During the fiscal third quarter of 2015, which ended June 30, the US Postal service lost an estimated $586 million. If it were a publicly-held company, shareholders might start clamoring for the CEO’s head.
Yet it’s business as usual for the USPS. In fact, a half a billion dollar loss in a single quarter could actually be seen as good news: It was $1.4 billion less than the $2 billion the postal service lost in the same quarter last year.
And the P&L is less in the red this quarter than it was the first and second quarters of the year, when losses were $754 million and $1.5 billion, respectively.
According to a US Postal Service news release, quarterly operating income remained at $16.5 billion, about the same as the previous year. Because the postal service tends to be busiest during the holidays, the fiscal third quarter of the year is when it traditionally performs at its best. And operating expenses for the year have fallen $1.3 billion, or about 7.2%.
Why Such Poor Performance?
Like many cities, states and other government entities, the USPS is hampered by the retirement benefits it must pay its former employees. Because it can’t meet its obligations due to a lack of capital, it has to borrow.
Plus if the postal service wants to do anything to improve its bottom line — such as cutting back benefits payments, implementing a smarter delivery schedule, or raising its prices — it has to ask Congress, whose constituents are loathed to change anything that will affect their service or jobs within their districts.
Needless to say, like everything else at the post office, change comes slow.
A Glimmer of Hope?
The only upbeat news in the postal service’s latest financial report card was that its Shipping and Packages division posted revenues of $3.561 billion, up 10.6%
Shipping and Packages grew as a result of successful efforts to compete in ground shipping services with companies like FedEx and UPS, as well as aggressively pursuing “last mile” delivery services for such online retailers as Amazon, including Sunday delivery.
While Shipping and Packages accounted for 21.6% of the postal services revenues, it represents only 2.9% of the total volume.
“The continued growth of our shipping and package services is a direct result of the Postal Service’s continued efforts to offer consumers more choice, excellent value and reliable service in a growing and competitive marketplace,” Postmaster General and CEO Megan Brennan said in the news release. “We are investing in our network and continually enhancing our services to best compete for America’s shipping and package delivery business.”
US Postal Service Not Going Anywhere
While no company can afford to lose more than $5 billion in a single year and not feel the heat, the postal service benefits by being a federal agency. As a result, there are no angry stockholders screaming for the heads of its top management.
It’s also a treasured part of US history and tradition, so most taxpayers — who ultimately end up holding the bag when the agency loses money — are reluctant to approve of any drastic action, such as dismantlement or even major reductions in service.