UPDATE 1-US Postal Service Oct-Dec losses climb to $3.3 bln

Thu Feb 9, 2012 4:21pm EST

* USPS calls on Congress to pass relief legislation

* Agency could hit borrowing limit in fall

* Package business grew due to holiday shopping

By Emily Stephenson

WASHINGTON, Feb 9 (Reuters) - The U.S. Postal Service's losses shot up to $3.3 billion in the last three months of 2011, a tenfold jump from the same period a year before, as its customer base eroded with the growth of email and online billing.

The cash-strapped agency recorded the loss during its traditionally strongest period, the year-end holiday shipping season, as declines in mail volumes outweighed growth in shipping.

"Technology continues to have a major impact on how our customers use the mail," Postmaster General Patrick Donahoe said in a statement on Thursday.

"While it has helped us grow our Shipping Services businesses, it has had a significant negative impact on some of our much larger sources of revenue."

The agency reiterated its call for Congress to pass legislation giving the Postal Service flexibility to remake its crumbling business.

Postal officials want lawmakers to allow the agency to tap into a retirement-fund surplus and permit it to offer new services. It also wants to end Saturday delivery and eliminate a large annual payment to prefund retiree health benefits.

"The longer the Postal Service remains in a weak position, the more damage can be done to our business," Chief Financial Officer Joe Corbett said during a conference call with reporters.

"We need to change and get back to a point where we're financially stable so that our customers and our suppliers have faith in us."

The Postal Service lost $5.1 billion the last fiscal year, which ended on Sept. 30. Corbett warned the agency could hit its legally mandated borrowing limit this fall. A downturn in the economy or other unforeseen circumstances could cause a cash crunch that would force the agency to miss some payments in order to keep paying employees and suppliers, he said.

Total mail volume dropped 6 percent in the first fiscal quarter which ended on Dec. 31, the Postal Service said.

Declines in first-class and standard mail revenue outweighed a boost to the package business from increased online shopping during the holidays.

Total revenue fell 1.1 percent to $17.7 billion, the Postal Service said.

The Postal Service said it needs to reduce operating costs by $20 billion by 2015, and that it expects large losses to continue unless it sees results from a plan to close thousands of facilities, eliminate jobs and restructure its healthcare program, as well as action from Congress.

Lawmakers remain deeply divided on closing post offices, ending Saturday mail and eliminating the retiree health benefit payment. But the losses could pressure Congress to act.

"USPS has reached a new, deeper level of crisis," said Republican Representative Darrell Issa, author of postal legislation in the House of Representatives. "Congress must pass legislation that allows USPS to reduce its operating costs and realign its network in line with America's declining demand for paper mail."

The Postal Service, which relies on sales of stamps and other products rather than taxpayer dollars, said it expects to default on this year's retiree health prefunding payment.

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