US Postal Service 2009 Annual Report Download - page 53

2009 Annual Report United States Postal Service | 51
For 2009, international air expense decreased $99 million,
largely due to lower volumes and a decrease in foreign
postal transactions fees compared to last year.
Air transportation expenses for 2008 were $3,047 million,
an increase of $57 million, or 1.9%, compared to 2007.
Domestic air transportation expenses for 2008 were
$2,336 million, a decrease of $57 million, or 2.4%, com-
pared to 2007. International air expenses increased $114
million, primarily due to the shift from surface to air delivery
resulting from the elimination of the Global Economy ser-
vice offering.
Other Transportation
Other transportation costs for 2009 were $356 million,
which was $59 million, or 14.2%, lower than 2008. The
decrease in mail volume reduced rail transportation costs
by $30 million compared to 2008. Terminal dues settle-
ments, the fees we pay to foreign postal administrations
for the outbound international mail that they deliver for us,
decreased $27 million compared to the prior year.
Other transportation expenses for 2008 were $415 mil-
lion, an increase of $53 million, or 14.6%, mainly driven by
an increased number of international terminal dues settle-
ments to foreign postal administrations compared to 2007.
OTHER OPERATING EXPENSES
For 2009, other operating expenses of $9,260 million, de-
creased $525 million, or 5.4%, compared to 2008. This re-
duction was driven by a decrease in Supplies and Services
of $276 million, or 10.6%, as a result of stringent cost cut-
ting initiatives. Vehicle Maintenance Service expenses fell by
$166 million, or 17.9%, mainly as a result of lower fuel costs.
Other Operating Expenses
(dollars in millions)
2009 2008 2007
Supplies and Services $ 2,321 $ 2,597 $ 2,594
Depreciation and Amortization 2,270 2,319 2,152
Rent and Utilities 1,778 1,779 1,700
Vehicle Maintenance Service 760 926 760
Information Technology
and Communications 722 658 630
Rural Carrier Equipment
Maintenance Allowance 510 545 495
Other 899 961 1,002
Total Other Operating Expenses $ 9,260 $ 9,785 $ 9,333
Depreciation and Amortization expenses were $49 million,
or 2.1%, lower based on reductions in the purchase of mail
processing, customer service and postal support equip-
ment. Other expenses, which included travel, were $62 mil-
lion, or 6.5%, less than last year. Travel expenses were re-
duced by 40% as a result of stringent cost cutting initiatives.
The only area of increase in this category was Informa-
tion Technology and Communications at $64 million. The
increased expense was mainly for upgrades of IT systems
and voice communication services.
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, which includes the fuel used by our carrier fl eet
increased by $166 million. 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.
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 2009, TFP declined 0.9%. This marks the second
consecutive year that the Postal Service registered a de-
cline in annual TFP. Prior to 2008, the Postal Service had
eight straight years of TFP growth. In spite of a record re-
duction of 115 million workhours, efforts to utilize mate-
rial such as supplies and services effi ciently, and efforts
to maximize the return on capital investments, mainly au-
tomation, we were unable to completely offset the 12.7%
drop in mail volume resulting from the poor condition of
the economy.
Aggregate workload for 2009 declined 8.3%. This was
mainly due to a sharp decline in weighted mail volume,
driven by the 10.5% decline in First-Class single-piece
mail volume. In response to the workload decrease, we
reduced resource usage 7.4% compared to last year. La-
bor usage, in particular, fell 7.9%.