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Postal Service earmarking $40B to boost share of package market

Postmaster General DeJoy gives lawmakers insight into yet-to-be-released 10-year plan

(Photo: Jim Allen/FreightWaves and U.S. Congress)

Postmaster General Louis DeJoy told lawmakers on Thursday that the U.S. Postal Service needs to make significant changes if it hopes to survive — and the biggest of those likely will be further adjusting to consumers’ growing appetite for package delivery.

Testifying before a House Appropriations subcommittee, DeJoy provided some insight into his agency’s 10-year operational strategy that he said will be formally released in the coming weeks.

“This plan is about service excellence at affordable prices, a commitment to six- and seven-day-per-week delivery,” he said. “It will have some big numbers for investing into the organization and workforce — approaching $40 billion — and spurring innovation for growth.”

As has been the case with previous congressional hearings for which DeJoy was called to testify over the past several months, lawmakers — largely Democrats — badgered him about service declines during the pandemic, ballot delivery in the run-up to last fall’s election and problems delivering first-class mail that continue in specific regions of the country. But they were also eager for more details on the agency’s operational strategy.

“Everyone recognizes the decline in mail volume that has been happening over the last 10 years — over 40% — that is projected to decline another 35-40% over the next 10 years,” DeJoy asserted. At the same time, he said, the Postal Service delivers only about 35% of the country’s package delivery volume, much of which is handled by private carriers FedEx [NYSE: FDX] and UPS [NYSE: UPS]. In contrast to mail, package volume is expected to double over the next six or seven years. As a result, he said, “we need to reorganize ourselves — which is part of what this plan will do to address the marketplace.”

Part of that will include investing in larger package facilities and new package-sorting equipment. But it will also involve changing service standards, DeJoy said.

“The service standards that we have now have not been met in the last seven to eight years,” he said, because “they’re not achievable in the current environment. We cannot go from California to New York in three days without going on planes, and we don’t own planes.”

Rep. David Joyce, R-Ohio, was concerned about where package service to rural areas fits in the Postal Service’s operational plans, which will also involve some form of consolidation.

“This board and this management team are very committed to keeping our service to rural America,” DeJoy said. “When we roll out the plan, you will see that a big part of this is to attain financial sustainability and have revenue growth and to become self-sustaining,” which is part of the agency’s congressional mandate.

But a self-sustaining business model for the Postal Service also leans heavily on legislation in Congress that would relieve the agency of the current requirement to pre-fund retiree health care for 75 years, DeJoy noted. The legislation seems to have bipartisan support.

“We have a significant alignment to make in how we run our network. The pandemic and the service impacts we had over the last several months are a view of what’s to come if we don’t make change.”

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John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.