U.S. Postal Service (USPS) losses continued to mount with a $4.5 billion loss reported on May 8 for the latest quarter amid warnings from the federal agency that government intervention is needed to avoid a potential service shutdown.
The loss in the agency’s fiscal second quarter (ending March 31) is more than double the $2.1 billion loss in the same period last year.
“We are unable to predict the duration of COVID-19 business closures and the duration of the recession we are currently experiencing; however, this situation will materially damage our financial condition,” commented USPS Chief Financial Officer Joseph Corbett.
“While we continue to conserve capital and reduce expenses in areas where volumes are declining, our ability to continue to serve the nation will require substantial funding from the federal government or other sources.” Absent financial assistance, the ability to fulfill its service obligations “are in extreme doubt,” he said.
Overall revenue increased 2% to $17.8 billion in the latest quarter compared to last year, with shipping and packages revenue increasing $386 million (7.1%) on volume growth of 12 million pieces (0.8%). The revenue increase was driven largely by price increases in January and the volume increase by a temporary surge in e-commerce later in the quarter resulting from COVID-19.
However, “mail volumes began to decline significantly in late March 2020. The sudden drop in mail volumes, our most profitable revenue stream, is steep and may never fully recover to levels prior to the pandemic,” the agency emphasized.
Marketing Mail revenue declined by $94 million (2.5%) in the quarter, on a volume decline of 604 million pieces (3.4%). “Secular declines in mail have continued to negatively affect mail revenue and volume, and the Postal Service believes those declines will be exacerbated by the effects of the COVID-19 pandemic,” USPS stated.
The glaring quarterly loss follows the appointment this week of former XPO executive Louis DeJoy to serve as Postmaster General to replace the retiring Megan Brennan. DeJoy’s private sector background and ties to President Donald Trump, who has threatened to hold back on a CARES Act loan unless the Postal Service raised its rates, fueled speculation that DeJoy would push to privatize the agency.
However, USPS Board member John Barger, a member of the search committee seeking Brennan’s replacement, rejected that speculation. He emphasized during the agency’s earnings call that DeJoy’s appointment was a unanimous decision by the board, and that “both Republicans and Democrats embraced the decision, showing a bipartisan view on this matter. Further, it’s intended to fulfill the board’s commitment to transform, build and strengthen the Postal Service.”