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USPS Continues to Hemorrhage Major Financial Losses

February 10, 2012
WASHINGTON, DC—Another quarter, another crippling financial loss for Mr. ZIP.

The U.S. Postal Service ended the first three months of its 2012 fiscal year (Oct. 1–Dec. 31, 2011) with a net loss of $3.3 billion. Management expects large losses to continue until the Postal Service has implemented its network re-design and downsizing, and has restructured its health care program.

The Postal Service feels the return to financial stability requires legislation that provides commercial freedoms, including delivery flexibility, returns more than $10 billion overpaid to Uncle Sam and resolves the need to prefund retiree health care at rates not assessed any other entity in the United States.

Stronger than expected holiday shipping activity, driven by solid growth in online merchandise sales and successful USPS marketing efforts, helped the Postal Service grow its competitive Shipping Services business in the first quarter, with revenue totaling $2.8 billion, an increase of $179 million or 7 percent over the same period last year. However, declines in First-Class and Standard Mail of $650 million were 3.7 percent of total revenue and greatly exceed the gains made in the package business. First-Class Mail declines due to electronic migration of transactions are expected to continue for the foreseeable future.

Mailing Services revenue, excluding First-Class Mail parcels, totaled $14.5 billion, a decrease of 2.9 percent. First-Class Mail continued to decline, with revenue decreasing 4.1 percent compared to the same period last year. First-Class Mail revenue has declined nearly 15 percent and volume has declined 25 percent since volume peaked in 2006. While some of the decline is attributable to economic weakness since 2007, the more significant factor is the continuing transition to electronic alternatives.

“Technology continues to have a major impact on how our customers use the mail,” said Postmaster General and CEO Patrick Donahoe. “While it has helped us grow our Shipping Services businesses, it has had a significant negative impact on some of our much larger sources of revenue, particularly First-Class Mail. Revenue from Shipping Services represents about 17 percent of total revenue and, even with continued growth, cannot fully offset the decline in First-Class Mail revenue.”

To return to profitability, Donahoe has advanced a plan to reduce annual costs by $20 billion by 2015. The plan includes continued aggressive actions to generate additional revenue and reduce operating expenses. To reach the goal, the Postal Service also needs changes in the law.

“Passage of legislation is urgently needed that provides the Postal Service with the speed and flexibility needed to cut costs that are not under our control, including employee health care costs,” Donahoe said. “The changes will give the Postal Service a bright future and provide the nation with affordable and reliable delivery for generations to come.”

 

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