Postal Service Loses $1.5B in Third Quarter Despite Growing Revenue

Shipping and package revenue saw ongoing growth, but USPS must gain $2 in shipping revenue to offset every $1 in lost mail revenue. Shipping and package revenue saw ongoing growth, but USPS must gain $2 in shipping revenue to offset every $1 in lost mail revenue. Nati Harnik / AP

The U.S. Postal Service on Thursday announced a net loss of $1.5 billion in the third quarter of fiscal 2018, including a more than 50 percent increase in what the agency deems “controllable losses” over the same period last year.

The news was not all bad for USPS, as its revenue grew over the April-June period by $400 million. The cash inflow grew by 2.4 percent to $17 billion, and has increased by $600 million year-to-date. The total losses were also a 36 percent decrease from the same quarter in fiscal 2017, though USPS officials cautioned that the improvement was driven by non-recurring accounting changes.

Normal, first-class mail revenue continued its precipitous decline, dropping by 2.2 percent. Shipping and package revenue saw ongoing growth, with revenue climbing by $475 million, or 10.2 percent. Marketing mail revenue also increased by $63 million.

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The Postal Service must gain $2 in shipping revenue to offset every $1 in lost mail revenue, a ratio the agency is not yet reaching. Controllable losses accelerated in the quarter due to higher transportation costs, which climbed because of rising fuel expenses, the higher costs of packages and a driver shortage that is forcing the agency to offer higher compensation to maintain adequate staffing.

USPS successfully brought its total operating expenses down by 1.3 percent in the quarter.

As she has throughout her time leading the agency, Postmaster General Megan Brennan used the financial data release to call on Congress to pass legislation that would enable the Postal Service to adjust its business model and put it on firmer financial footing. Bipartisan coalitions of lawmakers have introduced postal reform legislation along the lines of what USPS management has called for in both the House and Senate, but the measures have yet to receive a vote on the floor of either chamber of Congress.

“The root cause of our financial instability is a flawed business model that is imposed by law,” Brennan said. “We encourage the Congress to engage in a broad public policy discussion and pass postal reform legislation.” Brennan added she is also expecting relief from a revamped pricing system, which the Postal Regulatory Commission has proposed but has yet to finalize.

President Trump has also created a task force to deliver recommendations to put the agency on more solid financial ground. That group has finished its work and is submitting its report to the White House this week, and will brief Trump on its findings shortly. Brennan said the Postal Service worked with the task force to provide it information and data, but the agency has no idea what will be included in the group's final recommendations. Once the task force’s report is made public, she said, the Postal Service will weigh in with its own analysis of the proposals.

The White House has suggested USPS should be privatized entirely, an idea Brennan has not entirely eschewed.

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