US Postal Service 2009 Annual Report Download - page 60

58 | 2009 Annual Report United States Postal Service
Revenue Outlook
Although the economy is primarily responsible for the cur-
rent revenue and volume decrease, electronic diversion
presents an on-going, long-term challenge.
First-Class and Standard Mail comprise 94% of total mail
volume. First-Class Mail volume is expected to decline
slightly, while Standard Mail is expected to regain only
slowly its former volume. Total mail volume is expected to
show steady growth beginning in 2011 as the economy
continues to recover, but may never return to the peak
2006 levels.
For 2010, we project revenue to decrease between 4%
and 6% on a volume decrease of 6% to 9%. It is possible
that revenues and volumes could decrease more than pro-
jected. Revenue is expected to outperform volume due
primarily to recently announced Shipping Services price
increases and the residual effect of the 2009 price increas-
es. Mailing Services prices will not increase in 2010.
First-Class Mail volume is expected to decline during
2010. When employment, consumer spending and capital
investment recover, growing use of the Internet and other
electronic means of communication will continue to sup-
press mail volume growth rates. First-Class single-piece
letters have been in decline for more than a decade and
are expected to continue to decline in both the short- and
long-term. Presorted First-Class letters are expected to
grow as economic growth returns.
We estimate that Standard Mail will have fallen by 25% by
the time the effects of the recession have receded. The
ten-year outlook post-recession is more positive; however,
it may be a full decade before Standard Mail volume again
attains 2007 levels (if at all), with the strongest growth rates
forecast to occur in 2012 and 2013. For 2010, Standard
Mail revenue and volume are expected to decline. The de-
cline in both revenue and volume is expected to continue
through the fi rst half of 2010, with marginal growth in the
second half of the year.
Periodicals revenue and volume are both projected to de-
crease modestly in 2010. While the declines in Periodicals
are not as dramatic as some other mail categories, they
are part of a long-term trend.
Both volume and revenue are expected to be relatively fl at
in 2010 for Package Services.
Shipping Services revenues and volumes are expected
to increase slightly in 2010. An average price increase of
3.3% was announced on November 3, 2009. This entire
group is infl uenced by competitors’ prices, which may in-
clude fuel surcharges. P.L. 109-435 has provided an op-
portunity for greater competition by the Postal Service in
this market.
Expense Outlook
Total expenses for 2010, excluding retiree health benefi ts,
are expected to decrease approximately 4% as planned
cost reductions outweigh the impact of contractual and
expected wage and benefi t increases.
We plan to aggressively reduce costs wherever possible to
counter the effects of declining volume while maintaining
high levels of service. We are projecting more than $3.5
billion in cost savings including approximately 90 million in
workhour reductions across the organization in 2010. This
is expected to result from specifi c operational initiatives in
conjunction with expected cost savings from employee re-
tirement incentives targeted to specifi c employee groups.
We do not anticipate any COLA-based raises in 2010, as
infl ation is expected to remain below the levels that would
trigger such increases.
Bulk Mail Centers are being transformed into Network
Distribution Centers (NDC). The core principal of the NDC
concept is to fi ll containers and trucks as early in the net-
work as possible and dispatch them as deep into the net-
work as possible. Plant staffi ng optimization will continue
to contribute to operational savings in 2010 by aligning the
plant workforce to meet changing workload levels.
City Delivery operations are expected to generate savings
in FY 2010 from route adjustments made in 2009. Route
adjustments have resulted in over 11,500 fewer routes.
In 2010, we plan to save an estimated $500 million from
the departure of 20,150 employees that accepted the
special incentive offered in August 2009.
A continuing challenge that must be overcome in order
to achieve these savings will be our ability to reduce em-
ployee complement to fully capture the savings generated
by these initiatives.