May 31, 2016

USPS Reports Revenue Bump, Braces for 2B Loss

Author: Renee Bingling

The second fiscal quarter of 2016 held some good news for the U.S. Postal Service (USPS) - operating revenue increased for the fourth straight year! So while a 4.7% revenue increase is good news on the surface, the USPS top management is not exactly jumping for joy. According to the Federal Times, on a May 10 conference call, Postmaster General Megan Brennan noted, "We are facing some headwinds given the recent decision by our regulatory commission to reduce our market-dominant prices". She revealed that, "as a result of this price reduction (surcharge), the postal service will forgo approximately $1 billion in revenue this year and approximately $2 billion going forward.

Drilling further into the USPS’ 2016 second quarter financials, confirms a picture for concern. The financial spark is that the USPS again saw a solid increase of $788M in shipping and package delivery, which contributed significantly to the $17.7 billion reported as operating revenue for the quarter. However, the postal service had a $19.7 billion operating expense figure to contend with. The USPS recorded controllable income of $576 million, which notably, does not include the expense weight of the pre-funding of retiree health benefits imposed by a lame-duck congress in 2006. Adding the latter leaves the postal service with a $2 billion deficit.

So the $2 billion question is; how can the hemorrhaging be contained, so that Americans and their businesses continue to benefit from the most affordable delivery service? Leaders of the postal industry are again calling on Congress for postal reform. In a USPS recent press release, Brennan shared that, "Our financial situation is serious, but solvable…we can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the upcoming regulatory review of our rate-setting system."

Fredric Rolando, President of the National Association of Letter Carriers also added that, "If lawmakers… [allow] USPS the flexibility to use its invaluable networks for some new products and services, and [adopt] best private-sector practices in investing the

USPS retiree health benefits fund, USPS can continue to provide Americans and their businesses with the world's most affordable delivery services". The Postmaster General affirmed that she remains focused on improving operating efficiencies, speeding the pace of innovation and increasing revenue.

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