WASHINGTON, DC — The U.S. Postal Service ended its second quarter (Jan 1 – March 31) with a net loss of $1.9 billion, as the economic recession and longer-term financial pressures, such as the diversion of letter mail to electronic alternatives, continued to reduce mail volume and revenue. Despite aggressive actions to reduce costs and grow revenue, the Postal Service will likely face a cash shortfall of over $1.5 billion at the end of the fiscal year.

The Postal Service has incurred net losses from operations in 10 of the last 11 fiscal quarters. The year-to-date net loss is $2.3 billion, compared to a loss in the same period last year of $35 million. A significant portion of the losses over this period can be attributed to an unprecedented decline in mail volume. In the second quarter, mail volume totaled 43.8 billion pieces, down 7.5 billion pieces, or 14.7 percent, compared to a year ago.

The second-quarter results include operating revenue of $16.9 billion, a decrease of nearly $2 billion, or 10.5 percent, from the same period last year, and operating expenses of $18.8 billion, a reduction of $782 million, or 4.0 percent, from the second quarter of last year. Complete second-quarter results are contained in the Postal Service Form 10-Q report, available later today at usps.com/financials (click Form 10-Q under Quarter Reports) and also attached at the end of this release.

“The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter,” said Postmaster General John Potter during today’s Board of Governors meeting. “We are aggressively realigning our costs to match the lower mail volumes, while also maintaining the high level of service and reliability our customers expect. We are also taking a number of steps to grow revenue.”

The Postal Service has recently developed incentive programs to increase mail volume, including advertising mail and Priority Mail. In addition USPS has proposed a summer sale for Standard Mail, which is currently under review by the Postal Regulatory Commission.

The Postal Service continues to support H.R. 22, a House bill that would redirect a portion of the Postal Service’s prior payments to the Postal Service Retiree Health Benefits Trust Fund to pay its share of contributions for current retiree health benefits through 2016. If enacted, the legislation would reduce the projected 2009 net loss by approximately $2 billion and help enable the Postal Service to meet its 2009 financial obligations. The bill was introduced by Rep. John McHugh (R-NY) and co-sponsored by Rep. Danny Davis (D-IL). As of today, the bill has 297 co-sponsors. 

Cost Reductions 
“We are aggressively reducing work hours and other costs to limit losses, preserve cash and improve productivity,” said Joseph Corbett, chief financial officer and executive vice president. Initiatives designed to match work hours to reduced volume have resulted in a work-hour decline of 58 million hours – the equivalent of a reduction of 33,000 full-time employees – in the first half of FY 2009, despite an increase in the number of delivery points by 1.1 million from the same period last year. The work-hour reduction is on pace to meet the goal of reducing work hours by more than 100 million for the entire year, the equivalent of 57,000 full-time employees. 

Corbett said other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducing travel budgets and similar measures. 

An independent federal agency, the U.S. Postal Service is the only delivery service that reaches every address in the nation, 149 million residences, businesses and Post Office Boxes, six days a week. It has 34,000 retail locations and relies on the sale of postage, products and services, not tax dollars, to pay for operating expenses. Named the Most Trusted Government Agency five consecutive years by the Ponemon Institute, the Postal Service has annual revenue of $75 billion and delivers nearly half the world’s mail.