Postal Service posts $2 billion loss

Revenue up, but retiree fund debt drags down quarter

Postmaster General Patrick Donahoe gestures as he speaks during the Senate Homeland Security and Governmental Affairs Committee hearing on Capitol Hill, Thursday, Sept. 19, 2013, in Washington. According to Donahoe, the Postal Service may need an emergency rate increase to stay afloat. (AP Photo/Carolyn Kaster)
Postmaster General Patrick Donahoe gestures as he speaks during the Senate Homeland Security and Governmental Affairs Committee hearing on Capitol Hill, Thursday, Sept. 19, 2013, in Washington. According to Donahoe, the Postal Service may need an emergency rate increase to stay afloat. (AP Photo/Carolyn Kaster)

WASHINGTON -- Despite an increase in revenue for nearly all of the U.S. Postal Service's products, the agency continues to be mired in debt because of a congressional requirement to pay about $5 billion into a future retiree health care fund, post office officials said Monday.

In its latest quarterly filings for the period ending June 30, the post office reported a net loss of $2 billion, up from a net loss of $740 million over the same period last year.

But the service did report operating revenue of $16.5 billion, a $327 million increase over the same period in 2013. Post office officials attribute the growth to an increase in mail prices that started in January, new sales and marketing initiatives, and continued growth in its shipping and packaging business.

"A lot of this growth is attributed to changes we've made such as price increases and the efficiencies that our employees have made over the last few years," said Patrick Donahoe, the postmaster general.

A large part of the increased revenue in package delivery comes from contracts with FedEx and UPS. Although neither the postal service nor UPS would comment on their contract, the post office delivers an average of 2.2 million FedEx packages a day, or about 30 percent of the company's U.S. ground shipments.

Total mail volume was down slightly for the quarter -- 37.7 billion pieces of mail compared with 37.8 billion pieces over the same period last year. Shipping volume was up 7.7 percent, and standard mail -- also referred to as junk mail -- was up nearly 1 percent. Shipping revenue was $3.1 billion for the quarter, while standard mail was $4.2 billion.

First-class mail volume, the main source of revenue for the post office, was down 1.4 percent, but that was offset by the price increase. First-class mail revenue was $21.5 billion.

Because of the net loss, the Postal Service said it would not be able to meet a $5.7 billion payment for its future retiree health care fund. The payment is due Sept. 30.

A 2006 law requires the service to fund its future retirees' health benefits.

Congress mandated the payments because projections showed a steady decline in mail volume over the next decade, and lawmakers feared that the health care plans for post office employees would have to be bailed out by the government if the service did not prepay into a fund.

But the prepayments, the 2008 recession and an overall drop in the use of the post office by Americans have led to a faster decline in revenue than was originally projected, and the Postal Service has not made any of its health care payments in the past three years.

Postal officials and the service's workers' unions have called on Congress to pass legislation that will help reduce the burden of funding health care benefits in advance and overhaul the agency's business model. Bills are pending in the House and Senate, although it is unclear whether Congress will pass legislation before the election.

"We really need Congress to resolve this issue with the prefunding and get that dark cloud away from us," Donahoe said.

Donahoe has also asked Congress to allow the post office to eliminate mail delivery on Saturdays to save money.

Union officials said that was misguided.

"Given the positive mail trends, it would be irresponsible to degrade services to Americans and their businesses, which would drive away mail -- and revenue -- and stop the postal turnaround in its tracks," said Fredric Rolando, president of the National Association of Letter Carriers. "Lawmakers need to preserve and strengthen the profitable postal networks ... while fixing the prefunding fiasco."

A Section on 08/12/2014

Upcoming Events