Losses continue for United States Postal Service

As the quarters go by, the steep financial losses continue to mount for the United States Postal Service (USPS).

The USPS reported today that it had a $586 million net loss for the fiscal third quarter, which represents a $1.4 billion reduction compare to a $2 billion net loss for a same quarter a year ago. For the fiscal first and second quarters, the USPS had $754 million and $1.5 billion net losses, respectively.

Quarterly operating income was close to flat year-over-year at $16.5 billion. USPS officials said that based on the seasonal nature of its business, the fiscal third quarter is historically its lowest revenue quarter per year. And operating expenses dropped $1.3 billion, or 7.2 percent, annually.

The USPS remains hampered by its retiree health benefits prefunding payments, which it has been unable to meet, due to a lack of capital. What’s more, it continues to call on Congress to draft and sign legislation into law to not only reduce the payments, which it has been unable to meet, but also includes a smarter delivery schedule, greater control over its personnel and benefit costs, and more flexibility in pricing and products to provide the necessary cash flows.

An ongoing bright spot for the USPS is its Shipping and Package group, whose revenue was up 10.6 percent at $3.561 billion, with volume up 13.4 percent at 1.073 billion pieces. Revenue and volume gains for the group were paced by gains in Priority Mail, Parcel Select, Parcel Return, and Standard Parcels, and First Class Packages.

USPS said that Shipping and Packages revenue continued to show solid volume growth as a result of successful efforts to compete in ground shipping services and last mile e-commerce fulfillment markets, including Sunday delivery growth. And it said that volume saw strong end-to-end growth in response to “customers’ increased usage of online shopping, which provided a surge in package volume with a number of packages delivered during the fiscal year 2015 holiday season,” adding that to accommodate this surge in volume and minimize service disruptions during the holiday season and beyond, Sunday package delivery service is now available in limited U.S. markets.

Shipping and Packages accounts for 21.6 percent of USPS revenue but only 2.9 percent of total volume. The USPS said that the costs it incurs to provide these services are substantially higher than its costs related to First Class Mail, with the USPS needing to earn roughly $2.50 in Shipping and Package revenue to replace the contribution lost from each $1 of First Class Mail revenue.

“The continued growth of our shipping and package services is a direct result of the Postal Service’s continued efforts to offer consumers more choice, excellent value and reliable service in a growing and competitive marketplace,” said Postmaster General and Chief Executive Officer Megan Brennan in a statement. “We are investing in our network and continually enhancing our services to best compete for America’s shipping and package delivery business.”

Other operational metrics and financials for the USPS’s fiscal second quarter performance include:
-operational expenses of $17.1 billion dropped 7.2 percent or by $1.3 billion;
-total volume of 36.8 billion pieces, which was down 1.9 percent annually;
-First-Class mail, the USPS’ most profitable service line, saw volume drop 2.6 percent to 15.091 billion pieces
-Standard Mail volume (which represents about 50 percent of total USPS volume) down 2.1 percent to 18.797 million pieces; and
-Parcel Services volume (for Parcel Select, Parcel Return, and Standard Parcels) rose 18.2 percent to 473,000 packages