Finance Finance News Letter delivery slump hits Australia Post

Letter delivery slump hits Australia Post

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Australia Post wants a two-tier letter delivery service to help it staunch the bleeding in its loss-making letter delivery operations.

Details of the proposed new service came as the government-owned postal service warned it faces being overwhelmed by losses from its traditional letter delivery operations after its full-year profit slid by 34 per cent.

To help stem the losses, chief executive Ahmed Fahour is advocating a priority letter delivery service to be introduced alongside regular deliveries.

Under the priority service, customers would pay extra for a stamp to ensure that their letter is delivered within a set time, in a similar fashion to Britain’s Royal Mail which offers a “first” and “second” class delivery service.

The price of the priority stamp has not been determined yet.

Under the regular service, mail would still be delivered five days a week, but letters may take longer to be delivered after being posted.

For example, instead of taking two days for a letter to arrive, it may take three days.

“What we’re asking for is the regulatory change to enable us to put in place product choices, Mr Fahour told reporters on Thursday.

Mr Fahour said that without urgent changes to its community service obligations on mail delivery and pricing, Australia Post would become a loss-making enterprise in the near future.

“Unfortunately, without significant and urgent reform of our community service obligations, the loss in the regulated mail business will overwhelm the entire company and result in the enterprise making a loss in the near future,” he said.

Australia Post made a full year profit of $116.2 million for the 2013/14 financial year, which was 34.5 per cent below its result a year earlier.

But the company recorded a net loss during the second half, the first since its was corporatised in 1989.

Losses from the letter-delivery business blew out to $328.4 million for the full year.

That was offset by growth in the parcel delivery business, which lifted its earnings more than 20 per cent to $337.5 million for the year.

The division is benefiting from the rise in online shopping, with Australians buying $15.6 billion worth of goods over the internet in the year to July, according to a National Australia Bank survey.

Australia Post made a net loss of $105.9 million during the second half, as the slide in mail delivery overshadowed the growth in the parcel business.

The slide in annual profit saw the company cut its dividend to the federal government by more than half to $78.8 million.

Mr Fahour said without changes to the mail delivery business it could incur cumulative losses of $12.2 billion over the next 10 years.