February 22, 2016

USPS® Delivers First Quarter Profit

Author: Bill Bonato

Driven by a strong 2015 holiday shipping season which saw shipping and package revenue increase by 13.5%, the U.S. Postal Service reported a $307 million profit between October and December of 2015, as compared to a $754 million loss the previous year. But, postal officials cautioned at a press conference that without favorable interest rate changes and a postal surcharge that will expire in April, they would have had a net loss of approximately $700 million in the first quarter. 

"While net income is favorable compared to a net loss, it unfortunately does not reflect the end of our losses," Chief Financial Officer and Executive Vice President Joseph Corbett said. The service is still seeking relief from the mandate to "pre-fund" retiree health benefits. Legislation in 2006 required the Postal Service to fund 75 years' worth of retiree health benefits, something that neither the government nor private companies are required to do.

USPS reaction contrasted with that of National Association of Letter Carriers President, Fredric Rolando, who called these results an “impressive performance.” “These results aren’t a fluke. They stem from two structural factors: An improving economy has helped stabilize letter revenue, and Internet-driven online shopping has sent package volume sharply upward.” He said the news “is consistent with, and reinforces, the emerging consensus among key lawmakers, the Postal Service, postal unions, businesses, mailers and industry groups to move forward with practical reform that all stakeholders can buy into.” Rolando noted that such reform should include stabilizing rates as well as addressing the pre-funding mandate.

Despite the contrasting opinions regarding the health of the USPS, there are signs of a rebound. First-quarter operating revenue for the Postal Service was $19.3 billion, an increase of $613 million, or 3.3 percent, over the same period in the previous year. It seems as though the time may be coming for Congress to finally tackle postal reform and set the agency on a positive path towards the future. A bill sponsored by Sen. Thomas Carper, D-Del. could potentially draw the broad support needed to make that a reality. The Senator proposed a bill that would reform the burdensome obligation to pre-fund retiree health benefits, allow the Postal Service to provide new products and services (including the delivery of alcholic beverages such as beer and wine), require postal retirees to participate in Medicare and make the 4.3% surcharge permanent.

For more on the story, see CBS Money Watch and Union-Bulletin.

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