Postal Services Fighting A Losing Battle Against Recession and the Internet

by Tanya Thomas on Aug 9 2009 10:15 AM

Internet and recession have sounded the death knell for the much-revered art of letter-writing with fewer and fewer mailboxes lining the streets, post offices closing, mail volume in free fall. In short, the US Postal Service is going through tough times.

Up to a thousand of the 32,000 postal stations and branches could disappear from US cities and towns, as the service says it faces the biggest drop in mail volume of its history.

USPS on Wednesday posted a 2.4-billion-dollar loss in the third quarter, with an operating revenue of 16.3 billion, a nine percent drop over the same period last year.

"Ongoing electronic diversion and the widespread economic recession continued to reduce mail volume, resulting in a 1.6-billion-dollar decrease in revenue for the quarter," it said in a statement.

For the first time in decades, USPS was in the red in 2008, with a deficit of two billion dollars that is set to triple to 7.1 billion dollars in 2009.

"The financial situation of the postal service is grave," USPS acting vice president of network operations Jordan Small told a panel of the House Committee on Oversight and Government Reform last week.

The postal service is set to distribute 175 billion letters and packages in 2009 -- 38 billion less than in 2007 -- while it is organized to distribute 300 billion pieces of mail each year.

During the first three quarters of 2009, 20 billion fewer letters and packages were brought to the post office.

During the last quarter alone, seven billion pieces less were transported compared to the same period last year, "the largest consecutive three-quarter drop in total volume since 1971," USPS said.

"The trend of letter mail and business transactions being replaced with electronic alternatives will also cause continued downward pressure on mail volume into coming years."

The 13.7 percent projected drop in mail volume in 2009 is "the largest percentage decline since the Great Depression," the Government Accountability Office (GAO), Congress's auditing arm, noted in a report.

The GAO has already placed USPS on its "high risk list."

The Internet now accounts for a major portion of the postal market, as both businesses and individual consumers are opting for electronic transactions, which has sped the tremendous drop in mail traffic.

In 2000, 80 percent of households paid their bills by mail. That figure dropped to 56 percent in 2008, the GAO said.

"Mail volume peaked in 2006 and its decline has accelerated with the economic recession, particularly among major mail users in the advertising, financial and housing sectors," it added.

"Mail volume has typically returned after recessions, but USPS's 5-year forecast suggests that much of the lost volume will not return."

Half of all mail boxes have been axed over the past 20 years, dropping to 175,000 across the country.

Prospects for 2010 are just as grim, despite the increase in postal fees in May.

"USPS also expects continued financial problems in fiscal year 2010 with a similar deficit even if it achieves larger cost savings," the GAO report noted, stressing that its debt is expected to rise above 13 billion dollars.

The postal service currently has 640,000 employees, after 150,000 people were fired since 2000, but more cuts are expected.

Some 3,200 postal stations and branches are under "review," and "under 1,000 offices could be considered as viable candidates to study further," Small said, hinting that hundreds of offices could be closed or consolidated after the review is complicated in late September.