The US Postal Service made a net loss of $5.1 billion in the fiscal year ending September 30, 2007,due to heavy special payments to the government for pensions and other costs. It is now planning
more flexible pricing next year under new postal pricing regulations.The world’s largest postal operator increased revenues by 3% to $74.9 billion although totalmail volumes dropped 0.4% to 212.2 billion pieces. The main revenue growth drivers were first-classand standard mail, USPS CFO Glen Walker told a board of governors meeting yesterday.
The USPS recorded an eighth consecutive year of productivity growth, up 1.7%, aided by areduction of 36 million work hours, which is equivalent to $1.2 billion in costs, he noted.Operating costs rose 2% to $73.3 billion, resulting in an operating profit of $1.6 billion comparedto $0.9 billion in the year ending September 30, 2006.
According to the 2006 Postal Act, however, the USPS has to make special payments into federalgovernment accounts to fund retiree health benefits. Under these regulations, USPS paid $3 billionin cash in Q1, 2007, to cover 2006, and placed a further $5.4 billion into the newly created PostalService Retiree Health Benefits Fund (PSRHBF) for 2007. Taking $1.6 billion of refunded CSRSpayments and other refunded payments into account, the net “legislation effect” was $6.8 billion.As a result, USPS said it ended the fiscal year with a net loss of $5.1 billion.
Postmaster General John Potter commented: “It’s important to note that we not only achievedour plan, which had to be adjusted to reflect the new law, but we overcame a slow start and didbetter than our mid-year projection.” The USPS had projected a full-year loss of €5.4 billionearlier in the year.
For the 2007/08 financial year, the Postal Service Governors decided to cap future mail priceincreases at the rate of inflation, using new regulations issued by the Postal RegulatoryCommission (PRC) on October 29. For shipping services, including international express andparcels, the USPS plans to take advantage of more flexible pricing rules.
“We intend to use this new flexibility to grow our competitive business, offering volumediscounts and contract pricing,” Potter said. “There are still many details to be worked out, butwe look forward to partnering with the PRC and our customers to maximize the advantages of the newpricing rules.”
The USPS already announced in October that it aims to save over $1 billion in 2007/08. Itprojects revenue of $78.2 billion and expenses of $78.8 billion, resulting in a net loss of $600million.
