US Postal Service has $3.8 bln loss in fiscal '09

* 2009 saw unprecedented mail volume decline

* Agency cut $6 bln in costs, 115 mln work hours

* Seeks shorter delivery week, further benefits relief

* Without changes, sees 2010 loss of $7.8 billion

By Jasmin Melvin

WASHINGTON, Nov 16 (Reuters) - The U.S. Postal Service reported a $3.8 billion net loss for its fiscal year that ended Sept. 30, as some $6 billion in cost savings were not enough to keep pace with plunging mail volumes.

The agency, which delivers nearly half the world’s mail, saw 26 billion fewer pieces of mail in fiscal 2009 as global economic weakness took its toll.

The 12.7 percent drop in mail volume to 177.1 billion pieces from a year earlier was more than double any previous decline the agency has seen, said Joseph Corbett, the agency’s chief financial officer.

“Primarily it was the recession which drove the volumes down so quickly and with very little warning to us,” Corbett told reporters.

Increased use of email and competition from FedEx FDX.N, United Parcel Service UPS.N and other delivery services also continued to contribute to falling mail volumes.

Annual operating expenses totaled $71.8 billion, down 7.6 percent from the previous year, but the drop in mail volume caused operating revenue to slip 9.1 percent to $68.1 billion.

The loss would have been worse except for legislation which allowed the agency to postpone the recognition of billions of dollars in prefunded retiree health benefit payments.

The Postal Service had been concerned it might not be able to take advantage of the legislation because the law was signed after the close of the fiscal year. But it later determined that Congress’ intention was clear that the bill should apply to fiscal 2009. [ID:nN26203518]

The Postal Service is pushing for additional legislative measures to ease its financial load, including more relief from the prefunding of retiree benefits and flexibility to shift to a five-day delivery week from the current six-day week.

“We really need two changes, at least of that order of magnitude, in order to get the Postal Service back towards financial health,” Corbett said.

The agency estimates a shorter delivery week would save at least $3 billion while not having to prefund retirement benefits would free up some $3 billion to $5 billion.

The agency cut 115 million work hours in 2009 to match the reduced mail volume. “That’s the equivalent of 65,000 full-time employees,” Corbett said.

Other cost-cutting measures included realigning carrier routes and freezing salaries.

Without changes to the delivery week and benefits payment schedule, the Postal Service forecast a net loss of $7.8 billion for 2010 with mail volume falling by 11 billion pieces. (Reporting by Jasmin Melvin; Editing by Tim Dobbyn)