The United States Postal Service (USPS) has recently been put under pressure to improve its financial outlook without compromising its services, a directive that comes on the heels of the USPS’s reported loss of $1.5 billion for the first quarter of the fiscal year 2019. This figure represents an almost $1 billion increase from the same financial period last year. The USPS has also experienced slower growth in its package delivery business, where it continues to compete with private delivery services.
In 2018, the postal service reported a financial loss for the 12th year straight, with net losses widening from $2.7 billion in 2017 to almost $4 billion in 2018. One of the USPS’s most profitable products, first-class mail, continues to experience a rapid decline, with a 41% decrease in overall volume since 2007. These figures continue to worsen despite a 5.4% increase in package deliveries during the first quarter of 2019 (an equivalent of nearly 100 million packages).
Behind the Decline
While the USPS downturn has been worsening for more than a decade, their most significant losses occurred due to the passage the Postal Accountability and Enhancement Act 2006, which resulted in the payment of higher retiree health benefits. It is estimated that the USPS’s health benefits expenditures range between $5.4-$5.8 billion annually.
These financial losses are further compounded by rising employing salaries and higher transportation-related costs including the rising price of gas and growing vehicle maintenance costs.
While package deliveries from online retail giants, such as Amazon, have become a vital part of the USPS’s business, such deliveries are not enough to offset their rapid decline in profits.