Image: Postal service
Damian Dovarganes  /  AP
With salaries accounting for 80 percent of postal costs, office closings would only produce a modest benefit.
updated 8/5/2009 2:05:09 PM ET 2009-08-05T18:05:09

Buffeted by the recession and the popularity of e-mail and electronic bill payment, the Postal Service lost $2.4 billion from April through June, officials said Wednesday.

That brings the year's losses so far to $4.7 billion. And the Postal Service expects to be $7 billion in the red when the fiscal year ends Sept. 30.

"What has occurred in the economy is unprecedented and it has created a much greater challenge than we can respond to quickly," Postmaster General John Potter said in a briefing. "We're trying to navigate our way through a challenging period of time."

Total mail volume has declined sharply as businesses cut back on advertising during the recession. At the same time, people and businesses have been moving to e-mail to handle personal messages and send and pay bills.

In an effort to cope with the declining volume, the post office reduced work hours by 88 million in the first nine months of the fiscal year, which began Oct. 1.

Carrier routes have been combined as volume declines, hours of many offices were reduced and the post office has asked Congress for permission to cut deliveries from six days per week to five.

Mail managers are also looking at the possibility of closing several hundred offices or selling postal buildings in cities and relocating to leased space.

With salaries accounting for 80 percent of postal costs, office closings would only produce a modest benefit, Potter said.

A hiring freeze is also in place, early retirements have been offered and management salaries have been frozen.

A major burden, Potter added, is a requirement for the post office to make advance payments of between $5.4 billion and $5.8 billion annually to a retiree health-benefit fund. Without those payments — not required of other government agencies — the post office would have been in the black last year and would be looking at a loss of $1.9 billion this year, rather than the projected $7.3 billion.

Bills have been introduced in Congress to ease this requirement on a temporary basis.

Potter urged passage of those measures, but also noted that a fundamental look at how the post office does business in a changing society is needed.

Last year, mail volume fell by 9.5 billion pieces to a total of 203 billion pieces. It is expected to fall by 28 billion pieces this year to a total of 175 billion pieces.

At the same time population growth and new business mean the post office has to serve 1.2 million new addresses every year.

There are 155,032 city delivery routes today bringing an average of 4.1 mail pieces to each stop. In 2000 there were 167,470 routes averaging 5.9 items per stop.

While Congress votes money for free mail delivery for the blind and to offer reduced rates to charities, the post office does not receive taxpayer funds for its operations.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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