USPS volumes rise as does financial losses

February 11, 2019


Another quarter, another loss, as the United States Postal Service (USPS) reported its latest earnings, for the period ending December 31, 2018, a quarterly loss of $1.5 billion. Despite overall revenue increasing 2.9%, a net losses were $1 billion more than the same period the previous year, was reported. As noted by the USPS in its financial filing, growth was offset by increased work hours/related salaries and benefits & increases in transportation costs due to higher volumes. “Volume growth has been driven by consumers’ continued use of online shopping, which provided a surge in package volume with a record number of packages delivered during both the calendar year 2017 and 2018 holiday seasons,” said the USPS. “To accommodate this surge in volume and to avoid service disruptions during the peak holiday seasons, we increased Sunday delivery service for some of our customers in limited U.S. markets and added non-career employees for the peak seasons in accordance with our labor agreements.” For the quarter, volume for the USPS’ Shipping and Parcels division increased 5.4% to 1.8 billion packages. By service, First Class Package Services, which includes Retail and First-Class Package Services – Commercial, recorded the biggest increase, 14.9% to 378 million packages. The largest service, Parcel Services, recorded a 4.2% increase to 946 million packages. Still, the Shipping and Parcels division only accounts for 33% of USPS’ revenue. The largest division, First Class Mail and the most profitable of USPS’ products, declined 1.2% or by $81 million. To help stem the losses, the USPS implemented a hefty annual rate increase last month. The postal group estimates that the rate increase bring in about $891 million each year for its “market-dominant” products, which include letters and marketing mail, and an additional $870 million for its competitive services, including its package business. However, this will not be enough to ease such steep losses as reported for the period ending December 31, 2018. A number of postal reforms have been introduced in Congress. However, none seem to go anywhere. The President of the U.S. initiated a postal reform task force in 2018 and whose findings, which were made public in December 2018, were not decisive and likely to fall by the waist along with other referendums. Among the recommendations were:

  • To eliminate the ability of employees to negotiate over compensation
  • Develop a dual-tiered pricing model—one for essential services and another for deliveries deemed to have a profit motive.
The task force stopped short of privatization. But, would USPS benefit more from privatization? Competing against the likes of UPS, FedEx and Amazon is not easy and requires a nimble network and innovative solutions. To succeed and become a viable and profitable competitive option, we believe USPS will need to radically change or potentially eliminate its relationship with the government.

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USPS volumes rise as does financial losses

February 11, 2019


Another quarter, another loss, as the United States Postal Service (USPS) reported its latest earnings, for the period ending December 31, 2018, a quarterly loss of $1.5 billion. Despite overall revenue increasing 2.9%, a net losses were $1 billion more than the same period the previous year, was reported. As noted by the USPS in its financial filing, growth was offset by increased work hours/related salaries and benefits & increases in transportation costs due to higher volumes. “Volume growth has been driven by consumers’ continued use of online shopping, which provided a surge in package volume with a record number of packages delivered during both the calendar year 2017 and 2018 holiday seasons,” said the USPS. “To accommodate this surge in volume and to avoid service disruptions during the peak holiday seasons, we increased Sunday delivery service for some of our customers in limited U.S. markets and added non-career employees for the peak seasons in accordance with our labor agreements.” For the quarter, volume for the USPS’ Shipping and Parcels division increased 5.4% to 1.8 billion packages. By service, First Class Package Services, which includes Retail and First-Class Package Services – Commercial, recorded the biggest increase, 14.9% to 378 million packages. The largest service, Parcel Services, recorded a 4.2% increase to 946 million packages. Still, the Shipping and Parcels division only accounts for 33% of USPS’ revenue. The largest division, First Class Mail and the most profitable of USPS’ products, declined 1.2% or by $81 million. To help stem the losses, the USPS implemented a hefty annual rate increase last month. The postal group estimates that the rate increase bring in about $891 million each year for its “market-dominant” products, which include letters and marketing mail, and an additional $870 million for its competitive services, including its package business. However, this will not be enough to ease such steep losses as reported for the period ending December 31, 2018. A number of postal reforms have been introduced in Congress. However, none seem to go anywhere. The President of the U.S. initiated a postal reform task force in 2018 and whose findings, which were made public in December 2018, were not decisive and likely to fall by the waist along with other referendums. Among the recommendations were:

  • To eliminate the ability of employees to negotiate over compensation
  • Develop a dual-tiered pricing model—one for essential services and another for deliveries deemed to have a profit motive.
The task force stopped short of privatization. But, would USPS benefit more from privatization? Competing against the likes of UPS, FedEx and Amazon is not easy and requires a nimble network and innovative solutions. To succeed and become a viable and profitable competitive option, we believe USPS will need to radically change or potentially eliminate its relationship with the government.

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  • Categories