US postal chiefs have renewed their demands for legal changes to improve the US Postal Service’sheavy deficit after revealing a lower loss for January – March 2013.
USPS ended the second quarter of its 2012-13 fiscal year with a net loss of $1.9 billioncompared to $3.2 billion in January – March 2012. But the $1.3 billion improvement was largely dueto paying only $2.1 billion instead of $3.7 billion for retiree health benefits. The half-year lossdropped to $3.1 billion from last year’s $6.5 billion. The world’s largest postal operatorincreased its Q2 revenues slightly to $16.35 billion while total mail volume dropped to 38.8billion items from 39.4 billion 12 months previously.
The main growth driver was the Shipping & Packages business, which increased revenuesstrongly by 9.3% to $3.1 billion while volumes went up by 6.2% to 921 million items. “The increasesare reflective of our successful efforts to take advantage of the growing area of shipping andpackages and compete in the ground shipping services and “last-mile” e-commerce fulfillmentmarkets. Additionally, the 2012 holiday season provided a surge in package volume in the firstquarter as we took advantage of consumers’ growing fondness for shopping online,” USPS stated inits Q2 report.
Standard Mail revenues, mostly from advertising mail, increased moderately by 2.4% to just over$4 billion with a 1% volume rise, while International revenues increased by 4.5% to $748 million onflat volumes and higher prices.
But these various increases were wiped out by a 2.7% drop in First-Class Mail revenues to $7.1billion, with volume down 4.1%. The decline in the operator’s most profitable service categorymostly resulted from the ongoing migration toward electronic communication and transactionalalternatives.
USPS stressed that it “continues to grow revenue and reduce expenses by using the toolsavailable to it under existing law. However, without passage of comprehensive legislation toprovide the Postal Service with a workable business model for today’s marketplace, large quarterlyfinancial losses will continue”.
Postmaster General and CEO Patrick Donahoe declared: “To return the Postal Service to solvencyrequires a comprehensive approach, which is reflected in our updated Five-Year Business Plan. Theplan provides an achievable roadmap to restore financial stability and preserve affordable mailservice for the American public. The major elements of the plan must be pursued and executed withina short window of opportunity to avoid unsustainable losses and potentially becoming a long-termburden to the American taxpayer.”
The key legislative changes needed to achieve $20 billion in annual savings by 2016 include anew healthcare plan, a refund of the retiree benefit overpayments, adjusted delivery frequency(with six-day package/five-day mail delivery), authority to expand products and services and reformof pay levels, according to the agency.
The Postal Service said it has already reached its debt limit of $15 billion, defaulted on $11.1billion due for retiree health benefits in 2012 and also expects to default on an additional $5.6billion on September 30, 2013. In addition, the Postal Service owes an estimated $17 billion onfuture workers’ compensation claims.
“These obligations of nearly $50 billion and continuing losses highlight the need for immediatelegislative reform to give us the latitude to execute on our Five-Year Plan and improve our abilityto repay these obligations and return to profitability,” said Chief Financial Officer JoeCorbett.
He added that the plan also requires aggressive actions to increase operational efficiencyand improve the Postal Service’s liquidity position, including the accelerated consolidation ofmail processing, retail and delivery networks in order to better align them with mail volumes andchanging customer needs and continued administrative reductions.
The Postal Service said it also continues to reduce costs by reducing work hours. In the secondquarter, work hours were reduced by 2.4% compared to last year. “Even with a 6.2% volume increasein Shipping and Packages compared to the same period last year, we were able to reduce these workhours to increase efficiency,” Corbett added, noting that work hour reductions have been the singlelargest contributor to the ongoing achievement of savings targets.
The number of career employees decreased by approximately 25,000 in the second quarter and by46,000 in the last year. The reductions, which were accomplished primarily through attrition andseparation incentives, leave the Postal Service with the lowest number of career employees since1966.
