USPS Turns Profit During Busy Season, Says Transformational Changes Coming Soon
We “disappointed the nation,” DeJoy says of ongoing mail delays, while threatening slower service standards going forward.
The U.S. Postal Service saw a $318 million profit in the first quarter of fiscal 2021, though it called the rare bit of good news ephemeral and promised a major reform package in the coming days.
A historic surge in package volume, election mail and a temporary holiday-season price increase propelled USPS into the black, even as customers across the country decried skyrocketing mail delays. Postal management cautioned the fleeting profitability—which it said would not have been possible without an inflationary adjustment to its obligations and the seasonal price hike—was not a cause for celebration. Absent significant reforms, poorer service coupled with ongoing financial problems would become the new norm, officials said.
Despite the doom-and-gloom forecasts and weak performance, USPS managed to turn a $748 million loss from the same period—Oct. 1-Dec. 31—in 2019 into a $318 million profit in 2020. Shipping and package volume jumped by 25% in the quarter, and an unprecedented 40% in December, driving the turnaround. Postal leadership said it expects those figures are unsustainable once the pandemic recedes and Americans resume more in-person commerce and that ultimately package gains will not be able to make up for declines in the more profitable First-Class Mail sector.
USPS announced new leadership at its board of governors meeting on Tuesday, electing Ron Bloom to serve as its chairman. Mike Duncan, a Republican, opted not to seek reelection, allowing Bloom, a Democrat who served in the Treasury Department during the Obama administration and was one of the architects of its automobile industry rescue plan, to replace him. The move came ahead of President Biden’s likely nominations in the coming weeks to fill the three vacancies on the postal board, which would give Democrats a majority. The White House indicated this week it is focused on filling those vacancies.
Bloom once helped to write a white paper report commissioned by the National Association of Letter Carriers to address ways to reform the Postal Service, in which he castigated then-postal management for proposing to slash services and standards. The now chairman has spearheaded the board’s new 10-year restructuring plan’s development and said on Tuesday the “status quo does not work.”
“We must face the fact that we are not financially viable,” Bloom said, citing USPS for its own managerial failures. The new plan, which the Postal Service will receive in the coming weeks, will be “bold and comprehensive,” he added, and will force the agency to “make the necessary choices and do what is right for this great organization.”
Postmaster General Louis DeJoy, whose job could come under threat once Democratic governors take majority control of the board, simplified USPS’ coming changes and requests to three needs: improved operations, better marketing and investment. Absent reform, he said, recent failures would be just the tip of the iceberg and the mailing agency would lose $160 billion over the next decade.
“If our service reliability and costs do not improve and improve soon, our ability to meet our universal service obligation will be threatened and our relevancy diminished,” he said.
USPS delivered just 78% of First-Class Mail on time in the quarter, down from 90% in the same time last fiscal year. Delays were particularly severe during the peak holiday season and have continued into 2021, with postal management pointing in part to employee absenteeism due to COVID-19 and network bottlenecks also caused by the pandemic. Nearly 50,000 postal employees have tested positive for the virus and more than 150 have died from it, in addition to tens of thousands who have been forced to quarantine due to potential exposure. DeJoy said postal management did everything it could to address the crisis, including hiring 50,000 seasonal employees and 10,000 new career staff, using overtime, implementing extra delivery trips and buying as much air capacity as possible.
“All in all, we threw everything we had at it,” DeJoy said. “No cost cutting, no efficiency initiatives, no relaxation of any effort anywhere, and yet we missed our service standards by far and disappointed the nation.”
DeJoy previously tried to implement cost cutting and efficiency measures, but they remain tied up in federal courts after months of ongoing legal battles. The postmaster general has vowed to reimplement those changes and others, promising to reverse his agency’s recent failures.
“Too many Americans were left waiting weeks for important deliveries of mail and packages,” he said. “This is unacceptable and I apologize to those customers who felt the impact of our delays.”
DeJoy added part of the remedy to those issues will require significant investment. USPS recently received a $10 billion cash injection as part of the last COVID-19 relief package President Trump signed into law.
“Postal employees have been asked to do more with less, forced to employ antiquated systems, use outdated equipment and drive outdated vehicles,” DeJoy said. “This drives up cost and slows down service for our customers. We cannot afford to keep this up.”
The postmaster general also said, however, that “unachievable” service standards would be cut as part of its new plan, and other "weaknesses" in the business including plant processing and transportation would be addressed. DeJoy did not specify if reduced delivery standards would be coupled with plant closures and consolidations, as they were the last time USPS slowed its delivery windows. He added the plan would commit to six-day mail delivery and “empowering” the workforce, including by ensuring the growing number of non-career postal employees have pathways to long tenures at USPS. DeJoy vowed to engage with postal unions, employees, stakeholders, the Biden administration, Congress and the American public in laying out his vision in the weeks ahead.
The Postal Service has been victorious in one element of its push for reforms, as its regulator last year finalized a new pricing model that will give management more flexibility in setting rates above mere inflationary increases. The new system, however, is facing a lawsuit from some large-scale mailing organizations.