Postal Service suffered $354 million loss in first quarter

LOS ANGELES, CA - FEBRUARY 06: U.S. Postal Service employee Arturo Lugo delivers an Express Mail package during his morning route on February 6, 2013 in Los Angeles, California. The U.S. Postal Service plans to end Saturday delivery of first-class mail by August, which could save the service $2 billion annually after losing nearly $16 billion last fiscal year. (Photo by Kevork Djansezian/Getty Images) Kevork Djansezian, Getty Images

WASHINGTON The Postal Service lost $354 million over the last three months, and officials warned that mounting losses could lead to cash flow problems for the rest of the year, the agency said Friday. 

The loss was far less than the $1.3 billion in the comparable quarter the previous fiscal year, but Postmaster General Patrick Donahoe continued to press Congress to give the agency more flexibility to manage its finances.

The report for the financial quarter ending December 31 comes as Congress works toward fixing the agency's troubled finances. On Thursday, the Senate Homeland Security and Governmental Affairs Committee approved a bill that would end Saturday mail delivery and make permanent a temporary hike in the cost of a first-class stamp, which went from 46 to 49 cents on Jan. 26. 

The Senate measure also would restructure a congressional requirement that forces the agency to make a $5.6 billion annual payment for future retiree health benefits. The Postal Service has been urging Congress to reform the service's finances as it continues to cope with steep financial losses. The Postal Service lost $5 billion in the last fiscal year, down from $15.9 billion in 2012.

"We cannot return the organization to long-term financial stability without passage of comprehensive postal reform legislation," Donahoe said.

On the positive side, the Postal Service said revenue grew by $334 million, driven by a 14.6 percent growth in shipping and package services that saw a boost from the holiday season. But first-class mail declined 4.6 percent, as more customers shift to the Internet to pay bills and send emails.

Postal unions have complained that the Senate bill goes too far in calling for an end to Saturday mail delivery once mail volume drops below 140 billion pieces over four consecutive quarters. They claim the move would hurt consumers and lead to thousands of job cuts.

The bulk of the agency's financial problems stem from the federally mandated annual payments to cover expected health care costs for future retirees. It has defaulted on three of those payments and warned Friday that it is likely to default again when the next payment is due on Sept. 30.

The federal budget bill that Congress approved last month requires six-day delivery to continue, meaning the U.S. Postal Service won't be able to cut Saturday mail anytime soon.

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