USPS announce $1.9bn loss
Economic uncertainty continues to take a toll on the financial condition of the USPS, with 6 May’s announcement that it suffered a net loss of $1.9bn during its fiscal second quarter.
Economic uncertainty continues to take a toll on the financial condition of the USPS, with 6 May’s announcement that it suffered a net loss of $1.9bn during its fiscal second quarter.
USPS officials said that the recession, coupled with the diversion of letter mail to electronic alternatives, played a large role in the ongoing reduction of mail volume and revenue for the USPS, adding that the USPS will likely face a $1.5bn cash shortfall by the end of the fiscal year.
The USPS has experienced operational net losses in ten of the last 11 quarters, with a year-to-date net loss of $2.3bn compared to a $35m loss over the same timeframe a year ago, which it said is largely due to a significant decline in mail volume. For the quarter, the USPS said mail volume was 43.8bn pieces, representing a decrease of 7.5bn pieces—or 14.7%—year-over-year. Meanwhile, its operating revenue of $16.9bn was down nearly $2bn—or 10.5%—and operating expenses at $18.8bn were down $782m—or 4%.
In 2008, the USPS lost $2.8bn and in 2007 it lost $5.1bn, and even with a planned $5.9bn in savings, the USPS anticipates a loss of more than $6bn in 2010. Mail volume, explained postmaster general John Potter in a Congressional panel testimony in March, is expected to dip to 180bn pieces by the end of September, a sharp decline from its peak of 213bn pieces in 2006.
“The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter,” said Potter in a statement. “We are aggressively realigning our costs to match the lower mail volumes, while also maintaining the high level of service and reliability our customers expect. We are also taking a number of steps to grow revenue.”
Some of these steps include incentive programs to spur mail volumes, including advertising mail and Priority Mail, and proposed summer sale for standard mail that is being reviewed by the Postal Regulatory Commission, according to the USPS.
Another drain on USPS coffers is the $70bn it is required to spend between now and 2016 for retiree health benefits, as mandated by the Postal Accountability and Enhancement Act of 2006, which Potter said “has placed an unbearable strain” on its finances and will lead to the USPS exhausting its cash resources. In 2009, this includes a $5.4bn payment to cover the share of benefits USPS employees get when they retire, as well as a $2bn payment for the employer’s share of benefit premiums for current retirees. Potter said the combined $7.4bn represents more than 10% of USPS operating revenue and is cost-prohibitive considering the current and anticipated revenue declines.
