The pandemic’s e-commerce shipping surge propelled the U.S. Postal Service to better-than-expected financial fortunes in the second quarter, the agency reported Friday, but its governing board and Postmaster General said they would press forward with controversial service cuts.

Here’s four takeaways from the board’s meeting:

Mail service remains poor

The last time the board of governors met, in February, they said the generationally bad on-time mail service Americans received over the holiday season was because of vicious package volumes, employees out on leave because the pandemic and entrenched problems with the agency’s processing network. And they said that service would improve in the next quarter.

Well, service got worse.

In the quarter ending Dec. 31, the Postal Service delivered 78.4% of first-class mail on time. (It aims to make timely delivery 96% of the time.) In the quarter ending March 31, it delivered 78.1% of first-class mail on time.

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By the percentages, that is basically flat. But in the real world, that is hundreds of thousands of first-class items – bills, paychecks, prescriptions – that did not arrive on time. Already in February, mail customers were complaining of dings on their credit scores and late fees from bills because the items were getting stuck in the mail. And on the whole three months later, the Postal Service could not fix the problem.

Biden’s nominees are still not in place

President Joe Biden in February nominated three people to fill vacancies on the Postal Service’s governing board. They had confirmation hearings in April, and all advanced with the support of the Senate Homeland Security and Governmental Affairs Committee’s top Republican, Sen. Rob Portman (Ohio). Their confirmation before the full Senate seems likely, according to aides managing the nomination process.

But a full confirmation vote could still be a number of weeks away. Historically, that would still be a rapid nomination and confirmation process for postal nominees; Biden named the nominees (read more about them here) just 35 days after taking office.

That pace is still too slow for some of DeJoy and the board’s harshest critics, who wanted Biden’s nominees in place for this board meeting specifically to push back on some of DeJoy’s proposed service cuts. The Senate had a narrow window to make that happen – the committee voted to advance the nominees April 28, and Chair Gary Peters, D-Mich., reported them to the Senate the same day – but chose not to. The chamber went on recess on Monday.

Logistically, that delay will not mean much for the board. DeJoy’s backers would still have the votes on the nine-member panel to advance his plan. But the speedy confirmation would have been more symbolic, and would have signaled Senate Democrats’ desire to continue to confront DeJoy.

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Package volumes keep losses in check

Financially, the Postal Service has to be pleased with its first six months of fiscal year 2021. The agency projects that it will lose $160 billion over the next decade, including $9.4 billion in 2021, alone.

So far, the outlook appears far more peachy.

In the first quarter of 2021, the Postal Service actually made $300 million. In the second quarter, it lost $1.7 billion, compared to $1.9 billion in the same period last year.

Put that all together, and the Postal Service is down only $1.4 billion through the first half of the year, making it likely that the agency will beat its projections by a wide margin.

That is largely thanks to packages, which continue to buoy its balance sheet thanks to consistent e-commerce shipping volumes. Package revenue was up 33.6% in the quarter over the year-ago period; volumes jumped 25.3%.

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That was not enough to offset declines in first-class mail revenue and volumes (down 6% and 8%, respectively) and marketing mail revenue and volumes (13.6% and 13.5%, respectively). But it was enough to beat expectations.

Combined with the Postal Service’s cash reserves – $25.5 billion – the agency is on its most solid near-term financial footing than it has been in years.

DeJoy’s changes already in motion

Starting almost two weeks ago, the Postal Service began implementing some of DeJoy’s largest structural changes from his 10-year plan.

On April 27, the agency announced it would consolidate 18 mail-processing facilities into larger regional plants by November, purchase 138 package sorting machines and lease 45 package-specific processing annexes. On May 4, it told supervisory level employees to prepare for a “reduction in force,” the postal term for layoffs, if enough workers did not take early retirements.

Those were two big tenets of DeJoy’s 10-year vision: embrace and invest in package delivery, and centralize the agency’s bureaucracy to eliminate extra layers of staffing. The agency is quickly acting on both, and has already presented arguments to the Postal Regulatory Commission to justify increasing prices and slowing down mail service.

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Many of those changes have certain mailing stakeholders up in arms. Unions are furious about the plant consolidations. The moves are not layoffs, but job relocations. For workers in Cape Girardeau, Mo., for example, whose plant is merging to St. Louis, they are not losing their job. Their job is simply moving 120 miles away. They have to choose if they want to move to St. Louis, find another Postal Service job nearby or leave the agency altogether.

Supervisors are upset about the impending layoff and early retirement program. The retirement offers come without any additional financial incentive. One supervisor, who spoke on the condition of anonymity out of fear of retribution, told The Washington Post the offer “feels like a slap in the face.”

Mailing industry executives are furious over the proposed price hikes – up to 7% – and delivery slowdowns, and argue that they should not have to pay more for worse service. Many have told DeJoy in private meetings that they will spend less on mail and more on digital communication if the agency presses on with its changes.

DeJoy in Friday’s hearing appeared unmoved.

“Yes, I do hear criticism,” he said. “What I don’t hear is any viable comprehensive alternative.”


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