Postal Service posts $4.5 billion net loss for quarter preceding Covid-19

The U.S. Postal Service today reported a net loss of $4.5 billion for its fiscal second quarter, more than doubling the troubled agency’s red ink compared to the same period last year despite a reporting period that preceded most Covid-19 shutdowns and even got a bump in business from U.S. Census mailings.

Those ideal conditions allowed USPS to collect a slight increase in revenue for the period between January 1 and March 31, adding $348 million compared to its 2019 performance to reach $17.8 billion. But even that extra cash was not enough to offset the service’s core problems—like its large pension obligations and a “secular decline in mail” caused by a digital society—and the result was a loss more than double its loss of $2.1 billion for the second quarter of 2019.

The post office’s terrible finances will likely set up a showdown with a Trump Administration that has long pressed the agency to hike its parcel delivery rates for packages shipped by amazon.com inc. and other e-commerce businesses. Postmaster General Megan Brennan has resisted those calls for years, saying its rates were designed to maximize volume for parcels—already its most profitable sector. But Brennan is set to retire on June 15, to be replaced by Louis DeJoy, a supply chain operations executive who spent his career in the private sector at New Breed Logistics and XPO Logistics Inc.

The USPS’ new leader will take over just as the service increases its pleas for coronavirus rescue funds, saying its persistent losses pose an existential crisis. “Since the Postal Service began experiencing the impacts of the pandemic in mid-March, the pandemic did not have a material impact on its second quarter results, although significant impacts are expected for the remainder of the year,” USPS said in its quarterly earnings report. “The Covid-19 pandemic, which has severely affected the U.S. economy, began to negatively affect the Postal Service during late March with declining mail volume, and the impact has continued to worsen since then. It is estimated that the Covid-19 pandemic will substantially increase the Postal Service’s net operating loss over the next eighteen months, threatening the Postal Service's ability to operate.”

Looking at finances by sector, USPS said its First-Class Mail revenue increased by $89 million, or 1.4% compared to the same quarter last year, while Marketing Mail revenue declined by $94 million, or 2.5%, and Shipping and Packages revenue increased by $386 million, or 7.1%. The Postal Service now expects those trends to accelerate in coming months as the nation experiences a surge in e-commerce as a result of quarantines, shelter-in-place orders, and travel and logistics restrictions in connection with the pandemic.

"Although the pandemic did not have significant impact on our financial condition in our second quarter, we anticipate that our business will suffer potentially dire consequences for the remainder of the year, and we are already feeling those impacts during the last half of March,” Brennan said in the release. 

“At a time when America needs the Postal Service more than ever, the pandemic is starting to have a significant effect on our business with mail volumes plummeting as a result of the pandemic. As Congress and the Administration take steps to support businesses and industries around the country, it is imperative that they also take action to shore up the finances of the Postal Service, and enable us to continue to fulfill our indispensable role during the pandemic, and to play an effective role in the nation’s economic recovery,” Brennan said.

Editor's note: This story was revised on May 8 to clarify that DeJoy was not personally nominated by President Trump. Rather, he was approved as Postmaster General by a vote of the postal service’s Board of Governors, who were in turn nominated by the President and approved by the U.S. Senate.