USPS MAY POST A LOSS Could set stage for additional rate hikes A month before the end of the USPS’s fiscal year 2001, Postmaster General William Henderson told the Associated Press that the agency might post its first annual loss in six years. What’s more, the loss could be as high as $300 million. Some observers say that for mailers, already facing the likelihood of a postal rate hike early next year, the red ink could translate to yet another increase in 2003.
“I’m not optimistic right now,” Henderson told the Associated Press on Aug. 29. “Our cash flow is down.” But first class mail volume for the first 12 of the year’s 13 accounting periods was up 1.3%. And Standard A mail volume (which includes catalogs) was up 4.9% for the same period – an increase that postal economist and catalog consultant Walter Bernheimer II, president of Wellesley, MA-based Bernheimer Associates, describes as “tremendous.” In addition, Priority Mail was up 3.1% for the 12 accounting periods.
Final revenue figures for the USPS’s fiscal year are expected to reach $65 billion. But Bernheimer notes the agency showed a $226 million profit through its first 12 accounting periods. “That would mean the Postal Service would have to lose more than $500 million for the final one-month period” to post a $300 million loss for the year. But Henderson cites additional costs as the key problem, including $150 million in worker’s compensation and $350 million for higher gas prices.
Some sources wonder if Henderson’s warning was meant to encourage the Postal Rate Commission to approve aspects of the pending rate hike. The agency’s last increase, in 1999, averaged only 4.5% for most catalogers. But if approved, next year’s increase could run as high as 14.8% for some catalogers. Trade groups have attacked the USPS during the hearings for the $1.7 billion contingency it included in its rate increase proposal, an amount they say is nearly twice the sum necessary.
“Unless the Postal Service has screwed around with the numbers,” concludes Bernheimer, “it’s probably going to break even – maybe lose just a few bucks.”