The week that was: 10 June 2011

Industrial action continues in Canada, Royal Mail set for ₤1.7bn injection, and US government agencies could save through presorting… We will start in North America this week where Canada Post and the Union have yet to reach a deal to end continuing striking action. Union leaders insisted last night (Thursday) that differences with Canada Post will be solved at the negotiating table, after the Corporation warned that talks over a new wage deal have effectively run aground. With strike action in Canada now entering its second week, Canada Post said last night that it remains “far apart on several fundamental issues” from the Canadian Union of Postal Workers. The Corporation criticised the union for holding out for annual wage increases of around 3% over the four-year contract, and said it was offering nothing to help address declining mail volumes, increasing market competition and electronic substitution of physical mail. “Major compromises” by Canada Post on issues like sick leave reforms and staffing levels were being rejected by the union, said the Corporation. The union has proposed joint committees to look into some issues, including the Short Term Disability Plan that Canada Post wants to use to reduce unnecessary sick leave. Insisting its latest offer, based on annual wage increases that would bring the top wage rate to $26 an hour, was “fair and reasonable”, Canada Post said it could not accept the union’s current position. The Corporation said in a statement: “Every effort has been made to reach a negotiated settlement that is in the best interests of employees, customers and the company. Canada Post again reiterated that it is unable to move or accommodate the union’s demands without jeopardizing the mail service that Canadians rely on.” Last night, the union said it would be “calmly sticking to its strategy”, continuing strike action rotating through Canadian cities. About 1,500 postal workers were due to strike for 24 hours in Quebec City and Kitchener, Ontario, from 11pm last night.

In the UK, the Postal Services Bill made its final passage through parliament this week. During the final debate it was confirmed that the UK Government will inject a further £1.7bn into Royal Mail. The company currently has around £1.7bn of debt facilities with the Government. In order for the operator to be on a sustainable commercial footing going forward this will need to be restructured and Royal Mail’s level of debt will need to be reduced substantially, the Department for Business, Innovation & Skills (BIS) said. This figure, combined with the company’s historic pension deficit – believed to be more than £8bn – will see the public purse taking a £10bn hit ahead of the company’s privatisation. For this additional financial support to be provided, the Government will need approval from the European Commission, and will submit a formal state aid notification in the next few days. It hopes that the process will be completed by March 2012. As well as allowing private investment into Royal Mail, the Postal Services Bill outlines that Post Office Ltd could move to a mutual ownership model, Ofcom will become the regulator to the UK postal industry, and the government will take on Royal Mail Group’s pension deficit. The Government made a number of amendments to the Bill in April. During yesterday’s debate, minister for postal affairs Edward Davey said that the obtaining of state aid is crucial, along with the change of the regulatory regime.

Slow to move into digital forms of mail at the moment, US government agencies could nevertheless save up to $100m a year by establishing their own mail presort facilities, according to a new report. That’s according to a paper from Michael Ravnitzky, chief counsel to the chairman of the Postal Regulatory Commission, and economist J.P. Klingenberg. The report suggests that federal agencies could save, in aggregate, $100m per year through localised pre-sorting. Furthermore, States could save, in aggregate, $250m per year if each State centralised its mail operations at each state capital. The federal government is the largest single user of the mail in the US, accounting for 2% of First-Class Mail revenues and averaging a $1bn mail spend each year from 1997 to 2010, with a further $200-250m spent with FedEx or UPS shipping services. A small number of federal agencies, including the Department of Homeland Security and US Navy, already have their own presort mail facilities. But with other agencies seeing a return rate of up to 5% because of poor address quality and other issues that can be addressed with presorting, the report points out that outgoing government mail in particular is ideally suited to presort operations and potential discounts on postage offered by the Postal Service in its work sharing system. “Mail going through presort channels may have better address quality, and thus requires less forwarding and returns, resulting in better overall service,” it said. The report also recommends US states centralise their mailing operations, with states spending a similar amount to the federal government on mail. Anecdotal evidence suggests state authorities’ mailing volumes are not declining, but the report claims that the 10 states that have centralised their mailing operations have seen millions in cost savings each year, saving as much as 50% of postage and mailing operations costs. “If all state governments centralized their mailing operations, they would save up to US$250m per year in the aggregate,” it says.

And finally…

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