Airlines Could Lose Big if U.S. Postal Service Fails

The greater public at large wouldn’t be the only ones to lose guaranteed mail service if the United States Postal Service were to become insolvent. According to industry data, America’s major airlines could stand to lose over $300 million in yearly revenue, from a budget of over $8.5 billion.

The latest news about the United States Postal Service isn’t good, and casts a bigger shadow of concern over the agency’s operations. According to a statement by new Postmaster General Louis DeJoy, the mail service chartered by Congress could lose as much as $9 billion in fiscal year 2019, and 2020’s loss could approach $11 billion.

If the U.S. Postal Service were become insolvent and end operations, it wouldn’t just be Americans losing out on everyday mail. FlyerTalk ran the numbers, and discovered airlines could also lose a a source of guaranteed income as well.

Airlines Have Over $300 Million On the Line in U.S. Postal Service

It’s no secret that the U.S. Postal Service relies on the airlines to carry air mail. In addition to their contracts with FedEx, UPS and Kalitta Air, the mail is regularly carried aboard commercial carriers as well. Because of their robust networks to all corners of the country, the Postal Service awards contracts every year to the major passenger airlines. But how much money do the airlines get from it?

According to a 2019 study by Transport Topics, United Airlines held the largest mail contract among passenger airlines, valued at over $167 million in revenue for the airline. American Airlines ranked second with a contract valued at over $98 million in revenue, while Delta Air Lines’ contract is valued at nearly $85 million in revenue. Alaska Airlines was the last major passenger carrier in the top 32 mail carriers, with a contract valued at $39 million in revenue.

Those numbers are expected to increase in the USPS Fiscal Year 2020 budget. According to their publicly-available integrated financial plan, the Postal Service expects to spend $8.5 billion in mail transportation costs, which include airline contracts. Because of the natural increase in fuel prices and supplier cost increases, the budget was expected to rise by $300 million dollars.

“Increasing transportation costs adversely affected our financial results in 2019 and this upward pressure is expected to continue in 2020,” the USPS wrote in their Fiscal Year 2020 Integrated Financial Plan. “In 2020, transportation expenses are expected to increase by $0.3 billion, driven by increased air volumes, supplier cost increases, and higher costs for both jet and diesel fuel.”

If the Postal Service were to fail, the loss of revenue would hit carriers in what has already been a difficult year. All three legacy carriers – American, Delta and United – have reported losses between $2.6 billion and $7 billion in the second quarter of 2020.

Despite Uncertainty, International Organizations Continue to Support Postal Services

Although there is still uncertainty in the Postal Service, postmaster general DeJoy says there is still “great value” in the postal service, but requires cutting inefficiencies. To those ends, The Hill reports the new leader issued a new organizational chart which shuffled around responsibilities, while announcing a hiring freeze and offering voluntary early retirements.

International organizations are also supporting a robust international mail system, focusing on simplifying mail carrying operations between postal services around the world. In February 2020, the International Air Transportation Administration signed into a Memorandum of Understanding with the International Post Corporation, creating standards and aligning technology to aid the movement of mail around the world.

Feature image courtesy: JetPix via Wikimedia Commons/GNU Free Documentation License, Version 1.2