(Adds comments from finance minister's office, Canada Post)
By David Ljunggren
OTTAWA Aug 28 The large losses being racking up
by Canada's postal service are of great concern to the
government and it wants to see Canada Post's plans for stemming
them, an official said on Wednesday.
Canada Post reported a loss on Tuesday of C$104 million ($99
million) for the second quarter of 2013 and said it was on track
to run short of cash by the middle of next year.
Like the U.S. Postal Service, Canada Post is suffering as
customers switch to digital communications. Canadian mail
volumes fell by 6.3 percent from the second quarter of 2012.
The postal service's other big challenge is a C$5.9 billion
deficit in its pension plan.
Canada Post - which has a mandate to be self-financing - is
an arm's length corporation that reports to Parliament through
the office of Transport Minister Lisa Raitt.
"We are very concerned that they are posting significant
losses," said Raitt's spokeswoman, Ashley Kelahear. "The
minister has met with Canada Post to request their plans for
rectifying the financial under performance."
Canada Post says it is looking at a number of ways to save
money, such as cutting back on deliveries, raising prices and
relaxing delivery standards. Last year it signed a deal with the
Canadian Union of Postal Workers to reduce labor costs by
lowering wages for new hires and freezing wages for a year.
"We have a 19th century business model that we have to pull
into the 21st century ... we are exploring all options and
clearly talking to the government about those options. We
haven't landed on anything yet," said Canada Post spokesman Jon
Canada Post is required to make a series of special payments
to help make up the shortfall in its pension plan. Earlier this
month Raitt and Finance Minister Jim Flaherty offered the
corporation some relief, saying it could put off making the
first special payment until June 30, 2014.
Even so, Canada Post says it will have to make a special
payment of C$1.1 billion in 2014. To help avert a cash crunch it
says it is "seeking regulatory relief and changes to the pension
plan framework". Hamilton declined to give more details.
In March this year the finance ministry granted Air Canada,
the country's biggest airline, a seven-year extension of an
agreement that allows it to limit its special payments to its
A spokesman for Flaherty, asked whether the ministry might
offer Canada Post a similar extension, said he would not comment
on the specifics of a particular pension plan.
The Canada Post Group of companies, which includes courier
firm Purolator, has annual revenues of around C$7.5 billion and
employs about 68,000 people.
The Canadian Union of Postal Workers said on Wednesday it
wanted an open discussion about Canada Post's future.
"Even once we find a solution for the pension fund, we still
need to work out how Canada Post's operations can remain
self-sustaining in the long run," said union President Denis
(Reporting by David Ljunggren; Editing by Peter Galloway)