The Postal Service reported a net loss of $3 billion on total revenue of $18.5 billion for the fiscal year third quarter of 2021 according to its latest financial results. The loss is roughly a 36% increase over the same quarter last year in which it reported a net loss of $2.2 billion. It also is a sharp downward turn from last quarter in which it reported a net loss of only $82 million.
On the positive side, USPS saw revenue increases in its Marketing Mail and First Class Mail revenue. Revenue for those increased $1.0 billion (42%) and $54 million (1%), respectively, compared to the same quarter last year.
However, Shipping and Packages revenue decreased by $646 million (7.8%). This part of the business has been booming recently thanks to increased demand from a spike in e-commerce during the pandemic. USPS said that the strong demand from the pandemic has begun to wane which led to the revenue decline.
On the expense side, compensation and benefits expenses increased by $113 million (0.9%) percent over the same quarter last year. This was primarily due to contractual wage increases and certain general pandemic-related workplace inefficiencies, offset by a reimbursement of $71 million from the U.S. government for certain eligible pandemic-related leave costs pursuant to the American Rescue Plan Act of 2021.
Transportation costs also increased by $182 million (8.2%) due to highway transportation increases. USPS said that its air transportation expenses decreased, due to a decline in package volume from peak pandemic levels and a shift from air to highway transportation when more economical but allowing for improved reliability and service performance.
USPS Chief Financial Officer Joseph Corbett noted the losses in a statement and stressed that the Postal Service needs to fully implement its 10-year plan to continue to improve its financial performance. “While the financial results for the quarter showed a continuing net loss, our Delivering for America plan outlines our clear strategies to structure our organization for success” said Corbett. “By implementing this 10-year plan in full, we expect to operate in a financially self-sustaining manner within the next several years while continuing to fulfill our universal service mission.”
Part of this plan addresses the pre-funding mandate for retirement benefits that is often blamed for the ongoing financial losses. USPS requests in the plan that Congress enact legislation that would eliminate the pre-funding mandate as well as require current Postal employees to enroll in Medicare when they retire and become eligible for it. The plan proposes that current Postal employees enroll in Medicare Parts A and B after retirement. Medicare Part D would also be implemented through an Employer Group Waiver Plan (EGWP) so that Postal retirees and employees could benefit from subsidies for prescription drug benefits.
The Postal Service also reported its strongest quarterly service performance in Q3 for all First-Class, Marketing and Periodical mail categories and that it is making network infrastructure investments, such as the installation of new package processing equipment and short-term rentals of processing and logistics assets to meet increased demand during the upcoming Christmas season.
“Our improved service performance during the quarter is largely the result of significant organizational focus on implementing core elements of our Delivering for America plan,” said Postmaster General and Chief Executive Officer Louis DeJoy. “We are transitioning from an outdated network and operational posture that was ill equipped to handle the effects of the pandemic on the mix of mail and packages we process – and we expect this volume shift to continue into the foreseeable future. As we establish our new network design and deploy our operating initiatives, we will operate with much greater efficiency and precision, become financially self-sustaining, and deliver greater value to the American public we serve.”