Postal Service loses only $586M in 3rd quarter

The Postal Service’s most recent financial report offers a mixed picture of the agency’s finances. It reported a net loss of $586 million for the quarter that ended on June 30, an improvement over a $2 billion loss recorded during the same period last year. Operating revenue was steady at $16.5 billion.

The third quarter is typically the slowest for the Postal Service due to the seasonal nature of its business.

Joseph Corbett, CFO, USPS
Joseph Corbett, CFO, USPS

Joe Corbett, the Postal Service’s chief financial officer, said a price increase that went into effect on certain mail products on May 31 helped mitigate the losses. So did double-digit growth in the agency’s shipping and package businesses. Shipping and package volume rose 13.4 percent. Revenue rose by $340 million, or 10.6 percent, over the third quarter of fiscal 2014.

The National Association of Letter Carriers hailed the latest report as a sign of turnaround. The Postal Service’s operating profit year-to-date stands at $1.2 billion, an increase of $200 million over last year.

“Today’s results show the impressive Postal Service financial turnaround continuing in full force,” Frederic Rolando, the union’s president, said in a statement.

Yet Postal Service officials are more cautious in describing the gains. Corbett acknowledged that productivity had increased over the first nine months of the fiscal year. Yet the agency continues to struggle with the decline in first-class mail, the most lucrative part of its business. It delivered 2.6 percent less first-class mail, compared to the same period last year.

In addition, the Postal Service is paying more toward employees’ compensation. Growth in shipping and packaging comes with additional costs because it is more labor intensive, Corbett said. In addition, labor union agreements mandated pay raises. That  caused operating expenses within the Postal Service’s control to rise by $256 million over this period a year ago. The Postal Service does not consider other labor costs, such as workers’ compensation and health care expenses, within its control.

USPS has posted losses of $54.5 billion since 2007

The Postal Service has reported $54.5 billion in losses since 2007. It attributed much of its financial situation to a legal requirement to prepay retirees’ health care. It will likely default again on the next payment, of $5.7 billion, due at the end of September, Corbett said. The agency has refused to pay that debt since 2012. It currently owes $22.4 billion.

Postmaster General Megan Brennan
Postmaster General Megan Brennan

Congress repeatedly has failed to pass legislation to undo the prepayment requirement. But Postmaster General Megan Brennan said she was “cautiously optimistic” about prospects this year.

“We’ve been having very productive conversations with the principles of the respective unions, the management associations, as well as on the Hill and with the industry,” she said.

Yet the upcoming national election “would indicate that we have a compressed calendar in which to land on some key provisions, highest value and find common ground,” she added.

The Postal Service’s regulatory body has offered the Postal Service financial relief by letting it extend a surcharge originally intended to offset losses during the recent recession. The agency may continue collecting the surcharge until it receives a total of $4.6 billion from it, which is likely to come at the end of March or early April, Corbett said.

Meanwhile, negotiations with two of its labor unions over new agreements have stalled. It has entered mediation with the American Postal Workers Union. It is in arbitration with the National Rural Letter Carriers Association, Brennan said. Both contracts expired in May.

Brennan added that the Postal Service was exploring new opportunities for revenue. It is exploring grocery delivery and digital services that will attract new customers and increase loyalty among existing ones. For example, it is developing a digital tool that will give residential customers a preview of the mail that will be delivered that day.

“It’s an important way of being part of the daily digital lives of our customers,” she said. “It’s also an exciting way of leveraging an information platform that should spark a lot of innovation in the mailing industry.”

Sen. Tom Carper (D-Del.), the ranking member of the Homeland Security and Governmental Affairs Committee, said USPS’ net loss illustrates the challenges the agency is facing from financial and legislative burdens, along with the decline of first class mail revenue.

“Today’s news underscores that the only way to alleviate the Postal Service’s financial challenges and preserve its opportunity to grow in the digital age is for Congress to pass comprehensive postal reform legislation,” Carper said, in a statement. “Though the current financial state of the Postal Service is better than past financial reports, continued losses of this kind do little to bring the Postal Service out of its fiscal quagmire.”

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