USPS H1 loss hits $1.9 billion as volumes slump further

The world’s largest postal operator, the US Postal Service, will post a loss of $1.9 billion forthe six months ended March 31, 2010, after volumes declined by 6.3% to 88.1 billion pieces of

The loss is further evidence that the Postal Service continues to face incredible challenges,Postmaster General John E. Potter said yesterday. The organisation has warned it could lose arecord $7 billion in the year ending September 2010.

Potter reinforced the need for legislative and regulatory changes necessary to maintain a viablePostal Service. Two of those changes could save the Postal Service more than $8.5 billion in thefirst full year they are implemented: restructuring the prepayment of retiree health benefitpayments and eliminating one day of delivery service per week. Despite the ongoing financialchallenges, Potter commended employees for continuing to take costs out of the system andmaintaining high rates of customer service.

Chief Financial Officer Joseph Corbett reported that the 2010 mid-year financial results reflectthe continuing effects of both the recent recession and the migration of mail to electronicalternatives. Corbett noted that for the foreseeable future, the Postal Service expects to seecontinuing declines in First-Class Mail, the most profitable class of mail.

For the three months ending March 31, 2010, total volumes dropped 3.3% while revenue declined1.4% to $16.7 billion despite a one-off boost of $180 million of First-Class Mail revenue relatedto the US census. In contrast to the continuing declines in mailing services, the competitiveproducts, shipping services, that account for 12% of total revenues and consist primarily ofPriority Mail and Express Mail, grew 5.7%. Operating expenses were down 3.1% from a year ago andthe net loss was reduced by over $300 million.

For the first six months of the fiscal year, operating losses were reduced to $1.8 billioncompared to $2.3 billion in the previous year. Included in the March 31 quarterly and year-to-dateoperating losses were expenses of $1.9 billion and $3.8 billion, respectively, to fund retireehealth benefits.

Aggressive measures to reduce costs continue, USPS said. Work hours during the first half of theyear were reduced by 49 million hours below the previous year. Total mail volume decreased 6.3%during the first half of the year, but managerial initiatives have reduced work hours by 12.7% inmail processing and 11.6% in customer services. For the year to date, overall expenses have beenreduced by $1.4 billion, or 3.8% below the previous year.

“Despite aggressive efforts to reduce costs, including the reduction in full-time equivalentemployees by more than 120,000 since 2008, we are still experiencing unsustainable losses,” saidCorbett. “Quite simply, the business model is broken and laws, regulations and contracts must bechanged to provide commercial operating flexibility needed for financial stability.”

At mid-year, the number of career employees stood at 594,000, a reduction of 47,000 compared tothe previous year.