By Emily Stephenson
WASHINGTON | Thu May 10, 2012 4:38pm EDT
(Reuters) - The Postal Service said its loss widened to $3.2 billion in the first three months of 2012 and repeated on Thursday its warning that it will likely default on payments to the federal government unless Congress passes legislation offering some relief.
The agency, which does not receive taxpayer funds and has been losing billions each year as Americans communicate online, said it lost $2.2 billion in the same period in 2011.
Postal officials are pressing Congress to pass legislation that would allow the agency to move forward with its five-year business plan, including ending Saturday mail delivery. In the meantime, they have sought ways to cut costs.
The announcement came a day after the cash-strapped mail service said it was walking back a plan to close thousands of money-losing post offices and would instead slash operating hours at 13,000 locations with low traffic.
"We are aggressively pursuing new revenue streams and reducing costs in areas within our control," Postmaster General Patrick Donahoe said in a statement. "These actions are not enough to return the Postal Service to profitability."
The Postal Service lost $5.1 billion in fiscal year 2011 and was unable to make a massive annual payment for future retiree health benefits, which is required by law. The agency said much of the loss during the second quarter of 2012 came from setting aside funds for the $11.1 billion that is due this year.
Mail volume also fell 4.1 percent to 39.5 billion pieces from the same period a year earlier, as electronic communications drained both first-class and advertising mail.
The agency has asked Congress to end the retiree health payment requirement, let USPS pull its employees out of federal health programs and run its own plan, scrap Saturday mail delivery, raise rates beyond inflation, and give back a retirement-fund surplus estimated at about $11 billion.
The Senate passed bipartisan legislation last month that would allow the Postal Service to use the retirement-fund surplus to offer retirement incentives, spread out the health benefits payments over a longer time period, and let it end Saturday mail after two years.
USPS Chief Financial Officer Joe Corbett said the bill "doesn't go far enough."
"Huge losses will continue until the Postal Service's comprehensive plan, including the key legislative proposals, moves forward," he told reporters. "The Senate bill ... would provide short-term relief, but in the long-term we need additional initiatives passed."
The House of Representatives has yet to schedule a vote on postal legislation.
Several lawmakers issued statements on Thursday calling for action on postal legislation in response to the second-quarter loss. But they still disagree on whether or not to end the retiree health payments and what to do about Saturday mail.
The Postal Service said operating revenue during the three months that ended on March 31 was $16.2 billion, down about $7 million from the same quarter of 2011.
First-class mail volumes have consistently fallen, but Corbett said the decline in standard mail was disappointing. The Postal Service said better-targeted mailings and electronic alternatives eroded advertising mail volumes during the quarter.
The shipping business again represented the bright spot in a bleak report, with revenues related to shipping and packages up 13 percent from the same period in 2011, USPS said. The online shopping trend and sites such as eBay Inc. have given the package delivery business a boost.
Operating costs rose about 5 percent, in part because the agency is setting aside more for the retiree health benefit payments. The agency also saw an 8.1 percent increase in transportation expenses due to rising fuel costs.
Corbett said officials do not expect to make the retiree health payment, which comes due at the end of the fiscal year when the Postal Service expects to be low on cash and near its borrowing limit, and that to do so would be "irresponsible."
Fred Rolando, president of the National Association of Letter Carriers, a postal union, said Congress should end the health payment before making service changes such as ending Saturday mail or closing facilities.
"It would be absurd to start to dismantle the universal network and degrade service to the American people and America's businesses when almost all of the red ink ... stems directly from a burden that Congress imposed and Congress could fix overnight," Rolando said in a statement on Thursday.
(Reporting By Emily Stephenson; editing by Mohammad Zargham and Eric Beech)