US Postal Service revenue fell short in October

By Ayesha Rascoe

WASHINGTON, Nov 15 (Reuters) - October revenue at the U.S. Postal Service fell $300 million short of expectations because of the credit crunch and housing slump, the service said on Thursday.

"While it is too soon to actually predict how these trends will ultimately affect our bottom line, we are responding to them," Postmaster General John Potter told a meeting of the U.S. Postal Service's board of governors.

Although the service offset some of the October deficit by cutting expenses, it is still more than $150 million below its expected income, he said.

October was the first month in the service's 2008 fiscal year.

The U.S. Postal Service ended its 2007 fiscal year with a smaller loss than expected, even with a federal requirement to add $5.4 billion to a Postal Service fund for retiree health benefits, Potter said.

Delivering 212 billion pieces of mail during 2007, the service's total revenue was $74.9 billion. The Postal Service posted a $5.1 billion net loss for the fiscal year that ended Sept. 30.

The deficit was about $300 million less than the service projected earlier this year.

Without the financial obligations of a 2006 federal law, the service said it would have ended the year with $1.6 billion in profits. That law mandated a large payment to a retiree health-benefits fund.

"It's important to note that we not only achieved our plan, which had to be adjusted to reflect the new law, but we overcame a slow start and did better than our mid-year projection," Potter said, referring to fiscal 2007 results.

The service is trying to lower costs and searching for new services it can offer customers to increase profits.

In recent years the Postal Service has lost business to commercial rivals such as FedEx Corp (FDX.N) and United Parcel Service (UPS.N), and because of increasing use of the Internet. (Editing by Gary Hill)