USPS blames rising losses on high fuel costs, e-commerce boom

Losses soared again at the U.S. Postal Service last quarter due to a tricky business climate with rising fuel costs, spiraling parcel demand, and slumping mail volumes, the service said today.

In its accounting books, USPS reported a loss of $1.3 billion for the quarter ending December 31, compared to a loss of just $288 million for the same quarter last year. Measured by generally accepted accounting principles (GAAP), the service lost $1.5 billion for the quarter, compared to net income of $318 million for last year’s fiscal first quarter.

The results marked a stumble from USPS’ results last quarter, when it released figures showing it had slightly slowed the flood of financial losses for its fiscal year 2021 compared to 2020.

In its latest results, USPS said its fiscal first quarter generated operating revenue of $21.3 billion, a decrease of 0.9% compared to the same quarter last year. At the same time, USPS said its costs rose last quarter, led by a 9.2% jump in transportation expenses triggered by climbing rates for diesel fuel, unit costs per mile, and jet fuel.

While its revenue certainly dropped last period, USPS said the decline would have been even steeper if it hadn’t levied stamp price increases in 2021, since the service also saw a volume decline of 4.1% last quarter in the amount of items carried.

Thanks to its price increases, USPS said that its first-class mail revenue increased by 2.5% compared to the same quarter last year, despite a volume decline of 3.8% for that mode. The volume decline reflects a continuing migration from postal mail to electronic communication and transaction alternatives, which has been exacerbated by the pandemic, USPS said.

 Other mail classes also shrank in the number of pieces carried by USPS last quarter, as marketing mail revenue increased by 7.3% despite a volume decline of 3.6% and shipping and packages revenue decreased 7.9% on a volume decline of 9.7%.

Despite that slump, USPS said the trend toward shrinking volume was exaggerated by comparison to the pandemic-related surge of e-commerce during 2021, which continues to abate as the economy recovers. In fact, over a longer term view, USPS said its shipping and packages volume remains higher than pre-pandemic levels.

That rising popularity of e-commerce hits USPS in the pocketbook, since it makes less money carrying parcels than letters. So in order to adjust to those changing conditions, USPS hinted it may boost rates again. “The pandemic has significantly transformed the mix of mail and packages processed through the Postal Service's network and the Postal Service anticipates that its volumes and mix will not return to pre-pandemic levels,” the service said in its release. “The Postal Service continues to grow its revenue in mail services through optimization of its pricing strategies and effective use of its pricing authority, as outlined in the Delivering for America plan.”

In addition to defending its price hikes and continued losses, USPS leaders this week also took criticism from the Biden Administration for their plan to modernize the massive mail truck fleet primarily with gasoline-burning instead of battery-powered vehicles.

The White House’s Council on Environmental Quality asked Postmaster General Louis DeJoy to accelerate the electrification of the postal delivery vehicle fleet, in accordance with National Environmental Policy Act (NEPA) priorities to improve its competitiveness, tackle the climate crisis, and address environmental injustice.

But in response, DeJoy said USPS couldn’t afford the cleaner design. “We have an urgent need to replace our 30-year-old delivery vehicles that are powered by inefficient gasoline engines and that lack modern day safety features. We are also required by law to be self-sufficient,” DeJoy said today in remarks at a Postal Service Board of Governors meeting. USPS has proposed the purchase of 5,000 electric vehicles, but lacks the budget to order more unless it regains profitable operations or gains fresh funding from Congress, he said.

In the meantime, that order will be dwarfed by the size of the service’s main vehicle replacement contract, which has named military contractor Oshkosh Defense to build between 50,000 and 165,000 vehicles over the next decade.