On Strong Year, USPS Cautions

The U.S. Postal Service ended its fiscal year with a surplus for the second year in a row. But the agency warned that increased competition from other carriers and other media nonetheless threaten its future.

For the fiscal year ended Sept.30, the Postal Service had net income of $3.1 billion on revenue of $69 billion. First class mail brought in revenue of $36.4 billion, standard mail $18.1 billion, and other products and services $14.5 billion. Total mail volume rose nearly 4 billion pieces to 206 billion, mostly in standard mail. First class mail volume declined for the third consecutive year, this time by 1.1 billion pieces.

In fact, for fiscal 2005 the USPS projects standard mail volume will exceed that of first class mail. And that’s problematic, chief financial officer Richard J. Strasser Jr. told the Postal Service Board of Governors at the agency’s year-end meeting. “This shift in mail mix to lower revenue-per-piece mail classes will result in shrinking margins that are used to maintain universal service,” he said. What’s more, standard mail competes for advertising expenditures and is more susceptible to volatility of business cycles, he added.

On the other side of the USPS ledger, expenses totaled $65.9 billion. Personnel accounted for $52 billion, transportation $5 billion, and supplies, services, depreciation, and other expenses $9 billion.

“The Postal Service has continued to focus on its five-year transformation plan goal of removing $5 billion in costs. In FY 2004 we achieved another $1.5 billion in savings. To date, we’ve saved $4.3 billion against the five-year goal,” Postmaster General John Potter told the board. “While these strategies have resulted in historic productivity levels and cost savings over the last few years, we must recognize that additional efforts to take costs out of the system will require fundamental structural changes.”