As Mail Volume Declines, Postal Service Losing Money, Cutting Hours

Mail volume and revenue is declining at the Postal Service and revenue may exceed last year’s loss of $2.8 billion. The organization is taking steps to cut expenses and has been given authority to engage in long-term borrowing to stay afloat.

The Postal Service ended its first quarter (Oct. 1 – Dec. 31) with a net loss of $384 million. There was a decrease of 5.2 billion pieces of mail compared to the same period last year. The 9.3 percent volume drop marked the eighth consecutive quarter of accelerating volume declines. The Postal Service projects volume for the year will be down by 12-15 billion pieces.

The final first quarter results will be published later this month. The preliminary results, released during a Board of Governors meeting, include operating revenue of $19.1 billion, a decrease of $1.3 billion, or 6.3 percent, compared to the same period last year, and operating expenses of $19.5 billion, a reduction of approximately $200 million, or 1.1 percent, from the first quarter of last year. While lower energy prices in the first quarter offered some relief, there was expense pressure from record high cost-of-living adjustments that are part of the national collective bargaining agreements.

Most of the decrease in mail volume is attributable to the worsening recession, which has adversely affected all classes of domestic mail. First-Class Mail volume decreased by 1.8 billion pieces and Standard Mail volume was down 3.0 billion pieces in the first quarter.

If current revenue and volume trends continue, the Postal Service could experience a year-end net loss significantly higher than last year’s $2.8 billion loss. Retail sales, employment and investment spending are all significant indicators of mail demand. All three of these indicators are projected to decrease significantly in 2009.

“We are taking bold steps to cut costs immediately. At the same time, we are examining, realigning and streamlining our business to address longer-term financial pressures while continuing to provide high levels of service to the America public,” Postmaster General John Potter told the Governors. These steps include:

  • Eliminating $5.9 billion in costs through fiscal year 2010, including the reduction of 100 million work hours this year. In quarter one, almost 27 million work hours were reduced compared to the same period last year.
  • freezing the salaries of all Postal Service officers and executives at 2008 pay levels,
  • reducing travel budgets
  • halting all construction of new postal facilities
  • requesting Congress to provide legislative assistance by adjusting a portion of the payment requirements of more than $7 billion a year for retiree health benefits
  • providing the Board with the authority to adjust the number of delivery days, if necessary, based on mail volume
  • working with the National Association of Letter Carriers to implement a new process to evaluate and adjust delivery routes to help achieve work hour reduction targets.
  • consolidating  excess capacity in mail processing and transportation networks while protecting service.
  • reducing employee complement through attrition and voluntary early retirement. The number of career employees at the end of the first quarter was down by 24,240 compared to the same time a year ago.

The Board has also voted to give the Postal Service the authority to engage in long-term borrowing.