Another huge loss for the USPS
The US Postal Service reported a net loss of $1.9 billion in its second fiscal quarter (ended 31 March).
While growing package service volumes (including last mile delivery for express companies) increased, driving total revenue for the quarter up 2.3% to $16.73 billion, the USPS faces continuing decline in volume and revenue for its core First Class Mail product, and increasing costs to prefund retiree health benefits.
However, there is more to the Postal Service’s problems than the healthcare issue. In the words of Chief Financial Officer and Executive Vice President Joseph Corbett: “Some comments in recent news reports suggest that all we need from Congress is help with restructuring our retiree health benefit plan. Nothing can be further from the truth. Our liabilities exceed our assets by $42 billion and we have a need for more than $10 billion to invest in new delivery vehicles, package sortation equipment, and other deferred investments. We haven’t been making the retiree health benefit prefunding payments because we can’t. If legislation reduced the required retiree health benefit prefunding payment, it doesn’t provide us with any more cash to pay down our debt or put much needed capital into our business. Only comprehensive postal legislation that includes a smarter delivery schedule, greater control over our personnel and benefit costs, and more flexibility in pricing and products will provide the necessary cash flows.”
On the other side of the Atlantic, things aren’t so bad. Royal Mail, the UK’s recently privatized postal service, reported operating profit up 1% in its fiscal year ended 30 March to £671 million (US$1.13 billion), as total revenue rose 2% to $15.90 billion. However, the company said competition, particularly in the parcels business, was intensifying. Royal Mail also said that it is also now facing competition on the letters side of its business for the first time in its 500-year history, as TNT Post UK, a subsidiary of Netherlands-based PostNL, has entered the UK market.
