US Postal Service cuts operating loss to $642M

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US Postal Service cuts operating loss to 2M

Improved revenue from higher rates and lower costs helped the US Postal Service reduce its second-quarter deficit from a year earlier by 24% despite declining mail and parcel volumes.

The postal organization on Friday reported an operating loss of $642 million, a significant year-on-year improvement. Net losses, which include certain authorized obligations outside of management’s control, also fell — to $2 billion from $3.3 billion. The Postal Service attributed the reduced loss to a $463 million gain in revenue and a $1.3 billion reduction in workers’ compensation costs, partially offset by increases in retiree health benefits and other operating costs.

Total operating income was $20.2 billion for the quarter, an increase of 2.3%, compared to the same quarter last year. The increase was mainly due to price increases in parcel delivery, marketing mail and First-Class mail.

Shipping and Package revenue increased $348 million, or 4.5%, on a volume decrease of 22 million pieces, or 1.4%. First-Class mail volume decreased 6.3%. And parcels are likely to continue to decline after Amazon recently re-registered postal shipments, but said it would deliver 20% less volume than in recent years.

“During the quarter we were able to achieve positive revenue, cost and service results,” Postmaster General David Steiner said in a statement. “However, the level of our financial progress compared to last year was small and we have a long way to go [ahead] achieving anything close to long-term financial sustainability. It is a simple fact that we are in a financial crisis, and now we are taking drastic and appropriate measures to save money to work. To avoid disruption and continue our role in supporting American businesses and society, we need urgent Congressional action to expand our borrowing authority and address overdue issues in the organization.”

The USPS has a statutory debt limit of $15 billion, pays a disproportionate share of pension payments compared to the private sector, is subject to veterans’ compensation requirements and can only invest retirement funds in Treasury notes. Administrators also pressured the Postal Regulatory Commission to remove the postal rate or allow other rate changes so the agency could capture more revenue.

Steiner warned Congress in March that the Postal Service could run out of money by next spring, citing increased digital communications that have caused a 50% drop in mail volume, expensive policy measures and universal service obligations. Officials say the decision is pending the use of the Post Regulatory Commission to waive certain pension payment obligations so that the money can be used for operations and capital expenditures. The Postal Service also temporarily suspended contributions to the state pension fund, which is expected to save $2.5 billion for the remainder of the fiscal year and help conserve cash.

The postmaster general reiterated that Congress has two options: allow the Postal Service to lower service levels and charge higher rates to become profitable or provide subsidies, which he calls “refunding public services.”

But Steiner doesn’t place all the blame on Congress, saying the Postal Service needs to do more on its own to become a financially sustainable organization. The USPS, for example, plans to raise mail and package rates by 4.8% in July and recently applied an 8% shipping fee to all packages, largely because of high fuel prices caused by the Iran war. It has cut hundreds of millions of dollars in transportation, operations and labor costs. It also recently launched an auction for e-commerce shippers to bid on last-mile delivery, part of an effort to increase capacity and revenue.

“I continue to believe that the market wants to do business with a postal service that is competitive, responsive and easy to work with. And we are seeing movement in that direction through great commercial relationships and collaboration opportunities. We have seen encouraging progress in some key customer relationships, including Amazon and DHL,” said Steiner during his presentation to the postal board of governors.

“How do we make it easier to do business with it? How do we adapt our network to the needs of customers? How do we create more value from the assets we have built? If we are going to grow, we must be more responsive, more transparent, more aware of the markets, and reduce the burden of unnecessary conflicts. That is why we are working to ensure that our network responds to the needs of the bureaucracy,” it added.

Keep US Posted, a group representing nonprofits, newspapers, publishers of greeting cards, catalogs and other small businesses, said in a news release that the Postal Service’s biggest problem is spending and productivity, not revenue. It urged Congress not to provide financial aid that does not include spending reforms.

“Raising the Postal Service’s borrowing authority or providing funds without oversight would be a blank check that would only delay the inevitable collapse of the agency’s finances and lead to a massive bailout for taxpayers. The USPS has already increased its borrowing, which currently stands at $15 billion. Given that it faces $8 billion in costs, its authority will not buy the $8 billion, proposed years. without significant changes,” said Executive Director Kevin Yoder. “The USPS needs help from Congress, but any financial help must be combined with CPI-based pricing, strong oversight by the Postal Regulatory Commission, and measurable cost controls that protect universal service and affordability.”

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