No doubt about it: The U.S. Postal Service’s third-quarter financial report was–on the surface–a bloodbath. With $5.2 billion in red ink spilled in just three months, you might think Freddy Krueger was keeping the books.
Amid all the gore, though, the numbers reflect some faint flickers of hope. The question is whether those glimmers represent: (1) A blip; or (2) An early sign that finances are at least stabilizing, if not actually turning around.
USPS leaders are naturally eager to accentuate the positive, particularly after this month’s failure to make a required $5.5 billion payment into a fund for future retiree health care. During a conference call with reporters last Thursday, acting Chief Financial Officer Stephen Masse called it “unfortunate” that attention focused on those requirements often overshadows the agency’s success “in growing the business.” A case in point was the continued expansion of package and shipping services, where revenue was up by about 10 percent (or almost $950 million) for the first nine months of fiscal 2012 from last October through June.
Longer-term, there is evidence that the Postal Service’s financial slide is bottoming out. Here are the mail carrier’s operating revenues at the nine-month point for every fiscal year since 2007. (Note, incidentally, the recession’s devastating impact in 2009.)
2007: $56.3 billion
2008: $57.2 billion +1.7%
2009: $52.4 billion -8.4%
2010: $51.1 billion -2.4%
2011: $49.9 billion -2.4%
2012: $49.5 billion -.72%
As you can see, revenue for this year almost (but not quite) held steady with last year’s figure. The numbers are still headed in the wrong direction, but at least not as quickly. Other benchmarks aren’t so encouraging. Total mail volume dropped 3.6 percent in the three-month quarter from April through June, a significantly larger decline than in the same period a year ago.
At the same time, however, two big restructuring/downsizing efforts mentioned in the report are gaining traction, thanks in part to what appears to be some politically astute retrenchment.
Just four months ago, for example, a plan to close up to 3,700 post offices was withering on Capitol Hill. For lawmakers eager to score election-year points, defending the sanctity of small-town P.O.s was a godsend. Also in trouble was the push to close or consolidate almost half of about 460 mail processing plants by the end of next year.
What happened? In May, USPS officials dropped the post office closure plan in favor of cutting customer service hours at some 13,000 facilities–but leaving them open. So far, Congress is going along; the projected long-term savings of a half-billion dollars annually are actually more than what had been anticipated from the original closing plan.
On consolidation of the processing plant network, the Postal Service backed off its original schedule and deferred most of the pain until after the November elections. Still, it has made a start toward what is supposed to be a savings of some $2 billion a year.
Of course, any progress is relative and the list of long-range challenges is daunting: The continued loss of business to the Internet; workers’ compensation costs that threaten a cash crunch this October; and Congress’ reluctance thus far to drop or soften the retiree health care pre-funding requirement. Also, the Postal Service is currently benefiting from a boomlet in election-year mail that could bring in an extra $300 million this fall. Come January and revenues will resume their nosedive, said Gene del Polito, president of the Association for Postal Commerce.
Still, it’s worth remembering that at this time a year ago, USPS officials were predicting that the agency would be broke by now. That didn’t happen and it suggests some unexpected–and badly needed–resilience.