Postal Service trims losses slightly as pandemic changes take root
USPS reports annual loss of $4.9 billion as profitable postal mail volumes continue to shrink while number of labor-intensive packages rise.
The flood of financial losses at the U.S. Postal Service eased slightly in 2021 compared to last year, due in part to an economy rebounding from pandemic shutdowns and in part to higher package demand driven by e-commerce, USPS said today.
By its own accounting methods, the agency reporting an adjusted loss of $6.9 billion for the 2021 fiscal year ended September 30, compared to the $7.6 billion it lost in 2020. However, those figures exclude details like non-cash workers' compensation adjustments and discount rate changes. On a generally accepted accounting principles (GAAP) basis, the service had a net loss of $4.9 billion for 2021, compared to a net loss of $9.2 billion for 2020.
Either way, USPS lost money again in 2021, extending a long streak of red ink that Postmaster General Louis DeJoy is seeking to stop through a 10-year reorganization plan that he says will better position the agency to keep up with broad economic changes like the surge of online shopping.
Whether it’s ready or not, those changes are here to stay, USPS said, noting that the pandemic has permanently transformed the mix of mail and packages processed through its network. Specifically, the volume of postal mail—which is USPS’ most profitable revenue stream—continues to drop off, even as the volume of shipping and packages—which are the most labor-intensive revenue stream—extends its explosive growth.
In spite of those current, USPS increased its operating revenue over the past 12 months by $3.9 billion, or 5.3%, to $77.0 billion for its fiscal year. The service also cut its operating expenses slightly, trimming costs by 0.4% to $81.8 billion for the year, but that improvement was not enough to close the gap.
According to DeJoy, that improvement was sufficient proof that the changes are taking effect. “We are aggressively implementing our Delivering for America transformation plan and making solid progress in service and operational performance, and in enterprise-wide automation investments that have dramatically expanded our capacity to process and deliver holiday package volume for the nation,” DeJoy said in a release. “Despite the magnitude of our financial challenges, we are making encouraging progress in correcting the long-term imbalance in postal revenues and expenses, and we expect to see continued improvement as we fully implement the Delivering for America plan.”
However, the overhaul plan has also drawn criticism for its efforts to run USPS as a for-profit business instead of a public service. Critics have also pointed to impacts like a proposal to save money by slowing its delivery speed for parcels traveling more miles, converting its delivery guarantee for First-Class Package Service (FCPS) from the current umbrella 3-day service plan for the continental U.S. to a range of two to five days based on distance.
Undaunted by those reviews, DeJoy says change is necessary if USPS is going to keep up with the times. By the numbers, the service said its shipping and packages volume remain higher than pre-pandemic levels, with 2021 revenue increasing by $3.5 billion, or 12.2%, on volume growth of 253 million pieces, or 3.5%. Marketing mail revenue increased $681 million, or 4.9%, on volume growth of approximately 2.2 billion pieces, or 3.4%, but that category’s volume remains lower than pre-pandemic levels. And first-class mail revenue dropped by $500 million, or 2.1%, on a volume slump of 1.9 billion pieces, or 3.7%.
In order to boost its revenue in that climate, USPS said it will continue to hike rates, which it called an “optimization of its pricing strategies and effective use of its pricing authority.” The agency today proposed a price hike beginning Jan. 9, intending to raise shipping services product prices approximately 3.1% for both Priority Mail service and Priority Mail Express service.
If approved by the Postal Regulatory Commission (PRC), the new prices will include an increase in the price of a Small Flat-Rate Box to $9.45, Medium Flat-Rate Box to $16.10, Large Flat-Rate Box to $21.50, and APO/FPO Large Flat-Rate Box to $20.00. Regular Flat-Rate Envelopes, Legal Flat-Rate Envelopes, and Padded Flat-Rate Envelopes would increase to $8.95, $9.25, and $9.65 respectively, USPS said.
