The U.S. Postal Service ended the first three months of its 2012 fiscal year (Oct. 1 – Dec. 31,2011) with a net loss of $3.3 billion with volumes dropping 6%.
Total mail volume dropped 6% to 43.7 billion pieces while operating revenue fell 1.1% to $17.7billion, the postal operator announced today.
Stronger than expected holiday shipping activity, driven by strong growth in online merchandisesales and successful USPS marketing efforts, helped the Postal Service grow its competitiveShipping Services business in the first quarter, with revenue totaling $2.8 billion, an increase of$179 million or 7% over the same period last year. However, declines in First-Class andStandard Mail of $650 million were 3.7% of total revenue and greatly exceed the gains made in thepackage business. First-Class Mail declines due to electronic migration of transactions areexpected to continue for the foreseeable future, USPS said.
Mailing Services revenue, excluding First-Class Mail parcels, totaled $14.5 billion, a decreaseof 2.9%. First-Class Mail continued to decline, with revenue decreasing 4.1% compared to thesame period last year. First-Class Mail revenue has declined nearly 15% and volume has declined 25%since volume peaked in 2006. While some of the decline is attributable to economic weakness since2007, the more significant factor is the continuing transition to electronic alternatives, theoperator pointed out.
“Technology continues to have a major impact on how our customers use the mail,” said PostmasterGeneral and CEO Patrick Donahoe. “While it has helped us grow our Shipping Services businesses, ithas had a significant negative impact on some of our much larger sources of revenue, particularlyFirst-Class Mail. Revenue from Shipping Services represents about 17% of total revenue and, evenwith continued growth, cannot fully offset the decline in First-Class Mail revenue.”
Operating expenses (before prefunding of retiree health benefits and the impact of discount ratechanges for worker’s compensation liability) rose 1% to $17.8 billion. Transportation expensesincreased by $105 million, or 6.3%, due to rising fuel costs. The Postal Service continues todecrease controllable costs, including an 8 million decrease in work hours, or 2.8%. Totalcompensation and benefits expenses decreased by $180 million, or 1.4%.
USPS said it expects large losses to continue until it has implemented its network re-design anddown-sizing and has restructured its healthcare program. Additionally, the return tofinancial stability requires legislation which gives the Postal Service typical commercialfreedoms, including delivery flexibility, returns over $10 billion of amounts overpaid to theFederal Government and resolves the need to prefund retiree healthcare at rates not assessed anyother entity in the United States.
To return to profitability, Donahoe has advanced a plan to reduce annual costs by $20 billion by2015. The plan includes continued aggressive actions to generate additional revenue andreduce operating expenses. To reach the goal, the Postal Service also needs changes in the law.
“Passage of legislation is urgently needed that provides the Postal Service with the speed andflexibility needed to cut costs that are not under our control, including employee health carecosts,” Donahoe said. “The changes will give the Postal Service a bright future and provide thenation with affordable and reliable delivery for generations to come.”
The Postal Service continues to suffer from a severe lack of liquidity. “Absent significantchanges in the law to allow normal commercial freedoms, the Postal Service will default on bothretiree health benefits pre-payments to the federal government due this year,” said Chief FinancialOfficer Joe Corbett. “Even if legislation changes or eliminates the prefunding payments, we mayreach our $15 billion debt ceiling in the fall of this year.”
