The agency’s transportation expenses increased year over year in Q3 as it shifted some volume to air cargo handled by UPS.
Dive Brief:
- The U.S. Postal Service’s transportation costs rose for the quarter that ended June 30 as it faced climbing fuel costs and it shifted volume to satisfy its air cargo contract with UPS, per the agency’s Q3 earnings report.
- Expenses for air transportation between facilities increased 4.7% year over year to $509 million. The Postal Service attributed the jump primarily “to shifting certain package volume from highway transportation back to air to meet our service standards and contract requirements,” plus large jet fuel cost increases.
- Highway transportation costs grew 4.1% YoY to nearly $1.6 billion due to higher average diesel fuel prices, which were partially offset by the air volume shift.
In short, the USPS essentially traded ground fuel expenses for air fuel expenses to keep its contractual promises to UPS. Got it…
The 8% fuel surcharge increased revenue but package/shipping volume was down (again). This surcharge masks the damage caused by volume decline and does not solve the underlying infrastructure costs/issues. Future rate increases will drive more volume away. A common name for this is the Postal Death Spiral.
“Highway transportation costs grew 4.1% YoY to nearly $1.6 billion due to higher average diesel fuel prices, which were partially offset by the air volume shift.”
Wait until the surcharge disappears in January, if it does. They’re looking at tremendous losses then.
I’m no logistics expert, but the previous logistics “experts “ at the USPS were summarily fired by Dejoy, mainly for not doing their jobs and having half empty, or less, trucks running around. So you would assume the new crowd might know what they’re doing. They’re supposedly experts at predicting volume, so they agreed to this bad deal with UPS, and even parcel volumes fell along with first class. A central tenant of DFA was the switch to cheaper ground transportation from air, and they even reduced delivery times to compensate. But some genius or geniuses guaranteed minimums that couldn’t be achieved, so her we are with a bad deal that must be paid or renegotiated, and that’s if UPS agrees. That is unlikely with the pressure the teamsters are putting on UPS. When it comes to managerial incompetence and the USPS, the stuff that is made public you can’t make up.