* Postal Service concerned with future liquidity
* Says regulatory changes necessary for fiscal stability
* Customer group disputes prediction for cash shortfall
(Adds comments from Affordable Mail Alliance)
By Jasmin Melvin
WASHINGTON, Aug 5 The U.S. Postal Service
reported a quarterly net loss of $3.5 billion on Thursday and
said it will likely have a cash shortfall going into 2011.
The agency, which delivers nearly half the world's mail,
has reported net losses in 14 of the last 16 fiscal quarters.
Revenue in the third quarter that ended June 30 fell $294
million to $16 billion from a year ago, while expenses were
$789 million higher at $19.5 billion, due largely to higher
workers' compensation costs and retiree health benefits.
"Given current trends, we will not be able to pay all 2011
obligations," said Joseph Corbett, the agency's chief financial
Cash flow seems on track to handle 2010 operations, Corbett
said, but it is uncertain whether sufficient liquidity will be
in place for 2011 after the agency must make a $5.5 billion
payment on Sept. 30 to prefund retiree health benefits.
"It is clear that a liquidity problem is looming and must
be addressed through fundamental changes requiring legislation
and changes to contracts," Corbett said.
A U.S. law requires annual payments through 2016 to prefund
the health benefits, a requirement not placed on any other
government agency. The Postal Service is pushing for
legislation that would restructure this payment schedule.
Congress lowered the amount the Postal Service was
obligated to pay to prefund benefits in 2009, but there has
been no indication that will happen again this year.
To remain solvent, the Postal Service is also seeking
Congressional approval to cut Saturday service, and has
proposed price hikes for 2011 that require approval from the
Postal Regulatory Commission. [ID:nN06102566]
The Affordable Mail Alliance, consisting of hundreds of
small businesses, charities, and other customers of the Postal
Service, contested the service's predictions of a cash
The group said certain filings suggest the agency will have
$1.3 billion in cash after making the benefits payment.
"Unfortunately, the Postal Service seems to be attempting
to justify their proposed rate hikes of ten times the rate of
inflation - a move that would drive away more consumers and
worsen the financial situation they're highlighting in this
report," said Tony Conway, a spokesman for the group and
executive director of the Alliance of Nonprofit Mailers.
SHRINKING MAIL VOLUME
The Postal Service faces a continued downward spiral in
mail volume, as more Americans communicate by email and
electronically pay their bills.
Some 40.9 billion pieces of mail were delivered in the
third quarter that ended June 30, down 1.7 percent from the
same period a year ago.
While the global recession sparked unprecedented drops in
mail volume, the increased popularity of email and competition
from FedEx Corp (FDX.N), United Parcel Service Inc (UPS.N) and
other delivery services have long cut into the agency's mail
Postmaster General John Potter said the Postal Service is
expected to achieve around $3 billion in cost reductions in
2010 through cuts in work hours to match declining volumes and
other initiatives, but more is needed to secure the agency's
"It also will require that the Postal Service gain
flexibility within the law to move toward five-day delivery, to
adjust our network as needed, to develop new products the
market demands, and to work with our unions to meet the
challenges ahead," he said.
(Reporting by Jasmin Melvin; Editing by Tim Dobbyn)