Postal Service Posts $200 Million Net Loss in Q1

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By on February 15, 2017 in Agency News with 0 Comments

Image of postal service priority mail boxes and envelopes

The Postal Service recently announced that it experienced a net loss of $200 million in the first quarter of FY 2017.

Controllable income for the quarter was $522 million compared to $1.3 billion for the same period last year, a decrease of $735 million. Operating revenue decreased by $155 million, much of which the Postal Service blamed on the loss of the exigent surcharge.

This additional charge was temporarily levied on all products or services where the USPS is considered to have a monopoly, such as First-Class mail, but did not apply to competitive products, such as Priority Mail.

The surcharge had been put in place to offset revenue declines from the recession and expired on April 10, 2016 at which time the Postal Service had to drop its prices for the first time in almost a century. The price of a stamp, for instance, went from 49 to 47 cents.

Postmaster General and CEO Megan J. Brennan warned last year that cutting the prices would lead to further financial losses. Last February, she said, “Removing the surcharge and reducing our prices is an irrational outcome considering the Postal Service’s precarious financial condition.”

The decline in revenue was also attributable to a decline in revenue from First Class mail which decreased by $568 million, due in part to the removal of the exigent surcharge but also to continuing migration away from traditional mail to electronic means of communication.

On the positive front, the Postal Service did say that it delivered a record number of packages during the 2016 Christmas season. For the quarter, its Shipping and Packages business experienced revenue growth of $701 million, or 14.7 percent over the same period in the prior year.

Despite the continuing dire financial situation of the Postal Service, its Chief Financial Officer remained hopeful. According to CFO and Executive Vice President Joseph Corbett:

Despite the loss of revenue from the expiration of the exigent surcharge and continued effects of electronic migration on First-Class Mail revenue, we continue to believe there is strength in the postal system, and that there is a path forward for us to return to financial health. However, the Postal Service’s return to long-term financial stability is only possible when our continuing actions to improve efficiency, reduce costs and expand our use of technology are combined with our proposed legislative and regulatory reforms that together will enable us to continue to meet our universal service obligations and invest in the future of the Postal Service and the mailing industry as a whole.

Legislation was recently introduced in Congress that would potentially help the Postal Service with its financial situation. It would make a number of reforms to Postal employees’ benefits as well as allow for a rate increase on first class stamps. See Legislation Introduced to Reform Postal Employees’ Benefits

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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.

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