Despite $6.1 billion in cost savings from the reduction in the number of employees, reduction of overtime hours and reduction in transportation and other costs, we were unable to fully offset contractual price increases and an unforeseen, rapid and dramatic drop in mail volume and revenue. This resulted in a net loss for the year of $3,794 million.
On October 1, 2009, the President signed P.L. 111-68, Making appropriations for the Legislative Branch for the fiscal year ending September 30, 2010, and for other purposes (P.L. 111-68), which had passed both houses of Congress as of September 30, 2009. This law included a provision retroactively reducing the 2009 required payment into the Postal Service Retiree Health Benefits Fund (PSRHBF) from $5.4 billion to $1.4 billion. Without this legislative change, the resulting losses would have left us with very little operating cash at September 30, 2009.
As explained more fully later in the “Revenue and Volume” section of this report, the recession has had a significant adverse impact on operating revenue. For the year ended September 30, 2009, operating revenue was $68,090 million, compared to $74,932 million, a decrease of $6,842 million or 9.1%, in spite of average Mailing Services price increases of 3.8% in May 2009 and 2.9% in May 2008. Volumes of all categories of mailing and shipping services declined compared to last year.
For 2009, operating expenses were $71,830 million, compared to $77,738 million last year, a decrease of $5,908 million, or 7.6%. Excluding $718 million of non-cash adjustments to the workers’ compensation liability, operating expenses decreased by $6,626 million, or 8.5%. The 2009 decrease in operating expenses was driven by the $4 billion reduction of Retiree Health Benefits as a result of P.L. 111-68 and a reduction of 115 million workhours. The 115 million workhour reduction was, by far, the largest annual decrease in Postal Service history. Transportation expenses also decreased $935 million, or 13.4%, as fuel prices and mail volume declined from a year earlier, utilization decreased, and certain contracts were re-competed and re-priced. Other expenses decreased $525 million, or 5.4%, as substantial limits were place on spending for supplies and services, travel and other discretionary items. All of these expense reductions were accomplished without affecting service to our customers and despite the large percentage of our costs dedicated to serving the still-growing delivery network.
Compensation and benefits expenses decreased by $1,427 million, or 2.7%, excluding workers’ compensation expenses. Workhour decreases of 115 million hours resulted in significant savings, although they were offset by the $1.1 billion impact of the COLA that became effective in September 2008.
Workers’ compensation expenses increased $996 million, primarily due to a non-cash change in the estimated cost of future claim payments, driven largely by a change in economic assumptions. Those changes are discussed in Note 12 to the Financial Statements and in the “Compensation and Benefits” section of this report.
For 2008, we had an operating loss of $2,806 million, as compared to a $5,327 million loss in 2007. Operating revenues of $74,932 million were 0.2%, or $154 million greater than the $74,778 million in 2007. Despite the May 2007 and May 2008 price increases, revenues were negatively impacted by a decline in volume of 9.5 billion pieces.
Our 2008 expenses were impacted by high energy prices, COLAs and the large percentage of costs dedicated to serving the growing delivery network. These cost pressures partially offset the savings generated by a reduction of 50 million workhours. Operating expenses of $77,738 million were $2,367 million less than the $80,105 million incurred in 2007. Expenses in 2007 also included a one-time charge for the transfer of $2,958 million from escrow into the PSRHBF.
