PostalReporter News Blog

The US Postal Service today filed its July 2010 (unaudited) preliminary financial report with the Postal Regulatory Commission. USPS reported a net income/loss of $764 million. The total Fiscal Year to Date loss is $6.1 billion (June, $2.5 Billion; May $642;$382 lost for April; $381 lost for month of March; $611 Million lost in February; $592 million lost for the month of January, $179 Million gain the month of December; $255 million lost for November; $221 Million lost the month of October)

Total Mail Services Volume was up 0.9%, revenue down 1.7%
Total Shipping Services volume was up slightly by .0.4%, revenue down 0.2%
Total Mail volume was down 0.8%, revenue up by 0.1%

First class volume down 3.6%, revenue down 3.7%
Stand Mail volume up by 6.6%, revenue up 4.8%

Total Workhours was down 5.0% (City Carriers 2.9%, Mail Processing, 8.3%, Customer Services 9.7%, Rural Delivery up by 0.6%, Other down 6.4%)

Total Career Employees 586,852, down 2049 employees since June 2010
Total Non-Career Employees 88,220, up 551 employees since June 2010

see full report via PRC

The fiscal 2010 year-to-date net loss is $5.4 billion

Cash Shortfall Likely in 2011; Customer Service Scores Remain High

WASHINGTON — The U.S. Postal Service ended the third quarter of fiscal year 2010 (April 1 – June 30) with a net loss of $3.5 billion, compared with a net loss of $2.4 billion for the same quarter last year. Third-quarter mail volume totaled 40.9 billion pieces – down approximately 700 million pieces, or 1.7 percent, compared to a year ago.

Complete USPS third-quarter results include operating revenue of $16 billion, some $294 million less than the same period last year, and operating expenses of $19.5 billion, an increase of $789 million, or 4.2 percent, over the third quarter last year.

The increase in operating expenses was attributable largely to higher workers’ compensation expenses due to a non-cash fair value adjustment and higher retiree health benefits expenses. Lower interest rates adversely affected the workers’ compensation liability, resulting in a $2 billion expense for the quarter – $870 million higher than the same quarter last year.

A significant portion of USPS losses in the past few years has been due to an unprecedented decline in mail volume – down by more than 20 percent since 2007. The replacement of letter mail and business-transactions mail by electronic alternatives continues to cause downward pressure on mail volume.

The organization’s financial situation is compounded by its obligation to pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits. This requirement, established in the Postal Accountability and Enhancement Act of 2006 (PAEA), is an obligation unique to the Postal Service.

Liquidity remains a major concern as the end of the fiscal year approaches. Although cash flow appears to be sufficient for 2010 operations, it is uncertain whether cash flow, together with maximum available borrowing of $3 billion, will be enough to fund the Congressionally-mandated $5.5 billion payment to the Retiree Health Benefit Fund on September 30 and retain sufficient liquidity into 2011, according to Joseph R. Corbett, the Postal Service’s Chief Financial Officer.

“Given current trends, we will not be able to pay all 2011 obligations,” said Corbett. “Despite ongoing aggressive cost reductions totaling over $10 billion in the last three years, it is clear that a liquidity problem is looming and must be addressed through fundamental changes requiring legislation and changes to contracts”

The Postal Service has incurred net losses in 14 of the last 16 fiscal quarters. The fiscal 2010 year-to-date net loss is $5.4 billion, compared to a loss in the same period last year of $4.7 billion.

Postmaster General John Potter noted that despite the cost-cutting, the Postal Service has continued to maintain a high level of customer service. The third-quarter service score for overnight single-piece First-Class Mail was 96.7 percent on-time, an improvement of 0.4 percent from the same period last year.

“Our dedication to customer service remains a top priority,” Potter said. “We continue to provide dependable customer service even as we focus on reducing costs. With the dedicated efforts of our entire organization, we are well on track to achieve approximately $3 billion in total cost reductions in 2010,” said Potter.

Cost reductions center on initiatives to improve efficiency and match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, delaying construction of new postal facilities and a variety of other initiatives.

Work hours were reduced by 63 million in the first three quarters of fiscal 2010, or 6.6 percent compared to the first three quarters of 2009. That is the equivalent of about 36,000 full-time employees.

“Securing the fiscal stability of the Postal Service will require continued efforts in all of these areas, as well as further review of retiree health benefit prefunding,” said Potter. “It also will require that the Postal Service gain flexibility within the law to move toward five-day delivery, to adjust our network as needed, to develop new products the market demands, and to work with our unions to meet the challenges ahead.”

Details are contained in the Postal Service Form 10-Q report that will be available Aug. 9, 2010, at http://www.usps.com/financials/ (click Form 10-Q under Quarter Reports).

Aug. 5 (Bloomberg) – The U.S. Postal Service, which has predicted it may lose $7 billion this year, posted a loss of $3.5 billion in its fiscal third quarter alone.

The net loss in the quarter ended June 30 widened from a year-earlier $2.4 billion, the agency said today in Washington. An $800 million adjustment to workers compensation liabilities accounted for most of the difference, according to the agency.

Mail volume dropped 1.7 percent, the smallest quarterly decrease in three years, Chief Financial Officer Joseph Corbett said at the Postal Service’s board meeting

full story

This report presents the results of our audit of the fiscal year (FY) 2009 Standard Mail® Volume Incentive Program (Project Number 10BO008FF000). The report responds to a request from the Postal Regulatory Commission (PRC). Our objectives were to evaluate the Standard Mail Volume Incentive Program (Summer Sale) to determine whether the Postal Service achieved its objective of increasing volume and revenue and whether the process used to establish customers’ mailing history was valid and accurate. This audit addresses financial risk. See Appendix A for additional information about this audit.

The U.S. Postal Service intended its Summer Sale to increase volume during a typically light mail volume period and increase revenue. The program ran from July 1 through September 30, 2009. At the end of this period, the Summer Sale provided a 30 percent credit to customers for additional volume mailed over a specified threshold.

Conclusion
The Postal Service reported both volume and revenue increases resulting from the FY 2009 Summer Sale.1 However, the processes used to calculate the reported
increases may result in misleading reported revenue and volume impacts. While the Postal Service used actual, verifiable mailing data in many cases, the additional data
essential to calculations supporting the reported increases is less precise. These data included various assumptions related to mail thresholds,2 negotiated mail volumes
based on customer input, and incomplete or unconsidered employee cost data. Postal Service outsiders — including the PRC’s public representatives3 — have also
questioned the Postal Service’s methods for calculating reported revenue and volume increases. The public representatives found that using methods more closely aligned
with those initially considered by the PRC in approving the Summer Sale suggests the Postal Service may actually have lost money on the FY 2009 program.

A Postal Service official stated that the benefits gained from conducting incentive programs like the Summer Sale outweigh their potential financial uncertainties. The
official said the Summer Sale program should be viewed as an investment in the future of the Postal Service, creating long-term customer satisfaction and building its
reputation. While these goals are commendable, a stated objective of the FY 2009 Summer Sale was to increase revenue and volume. It is uncertain whether the Postal
Service achieved that objective. We believe the Postal Service needs solid data and complete cost information in order to make well-informed decisions on the programs it initiates or conducts, particularly considering the critical financial predicament it is currently facing.

Revenue and Volume Increases Reported for Summer Sale May be Misleading

Overall, the Postal Service did not always have independent, reliable, and complete data upon which to calculate the $24.1 million in net revenue contribution and increased volume resulting from the FY 2009 Summer Sale. This occurred because the Postal Service relied on certain customer-provided data to determine customer thresholds and this data was a key component in evaluating revenue and volume increases. In addition, the method the Postal Service used to determine customer mail volume without a Summer Sale — commonly referred to as “loyalty growth” — differs from the PRCapproved method. The Postal Service’s calculation of “loyalty growth” considered trends in volume, whereas the PRC’s public representatives applied a measure of price sensitivity to volumes actually mailed during the Summer Sale to calculate “loyalty growth.” As a result, the Postal Service provided $67.8 million in rebates to customers who exceeded the established threshold volumes that may have been inaccurate. We consider the $67.8 million to be assets at risk.

A key component in calculating net revenue and volume increases was determining customers’ mail volume thresholds. To determine thresholds, the Postal Service provided mailing data that established a threshold for all its customers who were eligible to participate in the Summer Sale. While 324 customers agreed with this threshold figure, 129 others did not. Customers who disagreed with the threshold met with a Postal Service analyst from the Business Customer Intelligence (BCI) Department to discuss and negotiate the changes. Postal Service officials stated that BCI analysts researched the requested changes; however, they were not able to provide documentation to support the changes made or the validation process.

Furthermore, Postal Service outsiders have questioned the validity of the calculation of the “loyalty growth.” The PRC’s public representatives8 found that using the PRC’s method for “loyalty growth,” the Summer Sale lost $39.6 million of revenue. This is in contrast to the Postal Service’s reported $24.1 million net revenue growth. These varying calculations illustrate the difficulty in determining the results and effect of the Summer Sale.

see full report from the Office Of Inspector General:

note: another postal website really likes stealing my headlines.

Recent audit report from the USPS Office of Inspector General :

Most Postal Service bargaining unit employees are represented by one of the four major unions. The national agreements signed by senior-level management and the four union presidents include grievance-arbitration procedures that Postal Service management, bargaining unit employees (also referred to as craft employees), and union representatives must follow. These procedures provide guidance for resolving workplace disputes, differences, disagreements, and complaints. The Postal Service pays millions of dollars in grievance settlements; in fiscal year (FY) 2008 and FY 2009 they paid $250 million and $179 million respectively. As a result, it is important to ensure the Postal Service has appropriate internal controls in place.

Conclusion

Management controls over grievance settlements and disbursements need to be strengthened. We found that grievance payments were often not supported by adequate documentation and, as a result, we identified at least $27.8 million in unsupported questioned costs. We also found that oversight of the grievance settlement process was not consistent among the districts and that union representatives received grievance payments to which they may not have been entitled. The weakness in the control environment makes it difficult to determine the propriety of settlement amounts, and
payments to employees and union officials who represent bargaining unit employees.

Documentation to Support Grievance Settlements and Payments

We reviewed 600 randomly selected grievances2 and found that 234 (or 39 percent) were not adequately supported by required documentation. The missing documentation included signed Grievance Arbitration Tracking System (GATS) decision letters that document the reason for the settlement; the Grievance Form, which explains the original grievance; and documentation that explains how management determined the amount of the payment. As a result, there is no assurance that at least $27.8 million in grievance settlement payments were justified or warranted.

Human resources managers and labor relations officials at six of the 10 districts in our sample stated that supervisors are not required to copy and maintain supporting documentation used to settle informal grievances because they can settle them verbally. Management at the remaining four districts stated the documentation was missing due to poor recordkeeping by supervisors and individuals who prepared the grievance payments.

The Postal Service requires management to maintain documentation supporting grievance files and appeals for 7 years. In addition, the Government Accountability Office (GAO) developed standards for internal controls. These standards require agencies to assess the level of risk associated with specific activities and develop nternal controls to mitigate these risks. One internal control activity includes documenting all transactions and other significant events and making the documentation readily available.

Payments to Union Representatives

We also found that union representatives received excessive payments from grievance settlements. Union representatives in four districts (Colorado/Wyoming, Alabama, Mid- America, and Capital) were involved with the allocation of class-action grievance settlements for six grievances that resulted in union representatives receiving payments that were significantly more than other members of the class. Specifically, union representatives received $33,447 (or 24 percent) of $141,639 in settlements for these six grievances. One union representative in the Mid-America District received as much as 35 percent of a grievance settlement, while other payees received less than 1 percent.

This occurred because the Postal Service has not established procedures for reviewing the allocation of settlements to ensure that payees whom the union identifies are part of a class action. Once the Postal Service negotiates a settlement, they often have no involvement with its allocation. As a result, union representatives may be receiving payments to which they are not entitled.

Inconsistent Oversight of Grievance Settlements

We identified inconsistencies in the oversight of grievance settlements among the districts we reviewed. Specifically:

• Six of the 10 districts did not encourage or expect management representatives to seek higher-level consultation during the grievance process.
• Four of the 10 districts had not established dollar thresholds indicating when consultation or approval was required. Thresholds varied among the six districts that did have established thresholds.

There was no requirement or nationwide methodology for monitoring grievances through GATS. District officials stated they each used one or more GATS reports, and seven of the 10 stated they used one or more alerts in GATS to monitor settlement amounts or prevalent issues.
We found that these inconsistencies existed, because supervisors are authorized to settle grievances at any amount; and although some Postal Service managers had implemented a consultation process, others believe oversight of grievances before settlement and documentation of any consultation would violate union contracts.

Without consistent procedures and appropriate oversight, management has no assurance that grievance settlements and disbursements are appropriate. According to GAO, internal controls provide reasonable assurance that funds are safeguarded and laws and regulations are complied with and support effective and efficient operations.

Without sufficient internal controls, the risk of fraud, waste, and abuse is high.

Download the full OIG report.

The US Postal Service filed its May 2010 (unaudited) preliminary financial report on Friday, June 24, 2010 with the Postal Regulatory Commission. USPS reported a net income/ loss of $642 million. The total Fiscal Year to year loss is $2.9 billion ($382 lost for April; $381 lost for month of March; $611 lost in February;  $592 million lost for the month of January, $179 Million gain the month of December; $255 million lost for November; $221 Million lost the month of October) see full report at the Postal Regulatory Commission

Total Mail Services Volume was down 0.9%
Total Shipping was up 4.6%
Total Mail voume was down 0.8% but revenue up by 0.1%

First class volume down 6.3%
Stand Mail up by 5.6%

Total Workhours was down 3.8% (City Carriers 3.0%, Mail Processing, 9.0%, Cusotmer Services 8.5%, Rural Delivery up by 2.4%, Other 0.8%)
Total Career Employees 590,596
Total Non-Career Employees 89,135

Vehicle Maintenance Service was up 33.6% (see OIG report on Vehicle Maintenance)

Documents submitted by PostalReporter reader shows the Postal Service’s History of requesting 5-day delivery to relieve its financial woes.

The 94th and 95th Congresses
Representative Tom Corcoran stated at a congressional hearing that the Postal Service took its first formal step toward eliminating one delivery day per week in 1976 when it conducted a study to examine the possible effects of such delivery reduction.That study, according to Corcoran, was completed, but a formal proposal stemming from the study was not drafted. Instead, in 1977, the congressionally created Commission on Postal Service (created in 1975) submitted to Congress and the President a report that discussed the possibility of transitioning to five-day delivery. The members of the congressional commission were divided on whether to recommend eliminating a day of Postal Service delivery. The commission’s final report said that five of the seven commissioners reluctantly recommended the reduction in delivery, but did not say which day of the week would be the optimal day off.
A series of congressional hearings were held on six-day delivery from November 1977 through March 1978. According to Representative Patricia Schroeder, who opened the hearings, the Postal Service prompted the hearings by proposing a cut back in delivery service.36 Although the Postal Service had made no formal indication that it supported the elimination of one service day, one Member of Congress said that “statements made by postal officials indicate[d] they [were] leaning toward making such a recommendation.”In all, Congress held 12 hearings in as many cities with more than 500 testimonies offered between November and March. Those who testified included Members of Congress, union representatives, editors and publishers, the general public, and representatives of the aging. Most of those who testified did not support a reduction in Postal Service deliveries, finding such cuts a “disservice”38 that could result in “possible delay in the receipt of welfare, social security, pension checks, and so forth—the kind of mail that people receive … on weekends and through Saturday mail.”

In addition to concerns about mail delivery in general, much of the testimony framed the debate over six-day delivery as a tension innately embedded in the mission of the Postal Service: is it a profit-driven organization, or a public service? Representative Timothy E. Wirth stated at one hearing that the six-day service was a “social value,” and that cutting a day of service at a time when people were “losing some of their faith in what government can do for them” would exacerbate their disillusionment.

1977 House Report on Saturday Mail Delivery
Early this year, the Commission on Postal Service, a special study commission created by Public Law 94-421 to study the public service aspects of the Postal Service and other subjects, issued a report recommending that Saturday mal delivery be discontinuance of Saturday delivery service would reduce postal costs by $412 million annually. Through attrition, approximately 18,000 full-time positions would be eliminated. The Commission attempted to support its recommendation in part on the basis of a small survey of public opinion which showed that 79 percent of the individuals surveyed would be willing to give up Saturday mail delivery if such a reduction in service helped hold down postal costs.
Immediately following the Commission’s report on April, the Postmaster General summoned the leaders of major postal union to discuss the discontinuance of Saturday mail delivery.
The 96th and 97th Congresses
In 1980, the House Committee on the Budget was expected to propose an $836 million reduction in Postal Service appropriations for FY1981.42 According to Representative James M. Hanley, the chairman of the House Committee on Post Office and Civil Service, the reduction in appropriations would have eliminated “all of the public service appropriations” and other subsidies for the Postal Service.43 At a March 26, 1980, hearing before the House Committee on Post Office and Civil Service, then-Postmaster General William F. Bolger stated that eliminating Saturday delivery was one option the Postal Service was considering to ensure its economic stability in the face of the budget cuts. Bolger estimated the service reduction could result in the elimination of 15,000 to 20,000 Postal Service jobs, but would save the Service about $588 million.

The 1980 Task Force
On March 25, 1980, Postmaster General William F. Bolger established a task force to analyze the possible effects of moving from a six- to a five-day delivery schedule. The task force conducted a study, which consisted of telephone interviews of 320 major mailers and 13 selected industries and government agencies. It found that moving to five-day delivery could save $588 million in the first full year of implementation.85 The savings were estimated to “exceed $1 billion annually in future years.”With the cost savings, however, were predicted increases in other stresses for the Postal Service, like loss of patrons to private mailing services or adverse effects on “the levels of service provided to mail on the remaining delivery days.”87 In spite of the projected cost and fuel savings, the task force stopped short of endorsing a reduction in delivery service, saying “[t]he potential cost reduction is extremely attractive; but it is clear that the risks to service and future postal revenues are high.”

The task force recommended a 12- to 18-month planning period if any action to move to five-day delivery was to be made. No such planning period occurred. In addition, the task force suggested that if five-day delivery were to occur, Saturday should be the eliminated day because it “will not greatly affect the majority of … business mailers.”89
April-May 1980 Senate Hearing
There are, of course, a number of factors which have contributed to the operating deficit; however, inflation has undoubtedly been the great factor. The sharp rise could not have been foreseen when the 1970 law was enacted, and it has has a major impact not only on labor costs, which comprise 86 percent of the USPS budget, but on construction, materials and equipment, and operations in general. Also unforeseen was the relentless rise in the cost of energy. The USPS estimates that for every 1-cent increase in the cost of a gallon of gasoline, the transportation costs increase by $3 million.

Mr. Chairman, these hearings are taking place in concert with the Senate’s consideration of the fiscal year 1981 budget. There has been a great deal of discussion about reducing mail delivery delivery from 6 to 5 days in order to meet the anticipated cut in the postal budget. I am concerned that such a decision could exacerbate the current trend of mailers seeking alternate delivery systems and thus decrease further the revenues of the Postal Service.
The President’s Commission on the Postal Service
In 2003, the President’s Commission on the United States Postal Service, created by President George W. Bush, anticipated an “unstable financial outlook” for USPS.90 The commission, however, adamantly rejected any action that would reduce delivery days to five. The Commission firmly recommends continuing the Postal Service’s current Monday
through Saturday delivery regimen. While the Postal Service could save as much as $1.9 billion (less than 3% of its annual budget) by reducing its delivery schedule by one day a
week, its value to the nation’s economy would suffer. Beyond the universal reach of the nation’s postal network, the regularity of pick-up and delivery is an essential element of its
worth in the current climate. Elimination of Saturday delivery, for example, could make the mail less attractive to business mailers and advertisers who depend upon reaching their target audience on that day. In addition, given the volume of mail the nation sends each day, scaling back to a five-day delivery regimen could create difficult logistics, mail flow, and
storage problems.

While the report advised continuing six-day service, the commission noted that increasing use of electronic mail was leading to “a reduction in the demand for mail services” that could lead to a “relaxation of the six-day delivery requirement” in the future.

Documents

July1968SenateHearings

July1968SenateHrgsP81onward

May1976HouseHearingsMailCutback

1977HouseReportSatMailDelivery

April-May1977HouseHearings

March-May1977HouseHearings

May-June1977SenateHearings

Nov1977-Mar1978House6DayHearings

Apr-May1980SenateHearings (PDF)

ChIR_5_Q_2_Attach_complied

My Five-Day Experience, by Postal Pete

On the day I was born June 12, 1957:

“Postmaster General Summerfield today outlined for Congress a series of cuts in postal service which he plans to put into effect July 1 if his department is not given more money … The list, submitted at a closed meeting, was reported to include: Elimination of Saturday mail deliveries … (and) closing of 2,000 small fourth-class post offices.”

When I was almost five years old :

Feb 19 1962

The Kennedy administration has studied the discontinuance of Saturday mail delivery but fears any publicity might adversely affect its proposals for raising mail raise, Postmaster General J. Edward Day has told Congress …
(Day) said the (post office) department estimated it could save $100 million a year by ending Saturday mail delivery.

When I was eighteen:

Nov 24 1975
With the United States Postal Service losing more that $250,000 an hour, Postmaster General Benjamin F. Bailar is considering further economic moves such as discontinuing Saturday mail deliveries …. The Postal Service … ran up a $1.5 billion debt as of last July.

The year I took the postal exam:

March 29 1977

“The Commission on Postal Service … voted 5 to 2 to recommend elimination of Saturday delivery, a step that would save $400 million a year … Elimination of Saturday delivery is likely to be unpopular on Capitol Hill. Numerous legislators denounced the idea when the service said it was being considered a year ago.”

and so it continued throughout my postal career:

Feb 7 1981
Saturday mail deliveries, Amtrak train service and urban programs, survivors of last year’s spending cuts, face a new threat from President Reagan’s budget ax, according to internal administration documents obtained Friday … (The documents say), “The possible reduction of service to five-day delivery is a symbol of the seriousness of the fiscal austerity being imposed by reductions throughout the federal government.

December 15, 1987:

The Postal Service lost $223 million in the fiscal year that ended Sept. 30 … Possible major effects … include … Seeking congressional permission to eliminate delivery on Saturdays … closing 10,000 to 12,000 small post offices, primarily in rural areas.

October 16, 1992:

Postmaster General Marvin Runyon said Thursday that he backs continuing Saturday deliveries but wonders whether home delivery could be cut from six to four days a week…

His suggestion was to eliminate Tuesday and Thursday mail for home deliveries, keeping deliveries on Monday, Wednesday, Friday and Saturday. Business deliveries would remain six days a week.

April 9, 2001:

The U.S. Postal Service is thinking about ending Saturday deliveries — and shutting down post offices in rural and remote areas, and raising the price of stamps even more … because it finds itself in almost exactly the position the railroads were in after commercial jet travel became commonplace…

Something quicker came along: regularly scheduled jets. We said we loved the railroads — but we headed to the airports. We gave the railroads our hearts, but not our money… This country will feel different — diminished — without Saturday mail.

But the country already feels different. Fax machines, privately owned overnight delivery services, and — most significantly — the huge growth in e-mail have transformed the way that we write to each other.

December 31 , 2008:

After thirty years of service I take the early out and talk of five day delivery resurfaces.

Postal Pete

Pete Countryman
Sectional Center Facility
Elizabethtown, Kentucky 42701
30 yrs USPS / APWU

The US Postal Service filed its February 2010 (unaudited) preliminary financial report yesterday with the Postal Regulatory Commission. USPS reported a net income/ loss of $382 million. The total Fiscal Year to year loss is $2.3 billion ($592 million lost for the month of January, $179 Million gain the month of December; $255 million lost for November; $221 Million lost the month of October) . see full report via Postal Regulatory Commission

Monthly and Year To Date  Lump Sum Performance Payments,  Bonus/Merit Payments

see full report via PRC

WASHINGTON — The U.S. Postal Service will post a net loss of $1.9 billion on declining volumes of 88.1 billion pieces of mail for the six months ended March 31, 2010, further evidence that the Postal Service continues to face incredible challenges, Postmaster General John Potter said today.

Potter reinforced the need for legislative and regulatory changes necessary to maintain a viable Postal Service. Two of those changes could save the Postal Service more than $8.5 billion in the first full year they are implemented: restructuring the prepayment of retiree health benefit payments and eliminating one day of delivery service per week.

Despite the ongoing financial challenges, Potter commended employees for continuing to take costs out of the system and maintain high rates of customer service.

Financial Results

Chief Financial Officer Joseph Corbett reported that the 2010 mid-year financial results reflect the continuing effects of both the recent recession and the migration of mail to electronic alternatives. Corbett noted that for the foreseeable future, the Postal Service expects to see continuing declines in First-Class Mail, the most profitable class of mail.

For the three months that ended on March 31, total volume was 3.3 percent less than the same period in 2009. Even with a one-time boost of $180 million of First-Class Mail revenue related to the Census, revenue at $16.7 billion was still 1.4 percent less than the same period a year ago.

In contrast to the continuing declines in mailing services, the competitive products, shipping services, that account for 12 percent of total revenues and consist primarily of Priority Mail and Express Mail, grew 5.7 percent.

Operating expenses were down 3.1 percent from a year ago and the net loss was reduced by over $300 million.

For the first six months of the fiscal year, operating losses totaled $1.8 billion in 2010 compared to $2.3 billion in the previous year. Included in the March 31 quarterly and year-to-date operating losses are expenses of $1.9 billion and $3.8 billion, respectively, to fund retiree health benefits.

Aggressive measures to reduce costs continue. Work hours during the first half of the year were reduced 49 million hours below the previous year. Total mail volume decreased 6.3 percent during the first-half of the year, but managerial initiatives have reduced work hours by 12.7 percent in mail processing and 11.6 percent in customer services. For the year to date, overall expenses have been reduced $1.4 billion or 3.8 percent below the previous year.

“Despite aggressive efforts to reduce costs, including the reduction in full-time equivalent employees by more than 120,000 since 2008, we are still experiencing unsustainable losses,” said Corbett. “Quite simply, the business model is broken and laws, regulations and contracts must be changed to provide commercial operating flexibility needed for financial stability.”

At mid-year, the number of career employees stood at 594,000 at mid-year, a reduction of 47,000 compared to the previous year.

With net losses reported for fiscal years 2007, 2008 and 2009 and continuing in 2010, the Form 10-Q will emphasize the continued significant uncertainty about the Postal Service’s ability to generate liquidity to fund large cash payment obligations in 2011.

The Postal Service’s liquidity challenge is compounded by the requirement established in postal reform legislation of 2006 that the organization pay $5.4 billion to $5.8 billion annually to prefund future retiree health benefits — a requirement no other government or private sector organization faces. Last year, Congress enacted legislation to restructure the payment for 2009. However, there is no assurance that similar adjustments will be granted in 2010, or at all.

Complete second-quarter results will be available Monday in the Postal Service’s Form 10-Q report, at www.usps.com/financials (click Form 10-Q under Quarter Reports).

In March 2010, the Postal Service presented an action plan for the next decade. View the plan online at Ensuring a Viable Postal Service for America

Service Standards

In other board action, Delores Killette, the Postal Service’s Consumer Advocate and Vice President of Consumer Affairs, reported that on-time delivery of mail during the past three months was largely steady with 96 percent of overnight single-piece First-Class mail delivered on time.

Overall, 85.7 percent of respondents polled in the most recent Customer Experience Measurement rated their experience in the top two categories – “very satisfied” or “mostly satisfied” – during the past three months.

The Postal Service receives no direct support from taxpayers.

The U.S. Postal Service, which has said it may lose $7 billion this year, narrowed its fiscal second quarter loss to $1.6 billion.

The net loss in the quarter ended March 31 shrank from $1.9 billion a year earlier, the agency said today in Washington.

Mail volume dropped 6.3 percent in the past six months, Chief Financial Officer Joseph Corbett said at the Postal Service’s board meeting. The Postal Service, which cut work hours 7.5 percent in the period, has asked Congress for permission to cut Saturday delivery to save money, a proposal being reviewed by the Postal Regulatory Commission.

Bloomberg http://www.businessweek.com/news/2010-05-06/u-s-postal-service-reports-1-6-billion-quarter-loss-update1-.html