International Postal Update — January 2009
January 2, 2009POSTAL OPERATORS HIT BY FINANCIAL CRISIS
ECONOMY IMPERILS POSTAL LIBERALIZATION?
Tumultuous 4th quarter puts pressure on reform initiatives. Q4 financial estimates have sent both government and private mail operators into crisis mode. Initially, skyrocketing fuel costs disrupted the plans of fuel-dependent mail operators. Although the price of fuel has since fallen, any relief has been modest, as the evolving credit freeze has led many credit and retail companies to cut back on direct mail advertising.
For example, the U.S. Postal Service reported a $2.8 billion loss and a 4.5 percent drop in total mail volume at the end of fiscal year 2008. These losses are building momentum behind calls for Congress to undo key provisions of the 2006 postal reform legislation, including loosening the healthcare funding requirements.
The effects of potential government intervention in postal marketplaces worldwide remain unclear. While the private mail sector is reacting to the downturn quickly with cutbacks and layoffs, public-sector mail unions have been digging in their heels to block any erosion of government-guaranteed wages and benefits. Thanks to the general uncertainty — with strikes and demonstrations in Europe — politicians are under pressure from unions to invoke the economic downturn as a reason to delay reform. In the United Kingdom, for example, unions reacted with further hostility to rumblings of private investments in Royal Mail. Labor demonstrations were also threatened in Austria and Canada.
ROYAL MAIL PENSIONS IN TROUBLE
Stock market declines have caused Royal Mail’s pension deficit to increase more than 25 percent, or £1 billion, since March. One report estimates that the 2009 deficit will top £7 billion in 2009. Although operating profits have held up so far, the service says it will need massive cash infusions to meet its obligations. Since May, Royal Mail volumes have fallen 4 percent. The service states it is “particularly vulnerable to a downturn in the advertising market, which is a key element in overall mailings.”
Tories warned that the government could raid Royal Mail’s £22 billion pension fund in order to make public borrowing look smaller. Such a move would saddle future taxpayers with a huge tab. Presently, Royal Mail must pump £800 million a year to make up for pension fund shortfalls.
EARLY FRENCH PRIVATIZATION PUT ON HOLD
Plans to sell off 30 percent of state-owned La Poste ahead of the 2010 target date have been postponed. Henri Guiano, a senior adviser to President Sarkozy, said that the privatization plans would not proceed because of the current market turmoil. Unions and other opponents of privatization celebrated. Strikes against privatization took place in September and were followed with more demonstrations across France in early December. A similar postponement is pending in Holland.
PRIVATIZATION SURVIVES TEST IN JAPAN
An opposition bill to freeze further privatization was defeated in Japan’s Lower House on December 9 after having passed in the House of Councilors. Postal reform continues to be a major political issue in Japan. Elections and parliamentary alliances have been heavily influenced in the continued fight over the 10-year plan — begun in 2007 — to restructure the country’s postal system. Japan’s national postal service has already been split into four group companies — Japan Post Service Company, Japan Post Network Company, Japan Post Bank Company, and Japan Post Insurance Company. Opposition to further privatization remains fierce.
