Postal Service reports $2 billion loss for third quarter despite revenue gain
WASHINGTON — The United States Postal Service continued its nearly six-year run in the red, reporting an overall loss of $2 billion for the third quarter despite increasing its revenue by 2 percent compared with the same time last year.
The agency announced Monday that it will also default for a fourth consecutive year on its $5.7 billion prefunding payment for retiree health benefits. The Postal Service and postal-worker unions have asked Congress to repeal the controversial requirement, which became law in 2006.
USPS operating revenue increased $327 million in the third quarter compared with the same span in 2013, reaching $16.5 billion with help from a temporary rate increase that took effect in January and growth in the Postal Service’s package business, according to the agency’s latest financial report.
But total operating expenses amounted to $18.4 billion, giving USPS an overall loss. A workers’ compensation adjustment helped drive the cost, according to the agency.
Expenses for compensation and benefits rose by $15 million compared with the third quarter of 2013, but the agency kept those costs from rising even higher with work-hour reductions and “more efficient use of available labor flexibility,” according to a USPS statement.
Joseph Corbett, USPS chief financial officer, said Monday that the Postal Service needs about $10 billion in new investments to replace its aging vehicle fleet and buy additional sorting equipment, among other upgrades.
“Due to continued losses and low levels of liquidity, we’ve been extremely conservative with our capital, spending only what is deemed essential to maintain existing infrastructure,” he said.
First-class mail revenue declined 1.4 percent in the third quarter, extending a long trend of contraction for that cornerstone service of the USPS. Nonetheless, revenue in that category increased by 3.2 percent because of the temporary rate increase.
Shipping and package revenue increased 6.6 percent, and standard mail rose 5.1 percent, the agency reported. The Postal Service has been trying to compete with the likes of UPS and FedEx in the package industry as a way to make up for declining demand for first-class mail.
“We’ve been effective in developing and marketing our products, and we’re improving how we leverage data and technology — all providing a higher return on mail for many customers and causing them to take a fresh look at the Postal Service,” Postmaster General Patrick Donahoe said in a statement.
Despite steep financial losses, USPS numbers have improved in recent years. In 2012, the agency reported a record loss of nearly $16 billion, compared with a loss of $5 billion in 2013.
Congress has tried for years to pass legislation that would overhaul the struggling agency, but lawmakers have been unable to agree on whether to include service cuts such as ending Saturday mail delivery and limiting door-to-door service in favor of more drop-offs at community “cluster boxes.”
Sen. Tom Carper, D-Del., who sponsored a postal bill last year with Sen. Tom Coburn, R-Okla., said the financial report “underscores the urgent need for comprehensive postal reform — reform that can only come from Congress.”
Rep. Darrell Issa, R-Calif., who has proposed controversial legislation to end Saturday mail delivery, agreed that lawmakers need to take action. “Unfortunately, some in Congress still have not come around to the need to allow the struggling institution to right size itself,” he said.
Fredric Rolando, president of the National Association of Letter Carriers, focused on the positives in the report, saying cuts in service would “stop the postal turnaround in its tracks.”
“Lawmakers need to preserve and strengthen the profitable postal networks — which are the future of the USPS as it increasingly delivers not just six but seven days a week — while fixing the prefunding fiasco,” Rolando said.