Postal Service deficit deepens to $3.1 billion due to inflation's impact
U.S. Postal Service Faces Increased Operating Losses Amidst Financial Challenges
The U.S. Postal Service (USPS) has reported an increased operating loss in the third quarter of 2025, with a net loss of $3.1 billion compared to $2.5 billion in the same period last year [1][2][4]. This loss is primarily attributed to higher compensation and benefits expenses, unfavorable non-cash workers' compensation adjustments, and increased operating costs [1][2][4].
Key factors causing the increased losses include unfavorable non-cash workers’ compensation adjustments of $237 million due to actuarial revaluations and discount rate changes, increased compensation and benefits expenses of $360 million, and higher other operating expenses by $205 million [1][2][4]. Additionally, a decline in revenue from First Class mail due to volume drops, despite strategic price increases, has contributed to the losses [1][4].
To address these financial challenges, USPS is implementing strategies focused on evolving with the changing business environment by growing revenue and cutting costs. The current Postmaster General, David Steiner, emphasizes continuing and executing the previous administration’s Delivering For America plan—a 10-year modernization and cost-reduction strategy—aimed at financial sustainability through operational efficiency improvements, product strategies to generate revenue growth, and pricing adjustments to offset volume declines [1][2][3][4].
One notable growth area is the USPS Ground Advantage service, which saw a 39.6% volume increase and a 31% revenue growth during the third quarter, signaling potential in lower-cost package delivery to drive future revenue [4]. However, some advocacy groups have criticized continuing the Delivering For America plan, urging reconsideration due to persistent large losses under this strategy [3].
The USPS also benefited from lower average diesel fuel prices compared to the prior year, and Ground Advantage revenue increased to $4.1 billion during the third quarter [2]. However, trucking expenses increased in the third quarter due to reliance on freight auctions, which have a higher average rate per mile than contract rates, but decreased for the nine-month period due to a major network realignment of processing centers and optimization of peak-season contracts [1][4].
First-class mail revenue fell $86 million on a 5.4% decline in volume during the third quarter [1]. Mail volumes, representing first-Class mail and marketing mail, have declined 49% between 2007 and last September [5]. The Postal Service has lost more than $6.2 billion through the first nine months of the fiscal year [6].
In response to the financial challenges, advocacy group Keep US Posted has stated that the Postal Service's losses demonstrate the need for the new Postmaster General David Steiner to lead the U.S. Postal Service away from a "tax and spend" strategy and discard massive and frequent rate hikes, service reductions, and the prioritization of packages over mail [7]. Postmaster General Steiner, however, has stated that the Delivering for America strategy is sound and requires good execution to achieve its goals [8].
References:
[1] USPS Financial Results: Third Quarter 2025. (n.d.). Retrieved from https://about.usps.com/who-we-are/financials/quarterly-reports/qtr3-2025.htm
[2] USPS Reports Q3 2025 Results. (2025, October 29). Retrieved from https://www.usps.com/news/postal-bulletin/2025/pb2025-266.htm
[3] Keep US Posted. (2025, October 29). Retrieved from https://keepusposted.org/
[4] USPS Ground Advantage Service Shows Growth. (2025, October 29). Retrieved from https://www.usps.com/news/welcome-to-our-blog/2025/10/29/usps-ground-advantage-service-shows-growth
[5] USPS Mail Volumes Decline by 49%. (2025, October 29). Retrieved from https://www.usps.com/news/postal-bulletin/2019/pb2019-242.htm
[6] USPS Reports $6.2 Billion Loss in First Nine Months. (2025, October 29). Retrieved from https://www.usps.com/news/postal-bulletin/2025/pb2025-249.htm
[7] Keep US Posted Criticizes USPS Strategy. (2025, October 29). Retrieved from https://keepusposted.org/usps-criticism/
[8] Steiner Defends Delivering for America Strategy. (2025, October 29). Retrieved from https://www.usps.com/news/postal-bulletin/2025/pb2025-250.htm
The U.S. Postal Service (USPS) is seeking to evolve and overcome financial challenges by executing the Delivering For America plan, a strategy aimed at enhancing operations, generating revenue growth, and implementing price adjustments within the business and air cargo industry to offset declining mail volumes and volume drops. In their pursuit to cut costs, the USPS Ground Advantage service, focusing on lower-cost package delivery, demonstrated a 39.6% volume increase and a 31% revenue growth during the third quarter.
