USPS Ends First Quarter with $1.3 Billion Loss

By on February 8, 2013 in Current Events with 6 Comments

The staggering financial losses for the Postal Service continue as the organization announced today that it ended the first quarter of its fiscal year with a net loss of $1.3 billion. The news follows on the heels of ending the 2012 fiscal year with a $15.9 billion loss, the largest in its history.

Due to its ongoing losses, the Postal Service recently announced it would move forward with accelerated cost cutting actions to help maintain liquidity, such as eliminating Saturday first class mail delivery, a change that is expected to save $2 billion per year.

The first quarter is traditionally the Postal Service’s strongest financial quarter, mainly due to the increased amount of shipping during the holidays. The Christmas mailing season resulted in an increase in competitive package volume as customers took advantage of Postal Service Priority Mail flat rate pricing and increasingly turned to the Postal Service for last-mile delivery. Continued growth in Shipping and Package revenue (+4.7%) and increased efficiency also helped to mitigate, but could not fully offset, the financial effects of continued First-Class Mail volume declines.

“The encouraging results from our holiday mailing season cannot sustain us as we move deeper into the current fiscal year and face continuing financial challenges,” said Postmaster General and CEO Patrick Donahoe. “By moving forward with the accelerated cost-cutting actions directed by our Board of Governors, we will continue to become more efficient and come closer to achieving long-term financial stability.”

The Postal Service blames Congress for much of its continued financial losses for not passing comprehensive postal reform legislation relating to prefunding retiree health benefits. Donahoe added, “We urgently need Congress to do its part and pass legislation that allows us to better manage our costs and gives us the commercial flexibility needed to operate more like a business does. This will help ensure the future success of the Postal Service and the mailing industry it supports.”

The Postal Service was forced to default on the health benefit payments last year ($11.1 billion) and may be forced to default on this year’s $5.6 billion payment absent passage of legislation.

There have been efforts to introduce legislation in the past, such as Rep. Darrell Issa’s (R-CA) 2011 Postal Reform Act, however the bill died without ever advancing to a vote in the House.

Revenue from First-Class Mail, the Postal Service’s most profitable service category, decreased $237 million, or 3.1 percent from the same period last year, with a volume decrease of 834 million pieces, or 4.5 percent. The continued migration toward electronic communication and transactional alternatives is the most significant factor contributing to this ongoing decline.

Operating revenue was $17.7 billion, a decrease of $17 million over the same period last year, and operating expenses were $18.9 billion compared to $20.9 billion last year.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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