Strategy

Postal Service Narrows Loss, Boosts Revenue

USPS' package-delivery business fuels revenue growth but its CFO predicts a "difficult" road ahead, citing escalating costs.
Matthew HellerNovember 13, 2015

The U.S. Postal Service delivered a somewhat improved fiscal picture on Friday, reporting that its net loss declined by 7% and revenue rose 1.6% in 2015.

The net loss was $5.1 billion, down from $5.5 billion, last year, while revenue was $68.9 billion, reflecting an 11.4% increase in shipping and packages services revenue from the likes of Amazon, eBay and other online shopping sites.

The package-delivery business has grown by 50% over the past five years.

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But it was the ninth consecutive year that the Postal Service has lost money, as people rely more and more on the Internet for bill payments. Controllable operating expenses rose by $1.3 billion in 2015 from 2014 and a special rate surcharge is set to expire next year, potentially reducing revenues by $2 billion annually.

“The road is difficult for a number of reasons,” Postal Service CFO Joseph Corbett told the Associated Press. “Without the surcharge, for example, in 2015, we would have recorded a controllable loss of $800 million, not income of $1.2 billion. Also, our costs continue to escalate.”

Under a 2006 law, the service has to pre-fund 75 years’ worth of retiree health benefits, something that neither the government nor private companies are required to do. It is continuing to lobby for legislation that would provide relief from the funding requirement and give it greater flexibility in setting rates.

Total mail volume in 2015 was 154.2 billion pieces, versus 155.5 billion pieces in 2014. With shipping and packaging higher, First-Class Mail decreased by 2.2% and Standard Mail volume decreased by 0.3%.

Lawmakers have been trying for years to overhaul the Postal Service, but proposals such as ending Saturday mail delivery and closing more post offices have met with resistance from other lawmakers and postal workers, the AP said.

“The USPS’ continuing financial upswing shows that dismantling services to the public would be precisely the wrong path to take,” said Fredric Rolando, president of the National Association of Letter Carriers.