Economy

Despite Some Improvements, Big Losses Continue for the US Postal Service

Just when you thought you were going to see less and less of the US Postal Service … now you even occasionally see them delivering packages on Sundays. One thing that is consistent is that the USPS is still losing billions of dollars thanks to those uncontrollable costs around future pensions and other mandated expenses.

Friday brought the USPS earnings release for 2015, which should be considered an anti-earnings report. The reported net loss for fiscal year 2015 was $5.1 billion. This was represented as a “controllable income” of $1.2 billion, and interestingly enough its revenue of $68.9 billion for 2015 was up by 1.6% from the prior year.

A driving force is that the USPS said that its shipping and packages services revenues were up by 11.4%. That is from the likes of Amazon, eBay and other online shopping.

Despite the “controllable income” being $1.2 billion, it was $1.4 billion in the prior year. Controllable income was defined as follows:

net loss excluding expenses related to the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers’ compensation adjustments, which are factors largely outside of management’s control

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Another issue at the USPS is that revenue gains are not coming without higher costs. The group’s controllable operating expenses also rose by $1.3 billion in 2015 from 2014. Driving forces of the cost hikes were higher compensation costs — attributable to increased benefits expenses and additional work hours partly associated with growth in the more labor-intensive shipping and package business. Non-controllable operating expenses of $6.3 billion decreased by $617 million, or by 9%.

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%.

All in all, the public should look for more shipping and packaging revenues to save the USPS. The public might as well go ahead and brace for higher postal costs to send a letter or greeting card in the mail.

The USPS is also sticking by the need for legislative change:

We achieved controllable income in excess of $1 billion for the second consecutive fiscal year giving us some limited flexibility to make critical investments in the future of the organization. To maintain this success we will need to continue our efforts to grow the business and drive operational efficiencies. However, we will also need the enactment of legislation that makes our retiree health benefit system affordable and that provides increased pricing and product flexibility.

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