Postal Service Reports $3 Billion Year-On-Year Loss

Shipping and package volume moved by the U.S. Postal Service declined by 14.1% year-on-year in its fiscal year 2021 third quarter as a surge in demand for package delivery services began to slow, the quasi-governmental agency said Friday.

Revenue for that sector of the Postal Service's business also fell in the quarter compared to 2020, by $646 million, or 7.8%. Despite those decreases, its shipping and package volume is still higher than pre-pandemic levels.

"We believe consumer behavior has evolved during the pandemic and our shipping and packages volumes are not expected to return to pre-pandemic levels, as the nation has increasingly relied on the safety and convenience of e-commerce," the company stated in releasing its fiscal third-quarter results on Friday.

"However, competition in the overall market has increased as certain major customers have returned to diverting their volume from our network and aggressively pricing their products and services to fill their networks and grow package density."

The declines in shipping and package volume and revenue in the quarter contributed to an overall loss at the agency of approximately $3 billion compared with a $2.2 billion loss during the same period in 2020, at the same time overall operating revenue increased by $845 million, or 4.8%. Operating expenses increased 8.3% to $21.4 billion.

Postal Service fiscal third quarter (April-June) financial segment breakdown. Source: USPS

The Postal Service's transportation operations during the period were also buffeted by pandemic-behavior effects, as expenses in that category increased by $182 million, or 8.3%, compared to the same quarter last year. The agency explained that highway transportation expenses increased, while air transportation expenses decreased due to the declining package volume from peak levels last year, as well as a shift from air to highway transportation that allowed for improved reliability and service performance, according to the agency.

"Transportation expenses were also impacted by the variation in the modes of transportation available due to the pandemic and higher average jet and diesel fuel prices, compared to the same quarter last year."

First-class mail went against longer-term trends by posting slight gains in the quarter – generating an increase of $54 million in revenue, or 1.1%, on volume growth of 130 million pieces, also up 1.1%. However, first-class mail volumes remain lower than pre-pandemic levels "and we expect continued secular declines in this product," the agency stated.

Despite the quarterly loss, Postmaster General Louis DeJoy, who is also the agency's CEO, noted that performance levels improved in the quarter due to the Postal Service's ongoing operational overhaul.

"We are transitioning from an outdated network and operational posture that was ill equipped to handle the effects of the pandemic on the mix of mail and packages we process – and we expect this volume shift to continue into the foreseeable future," DeJoy said.

"As we establish our new network design and deploy our operating initiatives, we will operate with much greater efficiency and precision, become financially self-sustaining and deliver greater value to the American public we serve," he said.

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Click for more FreightWaves articles by John Gallagher.

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