Package, shipping services lone positives in worsening financial situation for USPS

Gains in those areas can't offset continued drop in first-class mail.

By Mark B. Solomon

Once again, shipping and package services provided arguably the lone bright spot in an otherwise darkening financial picture for the U.S. Postal Service (USPS).

USPS reported a $5.2-billion net loss in its fiscal third quarter ending June 30, a significantly wider deficit than the $3.1-billion net loss it reported for the same period in 2011. USPS lost $3.2 billion in its fiscal second quarter.

The Post Office blamed most of the third quarter's loss on the $3.1 billion in expenses it was required by law to make to prefund retiree health benefits. On Aug. 1, USPS defaulted on a scheduled $5.5-billion prefunding payment due to insufficient cash reserves. Without help from Congress, it will default on a similar payment of $5.6 billion due Sept. 30, it said.

The third quarter's results are indicative of the Postal Service's overall fiscal year so far. In the first three quarters, USPS posted a combined net loss of $11.6 billion, and similar to this past quarter, $9.2 billion of that total loss is attributed to the costs of pre-funding retiree health benefits, it said.

BRIGHT SPOT: SHIPPING AND PACKAGING
For the second consecutive quarter, USPS' shipping and package segments showed strength. These segments include Express and Priority Mail, and "Parcel Select," which provides "last-mile" deliveries of packages to any residential destination. Revenue for those services totaled $3.3 billion, up 9 percent from the same period a year ago. Volumes grew year-over-year by 5.2 percent to 43 million pieces.

As has been the case for years, however, gains in shipping and package services could not come close to offsetting the persistent decline in first-class mail, the Post Office's most profitable product. In the third quarter, first-class mail volumes fell 4.4 percent from the same period a year ago, as more communications and transactions were processed electronically.

The decrease in first-class mail resulted in a 3.6-percent drop in overall mail volumes and a less than 1-percent decline in operating revenue, USPS said.

Even after subtracting the estimated $9.2-billion cost for prefunding health benefits, USPS has still lost $2.4 billion so far this fiscal year.

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