USPS Will Hit Exigent Surcharge Limit by August

Thanks to record holiday package volume and strength in Standard Mail, the U.S. Postal Service registered a 4.3% increase in operating revenue during the first quarter of its 2015 fiscal year ended December 31. Nonetheless, the agency posted a quarterly loss of $754 million, still plagued by a mandated $1.4 billion prepayment into its Retiree Health Benefits Fund.

Reprising what has become a mantra of the last several earnings calls, CFO Joe Corbett pleaded with Congress to pass postal reform legislation.“We need to be making investments in critical infrastructure needs, such as purchasing new vehicles,” he said. “We’ve delayed too long and we need to take action, and we are taking action.”

Yet Corbett and new Postmaster General Megan Brennan exhibited signs of optimism during a press call on quarterly results this morning. Shipping and package revenue increased by nearly $400 million on a 12.8% lift in volume, and Standard Mail receipts increased $351 million on a 3.5% volume rise.

While much of the Standard Class increase was attributed to political direct mail during midterm elections, Corbett said advertising mail rose, as well. “If you draw a line [of advertising mail volume] over the last four years, you see it moving up very steadily,” he said.

Corbett admitted dreading the day that the 4.3% exigent surcharge, enforced in January 2014, might be removed. He estimated it would arrive in late July or early August, when the $3.2 billion in funds deemed lost to the Great Recession would be recovered. The Postal Regulatory Commission issued an order for the removal of the surcharge last month, in keeping with the condition of its approval of the emergency rate hike.

According to USPS’s 10-Q report, it had collected $1.4 billion in exigent surcharges as of the end of September, and Corbett estimated the Postal service would lose some $2 billion in cash flow for Fiscal 2015 should the rate be dissolved. Both Postal Service officials and stakeholders in the mailing community await a decision from the D.C. District Court of Appeals on a USPS petition requesting the exigent increase be made permanent.

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