 |
1. Mail Volume
As shown in Table 2.1, mail volume fell slightly in 2001. In fact, volume fell for every class of mail except First-Class Mail, largely due to economic slowdown and the effect of rate increases. Total mail volume fell by 420 million pieces, or 0.2 percent.
For 2002, the Plan projects growth of about 1.2 percent. Since it is now clear that this growth will not occur, the Postal Service and its stakeholders have taken steps not contemplated in our FY 2002 plan to ensure the Postal Service’s continued financial viability.
Flexible pricing, an essential element of Postal Reform, would allow the Postal Service to accommodate unanticipated increase in costs and to increase mail volumes by offering a variety of pricing incentives to customers. In slow mailing periods, customers could be offered lower rates whereas premium rates could fairly be charged for mailing during high volume mailing periods when service is more costly. Such pricing flexibility is commonplace business practice in competitive markets. It is also practiced by government enterprises such as public transit systems.
Revenue grew about 2 percent in 2001, largely because of R2000-1 price increases, which were implemented in January and July. The price increases offset losses in volume and decreasing weight per piece. Priority Mail volume fell over 8.5 percent, but revenue actually grew slightly as a result of a 15 percent rate increase. Across almost all classes of mail, average weight per piece was down in 2001. This trend is most pronounced in Periodicals, Express Mail and Parcel Post. All of theses classes declined well over 5% in weight per piece since the rate change in January 2001. In the case of Periodicals Mail the weight decline is largely due to the economic slowdown and consequent weakness in the advertising market. Actions by our competitors to secure some of the volume in the wake of the rate increase also affected these classes. At the same time, differences in growth rates between classes of mail are changing the mail mix. More and more mailers are taking advantage of presort and dropship rate incentives, which affect our revenue and workload. Within First-Class, single-piece letters, which generate more revenue, fell close to 3 percent, while the less expensive workshared letters grew almost 6%.
In the 2002 planning cycle, we had expected volume to grow a little over 1 percent, as indicated by Table 2.1. We anticipated a decline in First Class volume, but projected growth in Standard Mail and a recovery in Priority Mail. However, the onset of recession, the events of September 11, 2001, and the anthrax incidents in the following months, have rendered these plans and projections obsolete. Actual mail volume declined 5.5 percent in the first quarter of 2002, and through the end of December revenues were already more than $1 billion below plan. Management has responded to this setback by ordering a $1.3 billion reduction in FY 2002 expense plans to mitigate the impact of lost revenues. At the same time, to protect the Postal Service’s financial viability, most members of the mailing community represented in the rate case process have agreed to early implementation of new postage rates. Accelerated rate implementation will infuse revenue needed to preserve the Postal Service’s financial health and will forestall rate increases greater than the 8.7 percent average increase that the Postal Service had proposed.
|
TABLE 2.1
HISTORICAL AND PROJECTED MAIL VOLUME BY FISCAL YEAR* |
|
|
(billons of pieces) |
|
|
|
|
|
|
|
2000 |
2001 |
Projected 2002 |
Projected 2003 |
|
|
|
|
|
|
|
|
|
First-Class Mail |
103.5 |
103.7 |
103.5 |
103.3 |
|
|
Priority Mail |
1.2 |
1.1 |
1.2 |
1.2 |
|
|
Express Mail |
0.1 |
0.1 |
0.1 |
0.1 |
|
|
Periodical Mail |
10.4 |
10.1 |
10.1 |
10.0 |
|
|
Standard Mail |
90.1 |
89.9 |
92.3 |
95.6 |
|
|
Package Services |
1.1 |
1.1 |
1.1 |
1.1 |
|
|
International |
1.1 |
1.1 |
1.3 |
1.2 |
|
|
Other |
0.4 |
0.4 |
0.4 |
0.4 |
|
|
|
|
|
|
|
|
|
Total Mail |
207.9 |
207.5 |
209.9 |
212.9 |
|
|
|
|
|
|
|
|
|
|
|
