U.S. Postal Service Records Loss of $354 Million in First Quarter, Underscoring Need for Comprehensive Legislation
The U.S. Postal Service ended the first quarter of its 2014 fiscal year (Oct. 1, 2013 – Dec. 31, 2013) with a net loss of $354 million. This marks the 19th of the last 21 quarters that it has sustained a loss. Though the Postal Service has been able to grow revenue by capitalizing on opportunities in Shipping and Package Services and has aggressively reduced operating costs, losses continue to mount due to the persistent decline of higher-margin First-Class Mail, stifling legal mandates, and its inflexible business and governance models.
"The Postal Service is doing its part within the bounds of law to right size the organization, and I am very proud of the achievements we have made to reduce costs while significantly growing our package business," said Postmaster General and CEO Patrick Donahoe. "We cannot return the organization to long-term financial stability without passage of comprehensive postal reform legislation. We appreciate the efforts of the House and Senate oversight committees to make this happen as soon as possible."
Without legislative change, the Postal Service will be forced to default on another required $5.7 billion retiree health benefits prefunding payment due by Sept. 30, 2014, because it will have insufficient cash and no ability to borrow additional funds at that date.
The Postal Service will continue to have a low level of liquidity through October 2014. In the event that circumstances leave the Postal Service with insufficient cash, the Postal Service would be required to implement contingency plans to ensure that all mail deliveries continue. These measures could require the Postal Service to prioritize payments to its employees and suppliers ahead of some payments to the federal government, as has been done in the past.
Citing that the Postal Service could not wait for legislation indefinitely, the Postal Service's Board of Governors directed management in 2013 to accelerate alignment of its operations to further reduce costs and strengthen its finances. The Postal Service leveraged employee attrition and increased use of non-career employees-as provided by new labor agreements-which allowed for better alignment of staffing and workload levels, resulting in reduced labor costs.