In a financially turbulent fiscal 2022, the U.S. Postal Service reported Thursday that operating income rose nearly 2% year over year to $78.5 billion while volume fell 1.2%, mostly due to a decline of shipping and parcel volumes by 5.3%.
The noise came from below the line, where the Postal Service reported net income of $56 billion, which was almost entirely due to a $57 billion one-time in-kind benefit from the landmark Postal Service Reform Act enacted in April. In its 2021 fiscal year, the Postal Service lost $4.9 billion, excluding the monetary benefit.
The law’s key provision removed the requirement that the agency pay out future health care benefits to retirees annually in advance. The law also eliminated all overdue advance payment obligations. The effect of both provisions is expected to save the postal service billions of dollars per year over time. No other federal agency has ever had to fulfill similar obligations.
Adjusted for the $57 billion one-time tailwind, the Postal Service lost $473 million in fiscal year 2020 compared to $1.5 billion in fiscal 2021.
Shipping and packages revenue declined 2.2% to $31.3 billion while volume was 7.18 billion units, compared to 7.58 billion units. Fiscal 2022 results suffered from poor comparisons to the prior fiscal year’s pandemic-driven surge in parcel delivery. Delivery volumes have fallen as consumers have returned to in-store purchases and market competition has intensified, the postal service said.
The postal service is facing an erosion of its parcel delivery market share as Amazon.com Inc. (NASDAQ: AMZN), which used to use the postal service to deliver most of its packages, has diverted more of that traffic, particularly in dense urban areas , to his own fleet. It also lost millions of packages after FedEx Corp. (NYSE: FDX) had moved its last-mile delivery business internally to what FedEx calls Ground Economy.
The postal service currently delivers about 16% of Amazon’s total package volume, according to estimates by ShipMatrix Inc., a consulting firm. Although the absolute percentage has dropped significantly, Amazon’s growing volume meant the postal service was still delivering more than 1 billion Amazon packages in 2021, according to ShipMatrix data.
On Thursday, Postmaster General Louis DeJoy told the Postal Service’s Board of Governors he had hoped the agency would break even by the end of its fiscal year. Still, he said the postal service had made “solid and steady progress” toward that goal.
The postal service, which by law is required to serve every US address and PO box, added 1.7 million addresses last year despite a continued decline in volume. The postal service still lacks a cost-effective integrated mail and parcel delivery network that aggregates all mail from collection to delivery through “logically ordered” processes.
Even with approval from all stakeholders, it will still take five years to achieve the agency’s multiple goals of increasing revenue, reducing operating costs and reducing the agency’s carbon footprint, DeJoy told the board of governors. Without the full cooperation of stakeholders, it will take much longer, he said.