updated 8/6/2008 5:43:04 PM ET 2008-08-06T21:43:04

The Postal Service had a net loss of more than a billion dollars in the third quarter of the fiscal year, the agency said Wednesday.

For the quarter ended June 30, the loss was $1.1 billion, which officials blamed on reduced mail volume in the slowed economy, coupled with rapidly rising transport costs because of high fuel prices.

The post office is working to deal with its losses by cutting costs. The agency has reduced its staff by about 100,000 since 2000 and is offering early retirement to some clerks, mail handlers and supervisors.

While the post office operated in the black the last four years, using the money to pay down debts, it has faced significant losses in the past. For example, it was $1.5 billion in the red in 1991, and was down $1.7 billion in 1993. The post office does not receive a government subsidy for operations.

For the quarter, operating revenue was $17.9 billion, down $437 million, or 2.4 percent, compared with the same period last year. Operating expenses totaled $19.0 billion, an increase of $178 million, or 1.0 percent, from the third quarter last year.

Total mail volume was 48.5 billion pieces, a 5.5 percent drop from the same period last year.

The agency said its fiscal 2008 year-to-date net loss totals $1.13 billion after nearly breaking even in the first two quarters.

Meanwhile, the post office said on-time delivery reached record highs for all three categories of first-class mail the Postal Service tracks. Overnight service was 97 percent on-time, up from 96 percent during the same period last year. Two-day service was 95 percent on-time, up from 93 percent, and three-day service was 94 percent on-time, up from 91 percent.

Postage rates rose a penny in May to the current 42-cent price. Another increase is expected next May, with the amount to be announced in February. Any increase is limited to the rate of inflation.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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