USPS Loses $5.2B in the Third Quarter

Postal service says legislative changes are now critical for its financial survival.

By Alexandra Skamangas
Friday, August 10, 2012

The United States Postal Service (USPS) is facing an increasing decline in revenue, losing $5.2 billion in the third quarter, which ended June 30. The loss is about $2.1 billion more than the $3.1 billion loss it came up against in its third quarter of 2011. 

The $5.2 billion loss this year has cancelled out its 9 percent revenue increase, which was generated by shipping services and package delivery. Expenses for the mandated pre-funding of retiree health benefits, and the steady downturn of the USPS’ first-class mail service, are responsible for about $3.1 billion of its total $5.2 billion deficit.

Results show that the total year to date loss is about $11.6 billion, a $5.7 billion increase from the same interval the year before. About $9.2 billion of the year-to-date total loss has come from the building expenses of the pre-funding retiree health benefits. 

Third quarter results show an aggregate mail volume of 38.5 billion pieces, a decrease of 1.4 billion pieces or 3.6 percent from the third quarter last year. 

The USPS’ data indicates the rapid move towards electronic mailing options, causing the ongoing reduction of First-Class Mail, a volume decrease of 4.4 percent. The $15.6 billion in operating revenue from this year’s third quarter decreased by $153 million from the same period in 2011. Operating expenses increased by $1.9 billion or 10.2 percent from the year prior, totaling $20.8 billion for the third quarter of 2012.

The USPS’ Postal Service Business Plan is the alleged path towards financial security for the USPS, which must be passed by Congress. Such changes consist of an $11 billion compensation of pension plan overfunding to ameliorate debt, cutting mail delivery to five days a week—an adjustment raising concern with several publishers—and the application of a Post health insurance program to rid the pre-funding for retiree health payments.

Until these legislative changes are implemented, the USPS says, reducing costs and revenue from new package delivery will not be enough to stop the ongoing deficiencies the Postal Service is encountering.

Just as the Postal Service’s inadequate funds drove them to default on the $5.5 billion prefunding payment owed to the U.S. Treasury on August 1st, the USPS anticipates that it will again be forced to default on a second payment of $5.6 billion expected on September 30th, 2012.

Over the past five years, the USPS has eliminated roughly $14 billion from its yearly cost base, and shipping services have produced a total of $3.3 billion in revenue in the third quarter, a volume growth of 43 million pieces or 5.2 percent when compared to 2011’s third quarter. However, the USPS says there is no existing borrowing capacity left for the Postal Service, and estimates for the current fiscal year display low levels of revenue through the end of October 2012.

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