Postal Service’s $15.9-Billion Loss Highlights Urgent Need for Legislative Reform

The encouraging growth trend in the package business is not, by itself, enough to offset the declines in First-Class Mail and Standard Mail. First-Class Mail revenue, which peaked in 2007, dropped $1.163 billion, or 3.9 percent, this fiscal year, while Standard Mail decreased $747 million, or 4.3 percent, compared to last year. However, the rate of decline in the First-Class category did slow in 2012.

Other details of the yearly results compared to the same period last year include:

  • Total mail volume of 159.9 billion pieces compared to 168.3 billion pieces a year ago
  • Operating revenue of $65.2 billion compared to $65.7 billion in 2011
  • Operating expenses of $81.0 billion (including the $11.1 billion expense associated with prefunding retiree health benefits) compared to $70.6 billion the year before

The $15.9 billion loss was driven by $13.4 billion in expenses that were outside the control of the Postal Service in the short-term. These expenses include the $11.1 billion retiree health benefits prefunding expenses and the expenses related to the long-term portion of workers’ compensation. When these expenses are deducted the net loss would have been $2.5 billion. The Postal Service has been successful in reducing controllable expenses as mail volume and revenues have declined.

“Our productivity grew to a record level as we captured cost savings and improved productivity for the 13th straight quarter,” said Chief Financial Officer Joseph Corbett.

This year’s improvement is largely attributable to the reduction in work hours, which decreased by 27 million, or 2.3 percent, in 2012 vs. the previous year. Total work hours continue to decrease despite increases in the number of delivery points, which rose by approximately 1.3 million over the last two years.

“These work hour reductions reflect our efforts to improve productivity and to respond to the decline in mail volume,” said Corbett. “Since 2000, we have reduced work hours by a cumulative total of 504 million work hours, equivalent to 286,000 employees, or $21 billion in expense savings each year.”