The holiday season will provide the struggling U.S. Postal Service with a much needed infusion of revenue, but hardly enough to stop its financial meltdown.
As the mail service heads into the holidays buckling under a $5.1 billion debt, sending packages is just about the only business line that’s growing and in the black.
“The Postal Service makes money on its package business and that business will increase dramatically during the holiday season,” said Pierce Myers, executive vice president of the Parcel Shippers Association, a trade association representing mail order companies such as LL Bean and Land’s End.
It is worth noting the hopeful signs, including the sharp increase in delivery of goods ordered online, which looms as a growing source of profit for the Postal Service.” – Fredric Rolando
The Postal Service offers a good deal for delivering packages, so good that FedEx and UPS often piggyback on the mail agency for service during the holiday season, said Gene Di Polito, president of the Association for Postal Commerce.
“The Postal Service will win a greater amount of that business in the holiday season,” Di Polito said.
Postal Service officials reported to the USPS Board of Governors on Nov. 15 that package shipping is one small area that is seeing growth, not shrinking. Package deliveries now account for 16.1 percent of postal revenues in fiscal 2011, up from just 12.7 percent in fiscal 2006.
In fiscal 2011 that ended on September 30, the Postal Service reported that package shipping accounted for $9 billion in revenue, up from $8.5 billion. This includes its global business, with international package products up more than 13 percent in the last year.
This year, the Postal Service is expecting 16.5 billion pieces of mail and packages that will be sent between Thanksgiving and New Year’s. There were 15.8 billion letters, cards and packages that same period in 2010, 16 billion in 2009 and 19 billion in 2008, according to USPS spokeswoman Darleen Reid-DeMeo.
“It is worth noting the hopeful signs, including the sharp increase in delivery of goods ordered online, which looms as a growing source of profit for the Postal Service,” said Fredric Rolando, president of the National Association of Letter Carriers.
While a positive development, it is small comfort for the Postal Service, which faces a deficit expected to balloon to more than $11 billion next year. The agency is considering a number of draconian options that include eliminating Saturday mail service, closing 3,700 post offices mostly in rural locations and firing more than 100,000 workers.
Richard Geddes, a management professor at Cornell University, said increased package revenue is too little to make a major dent on the mail agency that is so deep in the red.
“That’s a very thin reed to hang the Postal Service’s financial future on,” Geddes said. “It’s clear they are going to need a lot more than a good parcel business to get on sound footing.”
The next financial crisis is expected to hit the Postal Service on Dec. 15 when it is required to make a $5.5 billion prepayment for future retiree health benefits. Postal officials said they will have to default on the obligation unless they get an extension by Congress. Meanwhile, Congress is working on a plan to keep the Postal Service afloat for the 21st century.