USPS Reports $2.4 Billion Loss in 3rd Quarter

Increase in workers’ compensation expenses, reduced mail volume cited as primary reasons.

By Chandra Johnson-Greene
Thursday, August 6, 2009

The U.S. Postal Service reported this week that it has ended its third quarter with a net loss of $2.4 billion. An increase of $807 million in workers’ compensation expenses as well as a reduction in mail volume were cited as the primary reasons for a $1.6 billion decrease in revenue for the quarter.

Third quarter mail volume totaled 41.6 billion pieces, down 7 billion pieces— or 14.3 percent—compared to a year ago, marking the largest consecutive three-quarter drop in total volume since 1971.

The USPS has incurred net losses in 11 of the last 12 fiscal quarters. The fiscal 2009 year-to-date net loss is $4.7 billion, compared to a $1.1 billion loss in the same period last year. Despite actions to reduce costs and grow revenue, the USPS projects a net loss of more than $7 billion at fiscal year-end. The organization also attributed the projected loss to its obligation to pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits.

The USPS states that various cost-saving initiatives are under way, including matching work hours to the reduced mail volume, realigning carrier routes, and freezing officer and executive salaries at 2008 pay levels.

“Securing the fiscal stability of the Postal Service will require continued efforts in all of these areas, as well as further review of retiree health benefit prefunding,” Postmaster General John Potter, said in a statement. “It also will require that the Postal Service gain flexibility within the law to move toward five-day delivery, to adjust our network as needed, to develop new products the market demands and to work with our unions to meet the challenges ahead.”

Operating revenue for the USPS stands at $16.3 billion, a decrease of nearly $1.6 billion, or 9 percent, from the same period last year, and operating expenses are at $18.7 billion, a reduction of $294 million, or 1.5 percent, from the same period last year.

Third-Quarter 2009 USPS Mail Revenue

First-Class Mail 53%
Standard Mail 24 %
Shipping Services 12%
Other Mailing Services 11%

USPS Continues String of Quarterly Losses