The U.S. Postal Service had something in December it hasn't seen in a long time -- a profitable month.
The Postal Service had net income of $179 million for the month, it revealed in a report filed yesterday with the Postal Regulatory Commission. The USPS had more mail volume (9%) and revenue (6%) than budgeted, but lower expenses (-2%), enabling it to beat its budget by $546 million.
Holiday-related mail usually makes December one of the Postal Service's best months, but the USPS lost $185 million even in December 2008. The differences this year were a lower cost structure and higher labor productivity: Total work hours were 7.6% lower than in December 2008 even though mail volume was down only 3.2%.
The Postal Service is still on track to lose billions of dollars this year, mostly because of a mandated subsidy to the federal government (euphemistically referred to as prepayment of retiree health benefits). But the first three months of Fiscal Year (2010) are much better than budgeted and even a bit better than last year, despite a drop in mail volume of nearly 9%.
The USPS has managed to keep its expenses slightly under budget so far, despite mail volume running nearly 5% higher than planned. That has resulted in a quarterly loss of "only" $297 million in the quarter, nearly $1 billion better than the budget.
The recent results disprove the notion that higher postage rates are the only way to balance the Postal Service's budget. That would only drive away business without decreasing costs much.
A better path is to reduce fixed costs with early-retirement incentives and facility consolidations. Postal officials have mostly followed that path, though the early-retirement bonuses have been too small and the pace of consolidations too slow.