A dramatic 15% drop in mail volumes between January and March more than offset wide-ranging costsavings and left the United States Postal Service (USPS) with a massive $1.9 billion net loss in
the second quarter of its fiscal year.USPS revenues dropped 10.5% to $16.9 billion in the January-March 2009 quarter and mailvolumes declined 14.7% to 43.8 billion pieces. This was the highest quarterly drop since the USPSwas created in 1971. Driving factors were the impact of the recession on all products and thecontinuing electronic substitution of letter mail.
All mail products suffered a decline in volumes and revenues, USPS stated in its Q2 report.First-class and standard letters, which account for 94% of volumes, suffered an 11.8% revenuedecline and a 14.9% volume fall. Package revenues dropped 7.5% to $436 million and volumes fell14.7%.
The USPS shipping services, which compete with UPS and FedEx, suffered a 5.9% revenue fall to$1,937 million and a 15.9% volume decline to 334 million shipments. “The withdrawal of DHL from thedomestic portion of the American market has afforded opportunities for short-term growth fordomestic expedited and package products, but did not meaningfully impact results for the first halfof the year,” USPS commented.
Operating costs were reduced by 4% to $18.8 billion, leaving the operating loss at $1.9billion compared to $706 million loss over the same period last year. The Q2 results leave USPSwith a half-year loss of $2.3 billion and facing a cash shortfall of over $1.5 billion at the endof the fiscal year in September 2009.
“The economic recession has been tough on the mailing industry, and we have seen anunprecedented decline in mail volumes and revenue that continued to accelerate during the secondquarter,” said Postmaster General John Potter. “We are aggressively realigning our costs to matchthe lower mail volumes, while also maintaining the high level of service and reliability ourcustomers expect.”
“We are aggressively reducing work hours and other costs to limit losses, preserve cash andimprove productivity,” said Joseph Corbett, chief financial officer and executive vice president.Initiatives designed to match work hours to reduced volume have resulted in a work-hour decline of58 million hours – the equivalent of a reduction of 33,000 full-time employees – in the first halfof FY 2009, despite an increase in the number of delivery points by 1.1 million from the sameperiod last year. The work-hour reduction is on pace to meet the goal of reducing work hours bymore than 100 million for the entire year, the equivalent of 57,000 full-time employees.
Corbett said other savings are coming from consolidating excess capacity in mail processingand transportation networks, realigning carrier routes, halting construction of new postalfacilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducingtravel budgets and similar measures.
On the revenue side, stamp prices will rise on May 11, with the price of a first-class stampgoing up from 42 cents to 44 cents. In addition, USPS said it has recently developed incentiveprogrammes to increase mail volume, including advertising mail and Priority Mail. It has alsoproposed a summer sale for Standard Mail, which is currently under review by the Postal RegulatoryCommission.
