Operating expenses and declining revenues, volume add up to $15.9 billion postal loss

Nov. 28, 2012 -- In its latest financial results report, the United States Postal Service announced a $15.9 billion loss for the fiscal year, which ended this September. Mandatory payments for prefunding of retiree health benefits accounted for 17 percent of operating expenses, totaling $11.1 billion. But even without the required payments, the Postal Service would have lost $4.8 billion due to decline revenues, decreasing volumes and additional operating expenses. Revenue for the fiscal year totaled $65 billion.

Mail Volume and Revenue
Mail Revenue Volume Charts

First and Standard Class mail accounts for 70 percent of postal revenues. For the fiscal year, First Class mail revenue declined 3.9 percent and Standard Class mail declined 4.3 percent, when compared to the 2011 fiscal year period. Periodical revenues account for about 3 percent of postal revenues and decreased 4.9 percent this fiscal year. Periodical volume decreased 4.7 percent.

Jack Widener, ABM's postal counsel, expects mail volume, and thus revenue, to continue to decline. "A somewhat positive sign was the rate of decline in First Class revenues did slow to 3.9 percent from 6.5 percent in 2011," he said in an email to ABM members. "On the negative side, Standard mail accounts for 25 percent of revenue, and after having an increase in revenue of 2.9 percent in 2011, it suffered a decrease in 2012."

Total mail volume declined about 25 percent in the 2012 fiscal year period compared to the 2006 fiscal year period. This fiscal year, pieces totaled 160 billion compared to 213 billion in 2006.

Operating Expenses
Operating Expenses Charts

Personnel-related costs account for 81 percent of operating expenses. Total career employees dropped to 528,000 in 2012 compared to 557,000 in 2011 and 696,000 in 2006. "Work hour reduction have made significant contribution to reducing expenses," noted Widener. "They include network consolidation, streamlining of area and district offices, offering incentives for employees to retire or resign and adjusting delivery routes. The Postal Service is beginning to reach the limits of future reductions because of the present network structure."
Mail-processing facilities decreased to 417 to 461 in 2011. The decline was a strategic move by the Postal Service to reduce operational costs by $2.1 billion annually. The Postal Service cut nearly 300 postal-managed retail and delivery facilities this fiscal year (31,857 in 2012 vs. 32, 146). "The original plan was to eliminate many of these," wrote Widener, "but due to political and local pressures, a different approach is being considered to reduce expenses in this area."

Total vehicle inventory decreased by about 1,300 this fiscal year with no significant vehicle purchases. "The Postal Service is delaying many capital purchases, such as vehicles, in reaction to its financial position. This expense will eventually have to be incurred, not only for vehicles, but for other equipment as well. Capital investment at some point must increase  for the replacement of machinery and vehicles, as well as investment in new technologies."

By Elizabeth A. Reid

Photo credit, with thanks: USPS