The Canadian government said Thursday Canada Post will end most door-to-door delivery and reduce delivery frequency as part of a turnaround plan for the “insolvent” institution, which is suffering from an outdated business model and protracted labor dispute with mail carriers.
Canada Post has lost US$3.6 billion since 2018 and is on track to lose US$1.1 billion this year, according to government figures. Mail and parcel volumes have steadily declined this century as people turn to digital communications and private couriers have successfully taken away parcel business. Critics say Canada Post failed to innovate and adjust its network to address the competitive forces, focusing on questionable capital investments and not operations.
In January, the government provided a US$720 million emergency loan to prop up the national mail carrier.
“Canada Post is now facing an existential crisis.… Today, the corporation is losing approximately [$7.2] million every day,” said Joël Lightbound, minister of government transformation, public works and procurement,” in a statement.
Canada Post delivers 2 billion letters annually compared to 5.5 billion pieces of mail 20 years ago, even though the number of households has grown by nearly one-third. The combination of delivering fewer letters to more addresses has led to increased service costs, declining revenues and mounting financial losses. Meanwhile, Canada Post’s share of the parcel market has fallen from 62% in 2019 to below 24%.
“Structural challenges, combined with outdated restrictions and stalled negotiations between labor and management, have further limited the corporation’s ability to adapt. This situation is unsustainable. Canada Post is effectively insolvent, and repeated bailouts are not a long-term solution,” said Lightbound. “Transformation is required to ensure the survival of Canada Post and protect the services Canadians rely on.”
Lightbound issued several measures to modernize Canada Post and stabilize its finances, including lowering delivery standards and converting 4 million addresses that receive door delivery to community mailboxes. Universal adoption of community mailboxes, up from three-quarters of the population today, will generate nearly $288 million in annual savings, he said.
It will take up to nine years to implement community mailboxes to all four million households, but most of them will switch within three to four years, the minister said during a news conference in Ottawa.
The Liberal government is ending the requirement to deliver to addresses five days a week as the average household only receives two letters per week, but operations remain designed for far higher volumes. Instead, the postal operator will be able to provide service two to three times each week. Adjusting standards for non-urgent mail will allow more mail to be moved by ground instead of air, saving the company more than $14 million per year.
The government is also lifting a 1994 freeze on closing rural post offices, many of which the government says were once in rural areas that have since become suburban or urban.
Lightbound said the government is also reviewing how to speed up the process for approving increases for stamp prices.
Canada Post CEO Doug Ettinger welcomed the government’s intervention, saying it “will allow us to make the changes needed to restore Canada’s postal service for all Canadians by evolving to better meet their needs. We take this responsibility seriously and will work closely with the government and our employees to move with urgency and implement the necessary changes in a thoughtful manner,” CEO Doug Ettinger said in a statement. “Our goal is to ensure that a strong, affordable, Canadian-made, Canadian-run delivery provider supports the needs of today’s economy and delivers to every community across the country.”
The changes announced Thursday are in line with recommendations made in May by an Industrial Inquiry Commission.
“Today’s announcement is long overdue, but it’s a positive step towards making necessary changes that have been recommended for more than a decade,” the Canadian Federation of Independent Business, said in a statement.
Labor hostility
Canada Post last Thursday made a new contract offer to mail carriers, represented by the Canadian Union of Postal Workers. Negotiations remain at an impasse after 20 months, marked by a 32-day strike last winter, ongoing strike threats, and an embargo on overtime work during the summer. Earlier this month, union members stopped delivering direct mail flyers. The work stoppages and uncertainty about delivery reliability have further exacerbated declines in mail and parcel volumes.
The Canadian Federation of Independent Business said the recent job action banning flyers was another blow to small firms. “At this critical time of year, the last thing small businesses can afford is another strike. We urge the government to provide certainty and work proactively to prevent another labour disruption by temporarily making Canada Post an essential service.”
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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