USPS Parcel Post volume losses continue, Express and Priority Mail see growth.

USPS Parcel Post Volume Losses Continue, Express and Priority Mail See Growth. The U.S. Postal Service
(USPS) released F1Q:05 (quarter ending December 31) results which include a look at preliminary Priority Mail,
Express Mail, and Parcel Post statistics (see Exhibit 1 below). Generally Parcel Post and to some degree Priority Mail
competes with UPS, FDX, and DHL’s ground parcel products. Express Mail competes with UPS, FDX, and DHL’s
overnight air products. Our sense is USPS market share loses within ground and parcel market share places to UPS,
FDX, and to a lesser extent DHL (the former Airborne) may have stabilized.
For the seventh quarter in a row, a y-o-y volume decline occurred within the USPS’ Parcel Post product which
recorded a decline of 1.2% during F1Q:05 which compares to year-over-year declines of 1.7%, 6.4%, and 6.5% during F4Q:04, F3Q:04, and F2Q:03, respectively (see Exhibit 1 below). Comparably, UPS and FDX domestic
ground products have grown y-o-y volume in the most recent quarters by 1.5% and 16.4%, respectively.
Priority Mail volumes increased for the second quarter in a row by 2.4% year-over-year in F1Q:05 which represents
deceleration from the 3.2% growth posted during F4Q:04, but better than the 4.8% decline posted in F3Q:04.
Similarly, Express Mail volumes were also positive, posting 0.6% year-over-year growth in the current quarter. This
compares to prior year-over-year declines of 2.9%, 1.4%, 3.1% during F4Q:04, F3Q:04, and F2Q:03, respectively.
This is the first time Express Mail volumes have improved on a year-over-year basis in the last fifteen consecutive
quarters.
Yields fell year-over-year across the board in Priority Mail, Express Mail, and Parcel Post. Priority Mail yields were
down 0.7% vs. a flat performance last quarter and a 0.6% year-over-year decline in F3Q:04, while Express Mail
yields were down 0.3% vs. a 0.6% decline last quarter, and a 1.1% decline in F3Q:04. Parcel Post also reported a
year-over-year decline in yield of 0.3% vs. 2.6% growth in F4Q:04 and 1.6% growth in F3Q:04. We expect yields to
remain fairly flat going forward as the USPS does not plan on raising rates until 2006, as we reported in late
November.

Exhibit 1. USPS F1Q:05 Volume and Yields (year-over-year)
Y-O-Y Volume Trends Y-O-Y Yield Trends
F1Q05 F4Q04 F3Q04 F1Q05 F4Q04 F3Q04
Priority Mail 2.4% 3.2% -4.8% -0.7% -0.2% -0.6%
Express Mail 0.6% -2.9% -1.4% -0.3% -0.6% -1.1%
Total Air Express 2.3% 2.8% -4.6% -0.8% -0.9% -0.3%
Parcel Post -1.2% -1.7% -6.4% -0.3% 2.6% 1.6%
Total 1.2% 1.5% -5.1% -0.5% -0.3% 0.0%
Source: Company reports.