The US Postal Service (USPS) yesterday announced it ended the third quarter with a $2.4 billionloss on a 14.3% mail volume slump and expects a full-year loss of $7 billion despite some $6
billion of cost savings. The world’s largest postal operator wants to scale down to a five-daydelivery and close post offices in response to the dramatic downturn.In view of the postal operator’s financial status, the US Government Accountability Officehas put USPS on its list of “high-risk” government areas needing transformation. The USPS needs tocut costs quickly and in the longer term should consolidate operations and reduce the656,000-strong workforce, it said. “The Postal Service urgently needs to work with Congress andother key stakeholders to develop and implement a restructuring plan to help put it on a moresustainable financial path,” said Gene L. Dodaro, Acting Comptroller General of the United Statesand head of the GAO.
According to the Postal Regulatory Commission, the US postal regulator, USPS plans to reviewsome 3,200 postal outlets for possible closure or curtailment, and possibly a further 1,600 aswell. The USPS has released a list of 677 offices that it says it will review. There are 32,741post offices in the USA.
USPS announced that its third quarter (April 1 – June 30) revenues dropped 9% to $16.3billion despite higher prices while operating expenses were reduced 1.5% to $18.7 billion. Theoperating loss more than doubled to $2.4 billion as a result. The $2.4 billion net loss was alsomore than double the previous year’s figure.
Over the first nine months of the 2008/09 year, USPS revenues were 8.4% down at $52.4billion, and its operating loss soared to $4.7 billion compared to the previous year’s €1.1billion. The nine-month net loss also more than quadrupled to $4.7 billion from the previous year’s€1.1 billion.
Between April and June 2009, mail volumes dropped by 14.3% as the recession, electronicsubstitution and competition impacted on all products and services, USPS stated in its Q3 report.The 8.8% revenue drop was less than the volume decline due to higher mail prices (+3.8% in May2009) and shipping rates (+5% in January 2009). First-class and standard letters, which account for94% of volumes, suffered a 14.4% volume decline and a 10.7% revenue fall. Q3 package revenuesdeclined 13.3% and volumes fell 16.3%.
The USPS shipping services, including Priority Mail, Express Mail, Parcel Select, ParcelReturn Service and International Mail and which compete with UPS and FedEx services, suffered a4.1% revenue fall to $1,915 million and a 15.1% volume decline to 324 million shipments. Over thefirst nine months, shipping revenues, which represent about 12% of total revenues, were 3.8% lowerat $6,192 million while volumes fell 13.7% to just over one billion items. All subgroups withinShipping Services experienced volume declines with the exception of Parcel Return Service Mail,USPS noted.
USPS continued to cut costs in Q3 by scaling back working hours by 8.7% and reducingcompensation (payment) expenses by 5.1%. Other savings came from consolidating excess capacity inmail processing and transportation networks, realigning carrier routes, halting construction of newpostal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels,reducing travel budgets and similar measures.
Postmaster General John Potter commented: “Thanks to extraordinary efforts across the entireorganisation, we are well on track to achieve our 2009 target of more than $6 billion in total costreductions. In the third quarter, we surpassed the targeted amount by $500 million.”
Despite these cost reductions, however, USPS projects a net loss of more than $7 billion atfiscal year-end and a 13.8% mail volume to 175 billion pieces. The organisation said it faces apossible Sept. 30 cash shortfall of up to $700 million and may not be able to meet its 2009/10financial obligations without legal changes.
“Securing the fiscal stability of the Postal Service will require continued efforts in all ofthese areas, as well as further review of retiree health benefit prefunding,” said Potter. “It alsowill require that the Postal Service gain flexibility within the law to move toward five-daydelivery, to adjust our network as needed, to develop new products the market demands, and to workwith our unions to meet the challenges ahead.” But if the US Congress did agree to the move tofive-day delivery, USPS said it did not expect any savings from the measure before 2011.
