US Postal Service 2008 Annual Report Download - page 39

2008 Annual Report United States Postal Service | 39
Highway Transportation
Highway transportation expenses for 2008 were $3,499 mil-
lion, an increase of $349 million, or 11.1% over 2007. In
2008, the increase was attributed to higher fuel prices, con-
tract labor rates, and contract CPI rates. In addition, some
mail that was previously transported via air was moved to
surface transportation during the year. In 2008, the average
price of gasoline increased approximately 30.4% compared
to 2007. Diesel fuel, which makes up 93% of the fuel pur-
chased for highway contracts, was an average of $3.87 per
gallon in 2008, compared to $2.70 per gallon in 2007, an
increase of 43.3%.
In 2007, our highway transportation expenses were
$3,150 million, an increase of $173 million, or 5.8%, over
2006. This was driven by an increase in the number of
miles driven, contractual rate increases for the contract
drivers, and delivery growth. The increase in fuel prices
was somewhat neutralized through leveraging our buying
power to obtain favorable pricing by consolidating fueling
points and bulk purchasing.
Air Transportation
Air transportation expenses for 2008 were $3,047 million,
an increase of $57 million, or 1.9%, compared to the same
period last year. Domestic air transportation expenses for
2008 were $2,336 million, a decrease of $57 million or
2.4%, compared to 2007. International air expenses in-
creased $114 million primarily due to the shift from surface
to air delivery, resulting from the elimination of the Global
Economy service offering.
Air transportation expenses for 2007 were $2,990 million,
an increase of $219 million, or 7.9%, from 2006. In 2007,
the increase was driven by growth in mail volume on our
cargo carriers and the expansion of peak season opera-
tions, which provided improved service to our customers.
Additional contributing factors were increases in contract
rates for the offshore networks and an increase in fuel ex-
penditures. With the 5% growth in international volume, we
also saw a corresponding increase in international air ex-
pense compared to 2006.
Other Transportation
Other transportation expenses for 2008 were $415 million,
an increase of $53 million, or 14.6%, mainly driven by an in-
creased number of international terminal dues settlements
to foreign postal administrations compared to 2007. Termi-
nal dues settlements are the fees we pay to foreign postal
administrations for the outbound international mail that they
deliver for us.
In 2007, other transportation expenses were $362 million,
an increase of $65 million, or 21.9%, caused by increased
international terminal dues settlements to foreign postal ad-
ministrations and expedited mail delivery transactions as
compared to 2006.
Other Expenses
In 2008, other operating expenses of $9,785 million in-
creased $452 million, or 4.8%, from the comparable 2007
amount. The increase was primarily driven by Depreciation
and Vehicle Maintenance Services. Vehicle Maintenance
Services increased $166 million and includes the fuel used
by our carrier fleet. Depreciation and amortization expense
increased $167 million, compared to 2007, as a number of
equipment projects were completed during the last half of
2007 and the early part of 2008.
Other Operating Expenses 2008 2007 2006
(Dollars in millions)
Supplies and Services $ 2,597 $ 2,594 $ 2,643
Depreciation and Amortization 2,319 2,152 2,149
Rent and Utilities 1,779 1,700 1,721
Vehicle Maintenance Service 926 760 709
Information Technology and
Communications 658 630 649
Rural Carrier Equipment
Maint. Allowance 545 495 485
Other 961 1,002 978
Total $ 9,785 $ 9,333 $ 9,334
In 2007, other operating expenses decreased $1 million from
2006 comparable amounts, as shown in the table above.
Productivity
We use a single indicator called total factor productivity
(TFP) to measure productivity. TFP measures the change
in the relationship between outputs (workload processed)
and inputs (resource usage). Workload consists of weight-
ed mail volume, miscellaneous output, and our expanding
delivery network. Resources consist of labor, materials (in-
cluding transportation), and deployed capital assets. Work-
load minus resources used equals TFP.
During FY 2008, TFP declined 0.5%. This marks the first
year since 1999 that the Postal Service registered negative
annual TFP growth. Despite efforts to manage workforce
utilization (reduction of 50 million workhours), utilize material
such as supplies and services efficiently, and maximize the