On the Scene at MTAC: USPS CFO reports continued revenue drop-offs

Washington–Richard Strasser, chief financial officer/executive vice president of the U.S. Postal Service, said during the Mailers Technical Advisory Committee (MTAC) meetings on Feb. 6 that the agency’s revenue for its fifth accounting period, ended Feb. 1, will be down 3.5% from last year and 5.1% below plan. On the other hand, postal expenses for the period came in 3.9% below plan and 1.7% below the period last year, reflecting variable costs related to reduced volume. In general, 58% of USPS costs are volume variable, while 42% are fixed.

As for other numbers, standard mail volume is now down 8.3% for the fiscal year from last year. Parcel volume is down 3.5%, but parcel revenue is up 4.9%, due to the rates implemented last summer. Overall postal revenue has dropped $56 million.

Overall expenses, which had been forecast to increase $678 million for the first five accounting periods, have been cut by $32 million. There have been 33 million work hours fewer than last year at this time as a result of the volume declines. Overtime hours have been reduced 25% over last year in mail processing, delivery service, and customer service work hours.

Strasser wouldn’t comment on the timing of the filing of the next postal rate increase. “The key is what’s going on in the economy, and how it affects the mailing industry,” he said. “Most economists I’ve consulted with say there won’t be a boom when we come out of this recession–not anywhere near the boom of the ’90s.”

Strasser was followed by USPS manager of pricing Ashley Lyons, the agency’s rate case architect. He said that he remains confident that once the lone protester to the rate case settlement agreement–the American Postal Workers Union (APWU)–delivers its testimony to the Postal Rate Commission (PRC) on Feb. 14 regarding increases in discounts for bulk first class mail, the rate case will proceed with a recommended decision from the PRC on March 25 and a final USPS Board of Governors decision on April 2.

USPS rate case attorney Dan Foucheaux said that he highly doubts the PRC will tinker with the rate case as proposed by the USPS regardless of the APWU’s testimony, “because that would break the agreement,” he said. “We don’t expect that to happen.”

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