U.S. Postal Service loss triples, even as package deliveries rise

The U.S. Postal Service lost almost $4 billion in 2018 even as package deliveries rose, according to results released on Wednesday, potentially giving U.S. President Donald Trump ammunition against Amazon.com Inc, which he claims pays too little for the agency’s services.

Trump, without presenting evidence, has accused the world’s largest online retailer repeatedly over the past year of taking advantage of USPS by not paying enough for deliveries to make the service profitable.

USPS reported operating revenue of $70.6 billion for fiscal year 2018, which ended on Sept. 30, as sales at its shipping and packages business rose 10 percent.

However, its net loss more than tripled to $3.9 billion from a loss of $1.2 billion in 2017, hurt by rising pay and benefits and higher transport costs, such as gas prices.
An independent agency within the federal government, USPS is limited in what it can do to improve its financials.

“The flawed business model imposed by law continues to be the root cause of our financial instability,” said Postmaster General Megan Brennan, adding that the Postal Service is pressing for reforms that would allow it to cut costs, increase revenue and compete more effectively.

Neither USPS nor the president have the power to set postal rates directly. They are set by the Postal Regulatory Commission, an independent government agency with commissioners from both political parties who are selected by the president. That panel raised prices on packages by almost 2 percent in November.

Package delivery, especially for major customer Amazon, has become a key part of USPS’s business, but has not been enough to offset the sharp decline in first-class letters caused by the internet and email.

The Cowen Washington Research Group earlier this year forecast that USPS will nearly double the number of U.S. packages delivered for Amazon from 1.1 billion in 2018, or 55 percent of total USPS package deliveries, to 1.9 billion in 2023.

“Following discussions with persons in the U.S. Postal Service ecosystem and a review of USPS financials, it’s clear that Amazon has been a key driver of USPS for years,” Cowen analysts said in a research note.

Amazon is run by founder Jeff Bezos, who also owns the Washington Post, a newspaper Trump has repeatedly railed against. It has shown interest in delivering its own packages, and has tested drones for doing so.

In 2015, Amazon spent $11.5 billion on shipping, 46 percent of its total operating expenses that year. It has not commented publicly on Trump’s criticisms.