Home News After losing billions, Canada Post warns it could run out of cash

After losing billions, Canada Post warns it could run out of cash


Canada Post ended the week with even worse financial news, announcing an operating loss of $221 million in the first three months of the year. Earlier this month, the company also announced a loss of $748 million last year.

The state-run postal service has accumulated losses of more than $3 billion since 2018, and the outlook is bleak In the 2023 Annual Report The series is released this month.

“We expect losses to become larger and less sustainable in coming years,” the company wrote in the report, adding that it would run out of cash by early next year without borrowing $1 billion and refinancing $500 million of existing debt.

“Canada Post is at a critical moment in its history,” the company says in its annual report, an unusually blunt statement. “With financial pressures mounting, its long-standing role as a vital public national infrastructure for Canadians and Canadian businesses is facing significant threats.”

For decades, the biggest problem facing the post office has been the increasing number of people and businesses that have stopped sending letters, once a major source of revenue for the post office. In 2006, the average Canadian household received seven letters a week. Last year, that number was two.

The pandemic has provided some hope as online shopping has become the only way to buy many products. Although Canada Post lost $779 million in 2020, mostly due to pandemic-related costs, package shipments increased 50% from the previous year, with demand from shippers outstripping capacity.

But those gains were fleeting, in part because the rise of the package business brought in new competitors. In addition to unionized companies like UPS Canada, which have similar cost structures, Canada Post now faces competition from a growing number of small companies that rely on low-paid gig workers with no benefits.

Just before the pandemic, the post office was responsible for 62% of parcel deliveries in Canada. Now, it handles just 29%. The business is being squeezed from two sides. In addition to price pressure from competitors, it costs the post office much more to process and deliver parcels than letters, and it requires significant investments in equipment. As a result, profit margins are thin.

Canada Post CEO Doug Ettinger said in a statement that the service needs reform and is discussing plans with the government.

“Canadians understand that our business model must change,” he wrote, adding, “In 2006 we delivered nearly 5.5 billion letters, and last year we delivered 2.2 billion. This operating model is not sustainable.”

Mr. Ettinger did not say what form those changes would take. When I asked Canada Post for more details, it responded in a statement: “Any discussions regarding delivery or other significant changes are at a preliminary stage.”

In 2016, the government ordered Canada Post Review The commission made many recommendations that seemed politically difficult. It urged an end to a ban on rural post office closures introduced in 1994 after a public backlash. It proposed switching large numbers of households from doorstep deliveries to community mailboxes — a return to the “super mailbox” program that became so unpopular that Prime Minister Justin Trudeau’s government scrapped it almost immediately after taking office in 2015. And a recommendation to review wages and pension costs seemed like a formula for industrial conflict.

Canada Post isn’t the only postal company facing difficulties, and other postal systems may provide some clues as to what the future may hold.

Royal Mail, which was privatized in 2013, posted an adjusted operating loss of 419 million pounds ($729 million) last year. Regulators recently proposed reducing delivery times from six to three days a week.

(read: Three days a week for mail? The idea is met with resistance in the UK.

But once the idea was raised, Prime Minister Rishi Sunak said he was “absolutely committed” to a six-day working week as required by law.

(The UK Post Office, which runs postal outlets, remains government-owned but is mired in scandal and under official investigation after hundreds of branch managers were sacked. Wrongly accused of theft Because of software problem.

Although the British, like Canadians, use the mail much less frequently these days, the idea of ​​reducing the number of deliveries remains deeply unpopular. That is perhaps why Mr Sunak rejected the proposal out of hand. Elections announced for July This seemed likely to result in his party losing power.

Any major change at Canada Post is sure to be equally risky. It remains unclear whether Mr. Trudeau, another leader trailing by double digits in the polls and expected to call an election this year, would be willing to take the job.

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Ian Austin was born in Windsor, Ontario, educated in Toronto and now lives in Ottawa. He has been covering Canadian news for The New York Times for 20 years. Follow him on Bluesky @ianausten.bsky.social.

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