Amazon delivers for Postal Service despite Donald Trump criticism

A presidential tweet has suggested Amazon is exploiting the public mail system for its own gain.

Companies such as Amazon and United Parcel Service regularly use the Postal Service for what is often referred to as last mile delivery

A presidential tweet has suggested Amazon is exploiting the public mail system for its own gain. The company has benefited from the US Postal Service’s cheap and vast delivery network, but the online retail giant also has bolstered the agency’s struggling operations.

The Trump administration and congress have also been slow to fill senior leadership positions at the Postal Service and to push ­forward with legislation that could address the service’s financial ­difficulties.

Yesterday, President Donald Trump said in a tweet about ­Amazon that they “use our Postal System as their Delivery Boy (causing tremendous loss to the US)”. The sentiments echoed ­previous tweets by Mr Trump.

Former postmaster-general Jack Potter said delivering packages for companies like Amazon and FedEx had been a boon to the Postal Service.

“That’s actually the solution right now,” said Mr Potter, who held the top job from 2001 to 2010. “It’s well justified that they deliver those packages, and they make money on it.”

The Postal Service has been losing money overall for years, ­recording a net loss of $US2.7 billion for the most recent fiscal year ended in November.

Earnings releases for that year show a sharp decline in revenue from first class mail delivery of 6.9 per cent to $US25.6bn, a $US1.87bn decline that service ­insiders concede is an important source of the agency’s financial challenges.

The agency, however, has ­recorded strong growth in ­package delivery, the category that would account for Amazon, and many other online retailers. Revenue rose last year by more than $US2bn, or 11 per cent, to $US19bn. The number of parcels delivered rose from 5.1 billion to 5.7 billion, an increase of 11.7 per cent.

A postal spokesman declined to comment on the tweet. Amazon wasn’t available for comment.

Companies such as Amazon and United Parcel Service regularly use the Postal Service for what is often referred to as last mile delivery. They send packages to a local Postal Service centre, which can deliver them more cheaply because it already sends a mail carrier to every address six days a week.

In the quarter ended December 31, increased Postal Service revenue from package delivery failed to offset the steady decrease in letter delivery. First class mail volume dropped 3.3 per cent.

Letter mail has been on the ­decline in the age of email and ­online bill payments.

The Postal Service board of governors has been operating without any appointed members since December 2016, when the last remaining board member’s term expired. It is the first time the board has been empty since it was created in 1970.

Any move to raise revenue by charging more for letter delivery would require action by the board, though it was less directly ­involved with corporate contracts. Postmaster-General Megan Brennan has been vocal about the need to add members to its board of governors, which oversees ­operations and approves rate ­increases. The members are nominated by the president and must have congress approval.

The Postal Regulatory ­Commission, an independent monitoring body, monitors the agency’s relationships with corporate ­customers such as Amazon to assure delivery arrangements are ­offered at a profit. The ­commission’s latest review determined that only four of 846 ­National ­Service Agreements in effect last year failed to cover their attributable costs. Three of those either ­expired or were terminated.

Some analysts say the Postal Service could increase its rates for online shippers without losing any customers in the near term.

Citigroup analyst Christian Wetherbee said in a recent report the Postal Service could probably raise rates as much as 50 per cent without immediately losing ­volume.

However, such a move might “push the largest eCommerce shippers to increase already sizeable investments in in-house delivery”, and higher costs could eventually lead to consumers ­buying fewer items delivered to their homes. Amazon is working on its own delivery service.

“Amazon would not exist if not for the USPS, and USPS now probably wouldn’t exist without Amazon either,” said analyst John Callan.

Ms Brennan has long been pushing for congress to pass postal legislation that would overhaul how the agency calculates long-term liabilities and shifts retirees to Medicare.

The legislation could relieve the agency from billions of dollars in expenses that have crippled its financial outlook.

Board members typically would be a big part of this process, talking with members of congress about the effort and advising the postmaster-general.

Mr Trump nominated three members to the USPS governing body in October, and those nominations have been awaiting ­Senate consideration. Last month, Ms Brennan said she was “optimistic” the nominees would be confirmed in time for a board meeting next month.