Price Decrease Deepens Postal Service Losses in Third Quarter
Losses have nearly tripled over same period last year.
This story has been updated to clarify the Postal Service's calculation of revenue growth during the third quarter of fiscal 2016.
The U.S. Postal Service lost $1.6 billion in the third quarter of fiscal 2016, including $552 million in controllable losses, nearly tripling the deficits from the same period one year prior.
Excluding a $1.1 billion accounting adjustment, Postal revenue actually grew during that period (April-June 2015), bringing in $16.6 billion, an increase of 0.7 percent. But income dropped $450 million due to a forced reversal of USPS' emergency price increase in early April. Revenue from shipping and packages continued to grow rapidly, jumping 18 percent this quarter to $645 million.
Those gains were somewhat offset by the continuing slide of the Postal Service’s most profitable offering, first-class mail, which dropped off 5.5 percent. A change in interest rates affecting workers’ compensation payments contributed to the negative finances, as did the requirement that the Postal Service prefund future retirees’ health care. USPS continued to default on those payments and is seeking legislation in Congress to shift those costs to Medicare.
In a call with reporters Tuesday, Postmaster General Megan Brennan expressed cautious optimism that a bill advanced by the House Oversight and Government Reform Committee could make its way to the president’s desk this year.
“We recognize the legislative calendar is compressed,” Brennan said, “but we will work toward passage of legislation in this Congress.”
Brennan and Chief Financial Officer Joe Corbett identified some positive trends from the new financial report, noting revenue grew by nearly 4 percent and $600 million before adjusting for the exigent surcharge. Expenses, however, grew in the quarter, due in part to the heavier delivery costs associated with package delivery.
While shipping and package volume increased 14 percent over the third quarter of fiscal 2015, first-class mail volume dropped 3 percent. Overall volume remained essentially stagnant, falling just 0.2 percent. The period between April 1 and June 30 is typically the Postal Service’s slowest time of the year.
Overall losses are up 15 percent on the year, to $3.3 billion, though controllable profits have also increased to $1.3 billion.
Fredric Rolando, president of the National Association of Letter Carriers, said the report bodes well for the future.
“As the economy continues to improve from the worst recession in 80 years, letter revenue is largely stabilizing,” Rolando said. “And as the internet drives online shopping, package revenue is skyrocketing, auguring well for the future.”