Losses Widen for USPS in Second Quarter
Without legislative action, the USPS will default on its payments to the feds.
As it has warned in the not too distant past, this is a make or break year for the USPS. The organization released its fiscal second quarter financial results and losses have widened by $600 million to a net loss of $2.2 billion for the quarter. At this rate, without legislative action, the USPS will default on its payments to the federal government by the end of its fiscal year.
Once again, revenues and volume are down. Revenues for the quarter (January 1 to March 31, 2011), declined $568 million, or 4 percent, to $14 billion compared to the same period last year. Volume of 41 billion pieces is a 3 percent drop from 2Q 2010.
The periodicals portion of the revenue was $443 million and 1.7 billion pieces.
All of this is going on despite the USPS’ continued efforts to reduce costs. More than 130,000 full-time equivalent positions have been eliminated over the last three years, facilities have been closed or merged and the executive ranks have been shuffled and reduced. The USPS is currently trying to push through a proposal to reduce the delivery schedule to five days a week—a plan it expects to save $3.1 billion annually, which has been disputed by the PRC.
The staffing and organizational restructuring is expected to save between $1.2 billion and $1.6 billion in fiscal 2011, but that may be wiped out by rising gas prices.
Rate increases for mailing services, within the 1.7 percent CPI cap, took effect in April, after the close of the organization’s second quarter, and are expected produce about $720 million in additional revenue. That too, however, will be dampened by the continued increase in digital communications.
Despite its efforts to reduce costs and find new avenues of revenues, the USPS is going to need legislative action from Congress to ease its woes. "The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model," says postmaster general Patrick Donahoe in a prepared statement. "We are committed to working with Congress and the administration to resolve these issues prior to the end of the fiscal year. The Postal service may return to financial stability only through significant changes to the laws that limit flexibility and impose undue financial burdens."