August 9, 2019

Postal Service delivers $2.3 billion loss for third quarter

Mail office's "fixed and mandated costs" are rising faster than its revenues, postmaster general says.

By DC Velocity Staff

The U.S. Postal Service (USPS) is complaining that its "fixed and mandated costs" continue to rise at a faster rate than the revenues generated by its business model, as the organization rung up a net loss of nearly $2.3 billion for its third quarter.

The loss was not only large but also growing, as it rose $767 million over the net loss of nearly $1.5 billion incurred by USPS for the same quarter last year, the service said today. The results continue a trend of red ink, following recent results in 2019 including a $2.1 billion net loss for the second quarter and $1.5 billion loss for its first quarter.

For the third quarter, USPS said its total operating expenses were $19.3 billion for the quarter, an increase of $797 million, or 4.3 percent, compared to the same quarter last year.

However, the Postal Service said its hands were tied on controlling most of that amount, saying the expenses within management's control increased just by $218 million, or 1.2 percent, compared to the same quarter last year. The remainder consisted of costs resulting from actuarial revaluation, discount rate changes, and amortization of unfunded liabilities.

"We continue to focus on maximizing productivity," USPS Chief Financial Officer and Executive Vice President Joseph Corbett said in a release. "While many of our network costs are fixed to meet our universal service obligations, we reduced work hours by approximately 1.7 million relative to the same quarter last year."

Meanwhile, USPS revenue for the third quarter was just $17.1 billion, as First-Class Mail revenue declined by $98 million, or 1.6 percent, compared to the same quarter last year, Marketing Mail revenue declined by $121 million (3.0 percent), and Periodicals revenue declined by $38 million (11.2 percent). The only bright spot on the ledger was an increase of $250 million (4.8 percent) in USPS Shipping and Packages revenue, driven by booming e-commerce sales.

Postal Service management also pointed out that the USPS receives no tax dollars for operating expenses and relies on the sale of postage, products, and services to fund its operations.

"We continue to face imbalances in our business model that must be fixed through legislative and regulatory change," Postmaster General and Chief Executive Officer Megan J. Brennan said in a release. "As we work to effectuate that change, we continue our ongoing aggressive management actions, and remain focused on delivering for the American public, and meeting their evolving business and residential needs."

According to Brennan, the Postal Service's largely fixed and mandated costs continue to rise at a faster rate than the revenues that can be generated within a constrained business model, which is ill-suited to ensure the long-term sustainability of the Postal Service.

In response, the service is adding services to adjust that model. "We are actively adapting to changes throughout the mailing and shipping landscape, providing customers with new solutions that add value for their investment, improve the service we provide, and drive internal efficiencies," Brennan said.

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