Postmaster General Louis DeJoy said the U.S. Postal Service will be forced to initiate “uncomfortable” price increases for market dominant USPS products such as first-class mail, marketing mail and periodicals, while shippers using Parcel Select Ground can benefit from use of cubic pricing.
The USPS’s new pricing schedule goes into effect July 10, with the agency warning that twice-yearly pricing adjustments will be the norm going forward, even as the delivery service standard has slowed. The USPS delayed implementation of the service slowdown until after the peak holiday season.
The recent Postal Reform Act’s undoing of mandated prefunding of retiree healthcare benefits will save $50 billion over 10 years by switching pensioners to Medicare – which many argue causes other economic liability issues. But DeJoy said that still leaves a projected $110 billion dollar USPS loss over that period.
“While we are working diligently to improve our operating model and cost structure, we still have a long way to go,” DeJoy said in a statement ahead of a meeting with the USPS Board of Governors. “Therefore, from my perspective, the mailing industry needs to be prepared for continued use of our authority to raise prices on market dominant products at an uncomfortable rate until such time as we have accomplished our objective of projecting a trajectory that shows us becoming self-sustaining as required by law.”
DeJoy added that while the Board of Governors makes final pricing decisions, “I will most likely be advocating for these increases.”
As for cubic pricing, which is a discount to dimensional weight pricing from UPS, FedEx and the USPS itself, it will apply to packages sent by Parcel Select Ground as of July 10.
For the second quarter, the USPS reported a $1.7 billion loss, flat from last year, while shipping and package revenue increased just 1.3% to $7.9 billion. Its so-called “controllable loss,” backing out the unfunded retiree mandates, was $648 million, down from $691 million a year ago. The retiree mandates were eliminated as of April 6 based on the Postal Reform Act.
The USPS is also facing lawsuits from 16 states and two environmental groups, based on its decision to forego a more electrified delivery vehicle fleet in favor of gas-powered vehicles.