US Postal Service 2005 Annual Report Download - page 37

2005 Annual Report United States Postal Service | 27
our total liability for future workers’ compensation costs
at $7,521 million, a decrease of $58 million or 0.8 %
from 2004.
In 2005 we experienced a 4.4% decrease in the number
of paid medical claims and a 5.5% decrease
in the number of paid compensation claims.
These decreases led to a reduction of $12 mil-
lion for paid claims when compared to 2004.
Lower paid claims led to a $58 million dollar
reduction of our total workers’ compensation
liability, which resulted in a decrease of our
workers’ compensation expenses of $401 mil-
lion. This builds on decreases of $234 million
in 2004 and $51 million in 2003. These lower
costs are a result of our efforts to prevent
workplace injuries and our joint initiative with OWCP to in-
crease the number of injured employees returned to work.
There have been a total of 570 successful outplacement/
rehabs since the program inception three years ago. It has
long term impacts to the cost of workers’ compensation
by reducing the base costs. The program is on pace to
achieve the five year goal of 1,000 outplacements. Finally,
OWCP has instituted a more rigorous review of medical
bills to lower costs.
In 2004, we made changes to the discount rates we use to
estimate our liability in order to improve the accuracy of our
estimate. We discuss these changes in Note 3 of the Notes
to the Financial Statements.
Transportation Expenses
Transportation expenses for 2005 were $5,437 million,
an increase of $468 million over 2004 expenses. This
increase was primarily due to increased fuel expenses
of $214 million and an increase in mail volume.
The increase in volume accounted for an additional
$222 million in expense.
We continue to implement a number of measures to con-
trol fuel expenditures. These efforts focus on leveraging
our size and buying power to obtain more favorable pricing
by purchasing fuel in bulk. For example, we minimize our
fuel cost for certain highway contract routes by consoli-
dating our fuel purchases. We also purchase fuel in bulk
through the Defense Energy Support Center wherever we
have bulk facilities.
Air Transportation
Air transportation expenses for 2005 were $2,445 mil-
lion, an increase of $260 million over 2004. This increase
is primarily due to increased fuel charges as well as
increased mail volume and contractual rate increases for
our dedicated air transporter. During 2005, the index by
which jet fuel costs are adjusted for our dedicated air car-
rier increased 50.1%, resulting in an increase in fuel costs
of approximately $83 million. Increased mail volume added
an additional $26 million in fuel costs.
Air transportation expenses decreased by $68 million
in 2004, in spite of increased fuel charges as well as
increased mail volume and contractual rate increases for
our dedicated air transporter. We were able to offset these
increases in two ways. During our peak holiday season,
we significantly reduced the number of dedicated airplanes
formerly used to move mail. This saved us approximately
$54 million. We also moved more mail through the dedi-
cated air network reducing charges from other commercial
air carriers by $92 million. During 2004, the index by
which jet fuel costs are adjusted for our dedicated air car-
rier increased 6.34%, resulting in an increase in fuel costs
of approximately $10 million. Increased mail volume added
an additional $7 million in fuel costs.
Highway Transportation
Highway transportation expenses increased by $235 mil-
lion in 2005 as fuel prices and volumes increased. Diesel
fuel used by our highway contract routes rose $102 mil-
lion, while increased volumes and usage of highway
transportation added another $137 million in expense over
2004 totals.
Highway transportation expenses increased by $30 mil-
lion in 2004. This was primarily due to increasing prices
for diesel fuel used by our highway contract routes which
increased $31 million.
Other Transportation
Other transportation expenses decreased by $27 million
in 2005 primarily as a result of our decision to reduce the
(Dollars in millions) % Change
Transportation
Expenses 2005 2004 2003 2005-2004 2004-2003
Air Transportation $ 2,445 $ 2,185 $ 2,253 11.9% -3.0%
Highway
Transportation 2,658 2,423 2,393 9.7% 1.3%
Other Transportation 334 361 343 -7.5% 5.2%
Total $ 5,437 $ 4,969 $ 4,989 9.4% -0.4%