At the end of its fiscal year, the Postal Service’s books are oozing red ink, recording a $5.1 billion loss.
It could have been much worse, however. The loss would have totaled $10.6 billion due to a mandated payment of $5.5 billion for retiree health benefits, if not for legislation passed to postpone the payment (see our coverage on the legislation passed here).
Despite a 6.3 percent increase, or $530 million, in the agency’s shipping service revenue, which includes priority mail and express mail, any gains were overshadowed by an overall mail volume decline by 1.7 percent from 2010 to 2011.
In addition, the Postal Service reported a 5.8 percent decline, or $2 billion loss in first-class mail, which serves as its most profitable product.
“The continuing and inevitable electronic migration of first-class mail, which provides approximately 49 percent of our revenue, underscores the need to streamline our infrastructure and make changes to our business model,” said Joe Corbett, chief financial officer for the Postal Service. “Since peaking at 213 billion pieces in 2006, our volume has continued to decline each year.”
To cope financially, the Postal Service reduced its work hours by 34 million in 2011. Since 2011, work hours have been reduced by 28 percent, despite delivering to almost 14 million additional addresses.
Patrick Donahoe, postmaster general and CEO, said that to return to profitability, the Postal Service must reduce its annual costs by $20 billion by 2015.
“The Postal Service can become profitable again if Congress passes comprehensive legislation to provide us with a more flexible business model so we can respond better to a changing marketplace,” said Donahoe. “We continue to take aggressive cost-cutting actions in areas under our control and urgently need Congress to do its part to get us the rest of the way there.”