OTTAWA Dec 11 (Reuters) - Canada's postal service will phase out urban home delivery within five years and hike the cost of postage stamps to try to stem soaring losses, the post office said on Wednesday.
Canada Post, like the U.S. Postal Service, is suffering as customers switch to digital communications. In August it said it was on track to run short of cash by the middle of 2014 unless major changes were made.
The government-owned corporation - which has a mandate to be self-financing - last month reported a third-quarter loss of C$109 million ($103 million) before tax and said mail volumes had fallen 7.3 percent from the same period in 2012. It must also deal with a C$6.5 billion deficit in its pension plan.
About 5.1 million urban households in Canada - a third of the total - get door-to-door mail delivery. Under a five-point plan unveiled on Wednesday, this will be phased out over the next five years and replaced by a system of community mail boxes.
"With the ongoing decline in letter mail - we delivered a billion fewer pieces of mail in 2012 than we did in 2006 - we had to make changes," spokesman Jon Hamilton said.
"(This plan) really provides Canada Post with a future based on serving needs that Canadians have rather than trying to put something together than doesn't work."
The opposition New Democratic Party (NDP) said the move could harm pensioners who rely on home delivery in winter months.
"There is no doubt there are negative impacts on service across the country and, of course, thousands of jobs lost," NDP Member of Parliament Peter Julian told reporters.
The corporation reports to Parliament through Conservative Transport Minister Lisa Raitt, who said in a statement she supports Canada Post's efforts to cut its losses.
Canada Post employs around 55,000 people and the changes will involve a cut of between 6,000 to 8,000 staff, mainly through attrition.
"With its current labor costs, Canada Post has a much higher cost structure than its competitors in the private sector have. This is simply not sustainable," the corporation said in a statement.
The average annual cost of delivering mail to an address is C$283, compared with C$108 for a community box.
The cost of a single stamp for mail delivery in Canada will rise to C$1 from the current 63 Canadian cents. Such stamps bought in rolls or booklets will cost 85 Canadian cents each.
Canada Post will also open more franchise postal outlets in stores, streamline its operations by using modern technology and cut labor costs. The measures combined are designed to save C$700 million to C$900 million per year.
Canada Post said the changes would return it to financial sustainability by 2019.
The Canadian Union of Postal Workers said it would react to the corporation's plan later in the day.
Separately, the Canadian government said it would give Canada Post a four-year break from the requirement to make special payments to its employee pension plan to address its giant shortfall.
Canada Post had been due to make a special payment of C$1.1 billion in 2014.
($1=$1.06 Canadian) (Editing by Jeffrey Hodgson and Peter Galloway)