The U.S. Postal Service (USPS) today reported a net loss of $8.5 billion for the 2010 fiscal year, and warned that "fundamental changes are needed" to stem the rising tide of red ink.

USPS posted operating revenue of $67.1 billion in the fiscal year ending Sept. 30, a $1 billion loss over its 2009 fiscal year. USPS blamed the revenue decline on weak volumes, especially in its core first-class mail service, which generates half of its total revenue and is its most profitable segment.

The net loss was $4.7 billion higher than the 2009 deficit, the post office said. USPS said its biggest impediment to profitability remains a $5.5 billion payment due by the end of its 2011 fiscal year to pre-fund employee retirement health benefits.

In a statement, Joe Corbett, USPS's CFO, said the quasi-public organization has reduced costs by $9 billion over the past two years, mainly by eliminating 100,000 full-time jobs. "We will continue our relentless efforts to innovate and improve efficiency," Corbett said. "However, the need for changes to legislation, regulations, and labor contracts has never been more obvious."

The announcement comes a week after USPS announced a 3.6-percent rate increase for its Express Mail, Priority Mail, and parcel delivery services. Rates for Priority Mail, USPS's two- to three-day delivery service, will rise by 3.5 percent. Rates for its Express Mail next-day delivery product and its portfolio of parcel products will rise by 3.6 percent.

The rate increases are well below the rate hikes recently announced by the two main private delivery carriers, FedEx Corp. and UPS Inc.

USPS will also expand its popular "flat rate" Priority Mail offerings and make its "Hold For Pickup" service available for Priority Mail and commercial parcels moving via first-class mail. Under the "Hold for Pickup" service, which is currently only available for Express Mail shipments, packages are shipped directly to a local post office instead of being left at a recipient's address. The packages are then held at the branch office for pickup anytime during office hours at the recipient's convenience.