The U.S. Postal Service reduced its annual loss in fiscal year 2026 to $6.5 billion, down $2.5 billion from last year, but officials called again on Congress and the Postal Regulatory Commission for urgent reforms because its own measures to cut costs and generate more revenue aren’t enough to resolve an ongoing financial crisis.
The national mail carrier said its controllable loss, which excludes mandated obligations outside management’s control, decreased by $344 million to $2.4 billion, according to financial results released on Tuesday.
Operating revenue increased 3% to $83 billion driven by expansion in Ground Advantage, the organization’s economy parcel shipping product with two-to-five day service standards, strength in the marketing mail category, temporary parcel transportation surcharges, and a hike in First-class mail. The increases were partially offset by declining volume in First-class mail and parcels.
One of Postmaster General David Steiner’s top priorities since taking the helm 18 months ago is raising revenue, which he says is a key component to achieving financial sustainability.
“We are now meeting our revenue goals on a regular basis… the result of effective pricing strategies combined with strong promotions, strong incentives, and product development in our mail business. And in the first month of the new year, we actually saw our volumes turn positive and revenue growing at a double-digit rate,” he told the board of governors during a live-streamed meeting.
The Postal Service two weeks ago posted notice, as first discovered by e-commerce news site Value Added Resource, that it would introduce a permanent fuel surcharge in January for package shipments to offset the cost of diesel truck and jet fuel. The decision comes on the heels of a first-ever, temporary 8% transportation fee that took effect in April, after the Iran war triggered a run up in oil prices. The temporary transportation surcharge is scheduled to end Jan. 17, along with peak season handling fees.
Ground Advantage and Parcel Select surcharges will be based on diesel prices, while Priority Mail and Priority Mail Express will use jet fuel prices. Negotiated contracts may have customized terms for fuel. The USPS hasn’t disclosed the fuel surcharge formula
The decrease in red ink was attributed to a $2.4 billion increase in operating revenue along with a $2.7 billion decrease in workers’ compensation and retirement expenses, which outweighed increases in other costs. Transportation expenses for the year increased $225 million, but Postmaster General David Steiner said the agency hit cost goals the past six months despite fuel and inflation headwinds.
The fact that total expenses of $85.8 billion only varied by $200 million, or 0.23%, from the budget target during a time of very high fuel prices indicates how much progress management has made, added board member Daniel Tangherlini, who was elected as chairman during the meeting.
“Our actions alone cannot resolve the challenges brought on by an outdated business model. We will continue to do our part but we need meaningful legislative, regulatory, and administrative reforms to propel the Postal Service toward long-term financial sustainability,” said Chief Financial Officer Luke Grossman in a statement.
The Postal Service has previously said it could be insolvent by 2031, when the retiree health benefit fund is exhausted.
Steiner said volumes turned positive and revenue grew at double digits in October, driven by election mail and higher package volumes, with the momentum expected to continue in the coming months. The agency expects significant growth in revenue for shipping and package services in fiscal year 2027.
Shipping and packages revenue increased $1.7 billion, or 5.1%, on a volume decline of 5.3%, compared to the prior year third quarter. The Postal Service is losing packages to Amazon and independent parcel carriers. Ground Advantage volumes have increased, but Parcel Services and Priority Mail are down Marketing Mail revenue 5.3% on a 1.1% volume decline. First-class mail revenue increased 1.2% on a volume decline of 5.1%.
During the year ending Sept. 30, the Postal Service continued efforts to lower its cost structure by streamlining networks and optimizing air and surface options; reducing 19 million work hours; and deferring payments to retirement funds to conserve cash.
Management said service has improved considerably, starting with peak season last year, and that this peak season will set the stage for improved operational and financial performance in 2027. During the fourth quarter, First-class mail on-time performance was 90.7% compared to 88.9% year over year, with average days to deliver of 2.4, down a tenth. Performance levels for bulk mail were flat at 94.3%
“Our improved operational precision comes from our network transformation efforts, expert decision-making, and rapidly improving end-to-end visibility across all operations. But we can still do better, and we will as we bring technology to our operations,” Steiner told the board of governors during a meeting, which was live streamed.
Postal Service officials said the agency can’t continue to rely on short term fixes for long-term structural problems. Policymakers need to remove uneconomical mandates, such as six-day per week service, increase the $15 billion borrowing limit so the USPS can access capital necessary for upgrades to compete with private sector parcel carriers and help subsidize operations for the first time. Other requests include spreading responsibility for retirement payment allocations to the U.S. Treasury Department, expanding investment opportunities for pensions beyond solely treasury bonds, allowing the agency to adopt private sector best practices for addressing workers’ compensation claims and ensuring that Congress allocates funding as intended.
Postal officials have long complained to the Postal Regulatory Commission that they need more flexibility to raise prices and make other operational decisions because the slow approval process limits ability to compete with more nimble private carriers.
Opposition to price hikes
Keep US Posted, an advocacy group that includes newspapers, magazines and greeting card publishers, urged lawmakers to not to adopt some of the USPS’s reform agenda, arguing its 2021 business transformation plan has been a loser and that service shouldn’t be reduced to close the deficit. The trade association said that Postal Service has raised prices seven times in five years at rates above inflation, which has reduced mail volume and revenue, despite an infusion of money during the pandemic and pension liability changes under the Postal Service Reform Act of 2022.
“Congress must act to increase accountability, incentivize productivity and increase regulatory oversight. Without that action, a devastating cash crisis is unavoidable. The answer should not be another blank check without actionable reforms. Otherwise, USPS could soon be headed for a massive taxpayer bailout,” said Executive Director Kevin Yoder in a statement. “Excessive price increases and reduced service drive even more mail out of the system and further destabilize USPS. The lesson is clear: raising rates and borrowing more money are not a path to solvency without cost controls and productivity requirements.”
Keep US Posted wants Congress to limit rate hikes to once per year and keep them affordable for small businesses and consumers by capping them to the Consumer Price Index.
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Write to Eric Kulisch at ekulisch@freightwaves.com.
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