network in place.

It was all part of the plan. There's no incremental impact to domestic in the fourth quarter from the USPS contract. The cost that we -- the cost that Carol referred to was start-up costs associated with getting the contract stood up that was -- that impacted SCS doesn't impact domestic. And in the fourth quarter, we'll see SCS go back to about 9% and domestic to around 9.5%.

So I don't think that's going to impact us there.

Carol Tome -- Chief Executive Officer

No. And then, in terms of when we're going to see more meaningful margin expansion, let us get through the fourth quarter and then give you our outlook for 2025.

Scott Group -- Analyst

Thank you.

Operator

Your next question comes from the line of Stephanie Moore from Jefferies. Please go ahead.

Stephanie Moore -- Analyst

Great. Thank you. Good morning. I was hoping you could talk a little bit about our domestic RPP trends throughout the quarter.

Maybe if you could talk a little bit about how they trended as the months progressed and really what this means for 4Q and your thoughts into 2025, if you have those.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Sure. Thanks for your question, Stephanie. Yes. So we saw positive momentum going from Q2 to Q3 and domestic rev per piece.

As I mentioned in my earlier remarks, really, when you think about what happened in the base rate in the second quarter, base rate added about 90 basis points of improvement to rev per piece. In the third quarter, that jumped to 170. Now, as we translate into the fourth quarter, we actually expect rev per piece to inflect positive in the U.S. And that's really driven by a couple of things.

Look, we talked about actions that we're going to take around specific customers that were enabled by our architecture of tomorrow and the work that we've been doing in the most have been made to create more sensitive demand channels. SAS and AOP and the modifiers. And we're leveraging those in order to make adjustments to help drive rev per piece. The other thing is what we're doing on the surcharging in the GRI.

So we will continue to see lift as we go through the fourth quarter and into '25. So look, it's a positive trajectory on rev per piece, and it's been an area of focus as we move from our year one to our plus two strategy.

Carol Tome -- Chief Executive Officer

And pricing architecture of tomorrow is really moving from the art to the science of pricing. And one of the elements of this are modifiers we use modifiers that can provide discounts to our customers or modifiers that allow us to increase our price. And I'll just give you a real-life example of what happened in the third quarter to help you understand. In the third quarter, we had a discount modifier that we adjusted basically test the elasticity.

We reduced the discount by 25 steps which increased the RPP by 12% or reduced the volume by 26%. We liked that trade -- and because it's a modifier, it's not a contract that has to be reopened and renegotiated. You just adjust the lock. And this is just one element of pricing architecture of tomorrow that we will use not only in the fourth quarter but in '25 and beyond.

Stephanie Moore -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Daniel Imbro from Stephens. Please go ahead.

Joe Enderlin -- Stephens Inc. -- Analyst

Hey, guys. This is Joe Enderlin on for Daniel. Thanks for taking the question. Just wanted to ask another one actually on revenue per piece.

One of your peers noted increased price competition in the market. Just are you seeing any of that today? And then, do you think we felt peak trade down pressures yet?

Brian Dykes -- Executive Vice President, Chief Financial Officer

So I'll start on the price pressure. Look, we sit in a very price competitive industry, but we think it's very rational, right? And when you look bid for bid and product to product. It is very rational. We know we have to win on capabilities, and that's where we continue to add.

With every customer every day, it's -- you got to deliver service to do it. It starts with us with service and then we add incremental capabilities like RFID to win where we really want to win those. And I pointed out as Carol mentioned, we've had big enterprise commercial wins through that. We also have seen commercial now grow nearly 1% for the first time this year as we really started to catch that from the contract, that's been a big momentum point.

And then, specifically, SMB Commercial growing 3.8%. Those sorts of things allow -- the capabilities that we have allow us to win more and win new in those areas that help drive the rev for piece growth despite a very competitive price environment.

Operator

Your next question comes from the line of Brandon Oglenski from Barclays. Please go ahead.

Brandon Oglenski -- Analyst

Hey. Good morning and thanks for taking the question. Congrats on growth for the first time in a couple of years here. Good to see.

Carol, I think you mentioned something about enterprise customers. And I know in the past, you talked about glide down. So can you just put that in context as you head into 2025? And then, just very quickly on Fit to Serve, I didn't get it, but is that going to incrementally deliver in the fourth quarter?

Carol Tome -- Chief Executive Officer

So first on the customer glide down, we have, as you know, been in a glide down arrangement with our largest customer, and they continue to be our largest customer. I think it's fair to say that we have seen them drive a lot of the reduction in our air volume. In fact, if I look at the third quarter performance, 100% of the decline in air volume was down about 6.5%, is it attributable to the largest customers. So they, like many trading down from air to ground and in their case, a little bit of ground up to their own network.

But we're fine with that because it creates opportunity for us to grow in other areas. And then, looking ahead?

Brian Dykes -- Executive Vice President, Chief Financial Officer

Yes. And then, on the Fit to Serve point, yes, so -- we do expect about $70 million incremental to go to about $350 million in the fourth quarter. And we've seen a great progress with that program.

Brandon Oglenski -- Analyst

Thank you.

Operator

Your next question comes from the line of Ken Hoexter from Bank of America. Please go ahead.

Adam Roszkowski -- Bank of America Merrill Lynch -- Analyst

Hi. Good morning. This is Adam Roszkowski on for Ken Hoexter. You noted in the release that you are at the scope of the fit to serve initiative, which previously came for a reduction of about 12,000 position.

Could you just expand on what that means? Is there -- has that potentially accelerated this quarter? And just any thoughts on how you would expand the scope and what you would target there.

Carol Tome -- Chief Executive Officer

So you're just asking for a status update on Fit to Serve.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Sure. Yes. On Fit served, as we said, we have pulled forward incremental savings opportunities. We are -- we hit the full run rate that we expected.

We will have some incremental benefit as we wrap into the fourth quarter, but we're continuing with it as planned.

Carol Tome -- Chief Executive Officer

And to your question, do you have additional opportunities. We are an opportunity-rich company. And as you heard from Nando, we're looking at all opportunities to drive a better experience for our customer and actually higher productivity.

Adam Roszkowski -- Bank of America Merrill Lynch -- Analyst

Thank you.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Greg, we have time for one more question.

Operator

OK. Your final question comes from the line of Ravi Shanker from Morgan Stanley. Please go ahead.

Ravi Shanker -- Analyst

Thanks. Good morning, everyone. So maybe just a follow-up on the holiday side. I think you announced a pretty big step-up in your hiring for the first time in many years.

I know it's a compressed earnings peak season. But what's the logic beyond that if you're seeing a little bit of a reduction in customer experience or expectations on volumes here, how do you think of squaring that? And is there like a minimum surcharge bogey you guys need to kind of put extra costs?

Carol Tome -- Chief Executive Officer

So last year, we announced that we were hiring 100,000 for the peak holiday season, and our ADV declined 7.4%. This year, we announced that we're hiring 125,000 and our ADV will be positive. So it's not out of the realm of reasonable that we should hire more people this year than we did last year. But this is what you need to know.

We will hire what we need for peak regardless of where the volume actually ends up, we're not going to overhire for peak. We will hire what we need. And what we've done over time, Ravi, is we've added this amazing capability where within just a few -- less than an hour, just a few minutes, we can actually get a job off out or we can resend a job offer so we can flex up or flex down the way we need to. And Nando, would you like to add anything?

Nando Cesarone -- Executive Vice President and President, U.S.

Yes. I would just say the number also includes a favorable employee mix. So this year, we're adding -- we're going to increase our helper teams with our drivers by about 10%. That's not a small number.

So big percentage of our volume will be delivered by helpers, seasonal helpers that can deliver at Christmas time, and we've amped that up and make sure that we've got every position optimized -- and that is the number, as Carol had said, and we're going to deliver a great peak season.

Ravi Shanker -- Analyst

Thank you.

Brian Dykes -- Executive Vice President, Chief Financial Officer

Thank you, Greg. This concludes our call. Thank you all for joining, and have a great day.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

PJ Guido -- Senior Vice President, Global Capital Markets, and Investor Relations Officer

Carol Tome -- Chief Executive Officer

Brian Dykes -- Executive Vice President, Chief Financial Officer

David Vernon -- Analyst

Brian Ossenbeck -- Analyst

Matt Guffey -- Executive Vice President, Chief Commercial and Strategy Officer

Christian Wetherbee -- Analyst

Nando Cesarone -- Executive Vice President and President, U.S.

Thomas Wadewitz -- Analyst

Kathleen M. Gutmann -- Executive Vice President and President, International, Healthcare, and Supply Chain Solutions

Kate Gutmann -- Executive Vice President and President, International, Healthcare, and Supply Chain Solutions

Tom Wadewitz -- Analyst

Jordan Alliger -- Goldman Sachs -- Analyst

Bascome Majors -- Analyst

Ari Rosa -- Citi -- Analyst

Scott Group -- Analyst

Stephanie Moore -- Analyst

Joe Enderlin -- Stephens Inc. -- Analyst

Brandon Oglenski -- Analyst

Adam Roszkowski -- Bank of America Merrill Lynch -- Analyst

Ravi Shanker -- Analyst

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United Parcel Service (UPS) Q3 2024 Earnings Call Transcript was originally published by The Motley Fool