postal service worker processes mail.

Adrian Hopper, a 30-year employee of the U.S. Postal Service, processes mail in Richmond, Va. in December 2008. (Richmond Times-Dispatch, Dean Hoffmeyer / AP Photo )

By Frank James

The Internet continues to suck up the air the U.S. Postal Service needs to survive, causing the mail system to lose money at a mind-boggling rate.

USPS reported a third-quarter loss of $2.4 billion, more than double its loss in the comparable period last year.

Meanwhile, its revenue fell nearly 10 percent to 16.3 billion from 17.8 billion.

Besides the increasing use by customers of e-mail and online transactions, what the postal service calls "electronic diversion," USPS said it was hit hard by the need funnel as much as $5.8 billion into retiree health care funds.

An excerpt from its press release:

Ongoing electronic diversion and the widespread economic recession continued to reduce mail volume, resulting in a $1.6 billion decrease in revenue for the quarter.
Despite cost reductions against the fiscal 2009 plan of more than $6 billion and actions to grow revenue, the Postal Service (USPS) projects a net loss of more than $7 billion at fiscal year-end. 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, is an obligation that no other government agency has to pay.
The Postal Service has incurred net losses in 11 of the last 12 fiscal quarters. The fiscal 2009 year-to-date net loss is $4.7 billion, compared to a loss in the same period last year of $1.1 billion, in spite of comprehensive, organization-wide cost reduction initiatives. The organization is working to mitigate a possible Sept. 30 cash shortfall of up to $700 million...

The postal service also discusses its cost-cutting efforts:

Cost reductions center on initiatives to match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducing travel budgets and similar measures. Of note is an effort launched this year to reduce the cost of more than 500 existing contracts that will result in short- and long-term savings for the Postal Service in the areas of price, scope and process improvements.

A few paragraphs later, it mentions the eye-popping amount by which mailings have dropped. In short, if you compare the first three quarters of this fiscal year versus last, you're talking about 20 billion fewer mail pieces. That's BILLION.

It takes a lot of people, equipment and trucks to move 20 billion pieces. If the mail volume doesn't recover, and the trends don't look promising for that to happen, there'll be a lot of excess capacity at the postal service.

Here's the paragraph with that cites the volume declines.

... A significant portion of USPS losses are due to an unprecedented decline in mail volume, which has fallen by nearly 20 billion pieces in 2009 compared to the first three quarters of last year. Third quarter mail volume totaled 41.6 billion pieces, down 7 billion pieces, or 14.3 percent, compared to a year ago -- the largest consecutive three-quarter drop in total volume since 1971. The trend of letter mail and business transactions being replaced with electronic alternatives will also cause continued downward pressure on mail volume into coming years.

As it tries to further reduce costs, the postal service is considering closing or consolidating 700 post offices around the country.

Here's the list of post offices to be shuttered or merged.

categories: Economy

12:33 - August 5, 2009