Postal Service losing billions and delivering fewer packages as it burns cash
Not only is the U.S. Postal Service delivering less mail – it is now delivering fewer packages after it warned Congress it could run out of cash in the not so distant future.
In the agency’s latest quarterly statement, it reported a net loss of nearly $2.3 billion as it delivered 3.2 percent fewer packages.
Revenue from packages, however, increased due to higher prices.
But the decline in package volume – the first decrease in nearly a decade – could spell even more trouble for the financially-stricken agency, as its courier competitors ramp up delivery efforts to compete with the likes of Amazon. Packages were also one area of concentration for the Postal Service as it worked on a reform plan to shore up its finances.
The Postal Service experienced a 1.6 percent decline in revenue across first-class mail – its primary revenue driver – as well as a 3 percent decline in marketing mail revenue and an 11.2 percent decline in periodicals revenue.
“We continue to face imbalances in our business model that must be fixed through legislative and regulatory change,” Postmaster General and Chief Executive Officer Megan J. Brennan said in a statement.
The Postal Service ended fiscal 2018 with a net loss of $3.9 billion.
Losses for the latest quarter ($2.26 billion) were up from $1.49 billion from the same period last year. Revenue of $17.1 billion was slightly lower than last year.
Losses at the Postal Service between 2007 through 2018 are about $69 billion. The last time the agency recorded a profit was more than a decade ago. It has also defaulted on more than $40 billion in payments owed to pre-fund retiree health care expenses.
Throughout recent months, the U.S. Post Office has considered a number of reforms to attempt to put itself on firmer financial footing.
Brennan told lawmakers in May the agency is considering scaling back mail deliver to five days per week, from the current six, as it works on a plan to shore up its financial situation. As part of that plan, the Post Office would deliver packages seven days per week.
Brennan credited a “flawed business model” as the root cause of the agency’s financial instability. This model, she says, imposes significant costs – like an unaffordable retiree health benefit plan and price caps – on the Postal Service while constraining its ability to raise revenue in order to offset those costs.
“Absent legislative reform, in all probability we’ll be out of cash in 2024 and that will threaten our ability to meet our obligation to the American public,” Brennan said.
And if the agency makes all of its mandatory payments – including those retiree benefits – Brennan said the agency would be out of cash in 2020.
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Total operating expenses for the most recent quarter increased 4.3 percent – or $797 million – to $19.3 billion.
Last April, the president created a task force to examine the Postal Service and its operations. In December, the task force released a range of proposals with the aim of placing it on a path to sustainability.
Recommendations included developing a new pricing model, which eliminates across-the-board price caps and suggests charging “market-based prices” for both mail and package items that are not considered essential postal services. The report also suggested “franchising the mailbox” to private shipping couriers, meaning companies like FedEx and UPS could place items in private mailboxes.