USPS Reports 5.7% Decline In Parcel Volumes, $9BN Loss

Submitted by Eric Kulisch of FreightWaves,

The U.S. Postal Service lost $9 billion in fiscal year 2025, a $500 million improvement from the prior year that officials attributed to greater revenue intake and reduction in transportation and workers compensation costs. But controllable loss, essentially adjusted operating income that excludes expenses such as workers compensation that are out of management’s control, worsened from $1.8 billion to $2.7 billion.

Financial results for the year ended Sept. 30 were released Friday as the Postal Service ups its tempo for the busy holiday period, when package and greeting card volumes surge. 

The U.S. Postal Service needs to “execute flawlessly” during the peak shipping season before Christmas, and beyond, to demonstrate it can sustain improved service performance and win more parcel volumes necessary for the organization’s financial recovery, Postmaster General David Steiner said in a video address to employees this week.  Service levels are steadily improving this year and the Postal Service is regularly able to achieve on-time service in the high-eighty and mid-ninety percentiles for some of our products, he told the board of governors Friday. And nearly half of the packages and mail are actually delivered earlier than the service standard.

The national post said operating revenue increased $916 million, transportation expenses fell $422 million and worker’s compensation expense declined $1.1 billion, partially offset by increased compensation and benefits expense of $1.7 billion, including a voluntary retirement program, and higher other operating expenses of $221 million.  About 10,500 employees accepted early retirement offers leading to a $167 million expense provision.

Total operating revenue was $80.5 billion, an increase of $916 million, or 1.2 percent, compared to the prior year. The increase was due largely to continued growth of USPS Ground Advantage shipping service, which replaced first-class package services in 2023 and offers two-to-five day service standards for packages up to 70 pounds, as well as price increases in both mail and shipping categories.

First-Class Mail revenue increased 1.5% ($370 million) on a 5% volume decline year over year. Marketing Mail revenue increased 2.3% ($350 million), despite a 1.3% decline in volume. Shipping and packages revenue increased 1.0% to $32.6 billion despite a 5.7% volume decline, or 415 million pieces. 

The Postal Service is seeking further administrative and legislative reforms to get rid of outdated financial and regulatory burdens that other government agencies don’t face. These reforms include: changes in retiree pension benefit funding rules for the Civil Service Retirement System benefits, diversification of pension assets, raising the statutory debt ceiling, and workers’ compensation administration reform. The Postal Service Reform Act of 2022 repealed the requirement that the USPS annually prepay future retirement health benefits, but more structural changes are needed, postal officials say. 

Steiner, who has been on the job for a little more than 100 days, said he planned to build on the Delivering for America transformation plan of his predecessor, Louis DeJoy, saying the Postal Service is “generally on the right track in terms of network modernization strategies.”

He stressed the importance of generating more revenue by attracting parcel business, which postal watchers say is one of the few tools available since most costs are fixed and difficult to lower. In a news release last month, Steiner added that he expects the Postal Service to continue gaining market share in the parcel sector.

The USPS, which delivered an average of 23.9 million packages per day in 2024, controls more than 30% of the parcel market by volume. Despite being the market share leader, it only gets about 17% of the market’s total revenue, compared to UPS’s nearly 32% of revenues and FedEx, with 25% of the available revenue, according to ShipMatrix. 

“By any standard our financial situation is precarious. No organization, even the Postal Service, can lose billions every year without consequences. Over the coming 12 months, we are going to act with urgency to get on a financially sustainable path,” Steiner said in the video.

Peak season prep

Postal service officials say they are ready for the busiest mailing period of the year. 

Over the past four years, the U.S. Postal Service has invested nearly $20 billion in its facilities, logistics and processing capabilities, to streamline its mail and package network and improve delivery reliability. 

The USPS has added 94 high-tech package sorting machines this year. The installation of 614 total automated sorters over the past five years has increased daily processing capacity from 60 million to 88 million packages. The machines have automated scanning capabilities that allow tracking visibility for customers as packages move through the postal system and can handle larger packages than legacy machines, according to the semi-private agency. 

The Postal Service is hiring 14,000 temporary employees to help handle the surge in letters and parcels, down from 40,000 a few years ago. There is less need for temporary workers after the USPS in 2020 began converting 232,000 precareer employees to full-time positions. 

This year, the national post has opened new facilities in Dallas, Phoenix; Johnson City, Tennessee; and other locations, and will soon open buildings in Memphis, Tennessee; Birmingham, Alabama; Tampa, Florida; and San Antonio, Texas.  Within the past four years, USPS has opened nine regional processing and distribution centers; 19 regional transfer hubs (which now handle two thirds of three-to-five day Ground Advantage packages); 17 local processing centers and 133 sorting and delivery centers. 

At the same time the USPS is adding more efficient infrastructure, it is closing other facilities in an effort to consolidate operations. 

The U.S. Postal Service in 2021 had 427 facilities, many of them operated by contractors or under short-term leases, functioning in an uncoordinated manner. Under the transformation agenda initiated by former Postmaster General Louis DeJoy, the agency is moving to standardize operations by downsizing the network to 250 facilities — 60 regional processing and distribution centers, and 190 local  processing centers that sort letters, flats and parcels for final-mile delivery. Critics say the reorganization has negatively affected service in recent years.

Updated service standards this year allow the USPS to turn around mail within a region in two or three days, an improvement from the past, according to the USPS.

“Without a doubt, the Postal Service is in a better place today than it would have been without these initiatives. They dramatically improved our middle mile operations to transform the Postal Service into a logistics powerhouse,” Steiner said during the board meeting. “While we may change specific initiatives as we move forward and our execution needs improvement, I do not see the need for a fundamental reassessment of our processing and logistics modernization strategies at this time.”

The Postal Service said it has received nearly 29,000 new vehicles this year and deployed more than 24,000 of them on postal delivery routes. The Postal Service expects to acquire a total of 106,480 new vehicles, including 66,000 zero-emission electric vehicles, aimed at improving service reliability and reducing emissions.