Standard-A Mail Up, First-Class Down, USPS Says

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WASHINGTON -- Even though the U.S. Postal Service had a net income of $611 million during the first quarter of fiscal 1999 -- $365 million less than last year -- it had a successful fall mailing season, saw operating revenue increase and Standard-A mail volume outpace First-Class mail volume for the first time in its history.

The net income number for the first quarter, which runs from Sept. 12 to Dec. 4, was $159 million lower than expected, John Ward, vice president and controller, told members of the Mailers' Technical Advisory Committee here last week. That number is driven by the USPS' revenue variance, which was $177 million below plan. Priority Mail was a main cause since it accounted for $63 million of the $177 million variance, he said.

"While [Priority Mail] grew 5.8 percent, we had some very aggressive expectations for the first quarter. We had a plan that called for over 10 percent growth, and it didn't materialize," Ward said. "That product had slowed over the pace that we've seen over the past two to three years."

The USPS also had high expectations for Standard-B mail, which had a revenue variance of $42 million below plan despite its revenue growth rate of 3.3 percent.

"We had expected the strong growth we have been seeing in our parcel business also to continue in the first quarter," he said, "and it just wasn't as strong as expected."

International mail had a variance of $40 million below plan, but "this simply reflects what many companies are seeing with their international business, [such as] the Asian flu [and] the late summer dropoff in business in certain areas [such as] Latin America," he said.

In spite of the variance, Ward said there was healthy volume growth during the quarter, especially in the Standard-A category, which saw 8.1 percent growth. During the second accounting period, which runs from Oct. 10 to Nov. 6, Standard-A mail actually surpassed First-Class as a share of USPS' total mail volume.

"This is a very significant event, and I think it shows the growing importance of advertising mail as a share of our business," Ward said.

To meet the USPS' revenue growth plan for the rest of the year, the agency will have to see a 3 percent or 3.1 percent revenue growth rate. "According to our year-to-date growth rate, we are about at that rate," he said.

In addition, Ward said the recent contracts and wage increases the USPS and two of its unions agreed to are in line with what it expected.

Pat Mendoca, manager of operations process support, received a round of applause from MTAC members because of the successful holiday mailing season program. He said the postal service will keep communications open between headquarters and major mailing centers to make sure everything continues to move smoothly.

"We monitor conditions daily, focusing on the pinch points, and have weekly teleconferences with the areas so that communications and knowledge around the movement of mail increases," he said.

From the middle of September through the end of November -- the heart of the holiday mailing season -- Mendoca said the USPS saw Standard-A volume grow 8 percent, which was above expectations.

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