The week that was: 17 June 2011

Royal Mail reports a drastic drop in profits, UPS is banned from screening air cargo in the UK, Canada Post locks out its staff after strike-related losses reach $100m… There was bad news from London this week when Royal Mail Group reported a drastic £141m drop in operating profit, due to a decline in revenues. The operator – whose annual results were published on Tuesday – recorded a figure of just £39m, compared to £180m for the previous year. Revenues dropped to £9.2bn (2010: £9.3bn) as a result of a 4% drop in core mail volumes. The profit margin, after modernisation costs, fell from 1.9% (2009-10) to 0.4%. It was revealed that Royal Mail’s ‘UK Letters & Parcels and International business’ lost £120m over the last 12 months, a figure of £2m a week. The unit made a profit of £20m last year. Royal Mail Group CEO Moya Greene said the company remains in “significant financial difficulty”, and that the business will be challenged to reduce costs even further over the coming years, with up to half of Royal Mail’s delivery centres destined for closure. Greene said: “The next two years will be challenging. We need to reduce our costs faster than the decline in revenues from our core letters business. The pace of change in our mail centres will continue. We expect that around half of the mail centres could close by 2016/17. We are introducing new delivery methods throughout our 1,371 delivery offices and we have completed 117 delivery office changes already. In the next year, we will complete the delivery transformation in more than 700 offices or 50% of them.”

Earlier this afternoon (Friday), the UK Government banned international parcel carrier UPS from screening air cargo at several sites across the UK. Restrictions have been put in place due to problems with security, the Department for Transport (DfT) confirmed. However, the specific violations and locations where restrictions have been put in place have not been released. The ban will cause major disruptions to UPS’s domestic and international shipping agenda. A DfT spokesperson told Post&Parcel: “We can confirm that, following careful consideration, the Department has restricted the number of sites in the UK at which UPS Ltd are permitted to screen air cargo until it has satisfied current security requirements. The safety of the travelling public is paramount and our security regime is kept under constant review. For obvious security reasons we will not comment on the details.” In response to the decision, a UPS spokesperson said: “A Department for Transport scheduled review identified areas of concern UPS is working to address. As a result, some facilities in the UK have been temporarily taken offline, which in some cases has led to delays in the movement of packages.” Last October, a bomb was discovered inside a printer cartridge on a UPS aircraft at East Midlands Airport. The cartridge originated from Yemen and was destined for the US. The device was not picked up by security screening, and was only discovered after a tip-off. At the same time, a bomb was also discovered on a FedEx plane in Dubai.

Canada Post locked out its staff from facilities around the country on Wednesday, aside from a few rural workers, in response to the public avoidance of the mail during the postal strikes. In just two weeks since the strikes began, the Corporation has lost $100m because mailers have stayed away from their post offices or found alternative means to communicate. Further meetings between management and the Canadian Union of Postal Workers this week have not been able to break the deadlock as the union seeks better wages and a protection of pension and sick leave arrangements, while Canada Post wants to cut its costs and improve work force productivity and flexibility to counter the declining mail volumes. On Thursday, the Canadian government formally announced that it would be introducing back-to-work legislation to force an end to the work stoppages. The Restoring Mail Delivery for Canadians Act could be passed next week, forcing an arbitration process to set the terms of the next collective bargaining agreement for the union’s urban unit, effective from February 2011. The US Postal Service has said it is confident enough that progress is being made by the Canadian government, that it will be continuing to accepting mail bound for Canada.

And finally…

This week the postal sector asked the question: “What Would Google Do?” if it was running the struggling USPS. Here’s the answer!