Postal Service Posts Quarterly Loss of $1.9 Billion
Inflationary costs and First Class Mail declines offset a $379 million increase in Q2. Standard mail income holds steady, thanks to exigency.
Exigency keeps revenues up, volumes down, at USPS. Oregonlive.com
Largely due to exigency and a strong package-shipping business, the U.S. Postal Service tallied a revenue increase of $379 million to $16.7 billion in the second quarter of its fiscal year. Shipping and package delivery revenue increased 11.2% for the quarter to $7.3 billion.
But workers' comp adjustments, health benefit prefunding for retirees, and $1.2 billion in costs chalked up to inflation left the agency showing a $1.9 billion loss for the period ending March 31.
First Class Mail's steady decline continued apace, down 4.1% from last year's quarter, though rate increases placed First Class revenue even with last year's quarter at $1.6 billion. The same held true in Standard Mail, which ticked up 2% in a time when volumes are beginning a slow decline due to an exigency-fueled 5.9% increase this year.
In a press call discussing the financial results this morning, Postal Service CFO Joseph Corbett said his department expected Standard Mail volumes to drop steadily over the next two years in reaction to price increases. He anticipated a total volume of about four billion pieces this year.
Corbett noted that the losses came despite the Postal Service's efforts to aggressively cut costs. He predicted cumulative savings of some $500 million for the year, with about $300 million coming from the recently installed load-leveling program affecting large, pre-sort mailers.
Postmaster General Patrick Donahoe stressed the necessity of the exigent rate increase to the Postal Service's survival, especially in the absence of postal reform legislation that could lessen the agency's healthcare pre-funding burden. But he added that cutting the Postal Service's pre-funding bill was not the magic bullet.
“Those saying health care is all that needs to be done should check their math. It's not,” Donahoe says. “We start each year $2.5 billion in the hole. We lose $1 billion a year on First Class. Reform light is irresponsible.”
Both Donahoe and Corbett made impassioned appeals for comprehensive legislation that ameliorated its prefunding obligations but also baked exigency into the rate base and awarded USPS pricing authority. Donahoe, however, seemed less than optimistic that reform would get passed this year. “Hope springs eternal,” the PMG says, “but some people have some specific reasons for not getting it done. In the long term, we have to have legislation.”
Rep. Darrell Issa (R-CA), who this week cancelled a compromise markup of his postal bill due to what he said was a lack of interest on the part of Democrats, also tolled the bell for legislation. “Both President Obama and myself support a series of cost-cutting reforms, but House Democrats continue to oppose all real reform efforts, including those supported by the President,” Issa said in a statement commenting on the quarterly results.
“Unfortunately, today's announcement that the Postal Service lost $1.9 billion in the second quarter of 2014 comes as no surprise,” says Sen. Tom Carper (D-DE), sponsor of the Postal Reform Act. “The harsh reality is that it's likely we'll continue to see the U.S. Postal Service suffer unsustainable losses that threaten its long-term viability until Congress acts. Congress and the administration need to come to agreement on comprehensive legislation that reforms, right-sizes, and modernizes this American institution.”
For the first six months of its fiscal year, USPS posted an operating income of $1 billion, compared to a loss of $200 million in the first half of Fiscal 2013. Revenue for the period increased by some $700 million.