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USPS suffers $8.5 Billion loss for 2011

The U.S. Postal Service (USPS) ended its 2011 fiscal year (October 1, 2010 - September 30, 2011) with a net loss of $5.1 billion. The year-end loss would have been approximately $10.6 billion had it not been for passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.

Total 2011 mail volume declined by 3 billion pieces, or 1.7 percent, from 2010. The Postal Service's largest and most profitable product, First-Class Mail, continued its year-over-year decline, from $34.2 billion in 2010 to $32.2 billion in 2011 (5.8 percent), which dwarfed continued growth in its more competitive products, packages and Standard Mail.

Economic indicators suggest that the worst of the precipitous volume decline during the recession is over. The lack of strong economic growth, however, continues to have an impact on the Postal Service's financial situation.

USPS Shipping Services' revenue, which includes Priority Mail and Express Mail, increased $530 million in 2011 (6.3 percent). The increase in Shipping Services revenue was driven by strong growth in the Parcel Select and Parcel Return Services, due to increased mailings of packages, as customers continued to use the Internet more often to purchase products. Revenue from Standard Mail increased by $495 million (2.9 percent) on a volume increase of 2 billion pieces (2.6 percent).

"The Postal Service can become profitable again if Congress passes comprehensive legislation to provide us with a more flexible business model so we can respond better to a changing marketplace," said Postmaster General and CEO Patrick R. Donahoe. "To return to profitability we must reduce our annual costs by $20 billion by the end of 2015. We continue to take aggressive cost-cutting actions in areas under our control and urgently need Congress to do its part to get us the rest of the way there."

Strategies to reduce total expenses include organizational redesign initiatives. Benefits of some of these plans, however, may be partially offset by rising fuel prices. The Postmaster General has reported that despite taking aggressive steps to reduce costs, the U.S. Postal Service will not survive as a self-financing entity without significant changes to current law. The path forward for the Postal Service will require that all stakeholders embrace fundamental change, "and that our employees, the labor unions and management associations, mailing industry customers and business partners (all) play a constructive role shaping our future," Donahoe said.

Several new marketing initiatives have been introduced that may help to improve revenue growth, including expansion of simplified addressing for business mailers, Priority Mail Regional Rate Boxes, Reply Rides Free, customized cards and the sale of gift cards.

Other 2011 USPS financial results include:
* Operating revenue of $65.7 billion compared to $67.1 billion the year before.
* Operating expenses of $70.6 billion compared to $75.4 in 2010.

The Postal Service continued to increase operating efficiency in 2011, including a reduction in work hours by 34 million, despite an increase of 636,500 delivery points. Its productivity gains were the result of effective workforce management, efficient use of materials and transportation, and continued advancements in the use of technology. Since 2001, the Postal Service has reduced work hours by 28 percent, while delivering to almost 14 million additional addresses.

"The continuing and inevitable electronic migration of First-Class Mail, which provides approximately 49 percent of our revenue, underscores the need to streamline our infrastructure and make changes to our business model," said Chief Financial Officer Joe Corbett. "Since peaking at 213 billion pieces in 2006, our volume has continued to decline each year."


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