USPS Moves Up Parcel Rate Hike to Offset $2.8 Billion Loss

An announcement wasn’t expected until next week, but the U.S. Postal Service confirmed Thursday that it was moving up the date for next year’s price increases for shipping services from May to Jan. 18.

Overall, USPS shipping services prices will increase an average of 5%: Express Mail will increase 5.7%; Priority Mail will increase 3.9%; Parcel Select will increase 5.9%; Parcel Return Service will increase 5.3% and International Shipping Services will increase 8.5%.

This is the first time the USPS has adjusted prices for its shipping services on a different schedule from its mailing service price adjustments. Price changes for mailing services, including stamp prices, will be announced in February, and will take effect in May.

Robert Bernstock, president, mailing and shipping services, said in a statement that the move will put the USPS on the same pricing schedule as its major parcel carrier competitors. “The move to annual January price changes for shipping services products is consistent with industry-wide practice,” he said.

In other USPS news, the agency ended the 2008 fiscal year (Oct. 1, 2007 to Sept. 30, 2008) with a net loss of $2.8 billion. Total revenue was $75 billion, unchanged from the previous fiscal year, but expenses totaled $77.8 billion. Mail volume in fiscal year 2008 totaled 202.7 billion pieces, a decline of 9.5 billion pieces, or 4.5%, compared to the previous fiscal year.

In addition, the USPS had to bear additional costs for changes mandated by the Postal Act of 2006. As per the Act, the USPS had to shell out $5.6 billion to pre-fund retiree health benefits. Excluding all the retiree health benefit fund payments from 2008 and 2007, expenses were up less than 1% over last year.

Though the loss is an improvement over the $5.4 billion lost in fiscal 2007, the USPS had implemented more than $2 billion in cost cutting measures in 2007- including a reduction in labor of about 50 million hours. The USPS says these cost reductions were offset by rising inflation, as well as the spike in fuel costs earlier this year.

During the Postal Service Board of Governors meeting held today, Postmaster General John Potter said he expects the next fiscal year “to be another difficult one for the Postal Service and the entire mailing industry, as economic factors will continue to reduce mail volume and increase expenses.”

Alan Kessler, chairman of the Postal Service Board of Governors, said the board is planning to “work with members of Congress to ease some of the financial pressure we are currently facing from the Postal Act.” But legislative relief is only part of the solution to the USPS’s woes, Kessler said during the meeting. “The board and management will actively pursue the actions necessary to further reduce costs and grow revenue.”

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