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Australia Post faces catastrophic losses

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Change the price of letters or stump up $6 billion over 10 years: that was Australia Post’s message to the government today, as it forecast its first full-year loss in 30 years.

Chief executive Ahmed Fahour said Australia Post had a competitive parcel business, but losses from its letters business were swallowing up profits.

Mr Fahour said the government understood the scale of the problem.

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“They either fund the next 10 years of losses, which could amount to $6 billion, or we’re out of business,” he told Fairfax radio on Monday.

Australia Post reported a FY15 first-half profit after tax of $98 million, down 56 per cent on the first half result of the previous year.

The letters business lost $151 million, 57 per cent worse than the loss in the first half of last financial year.

Mr Fahour said Australia Post wanted to offer regular customers two-speed letter pricing, similar to what businesses and the government sector uses.

He said that would allow the company to focus its resources on competing with the growing number of multi-national parcel companies entering Australia.

“We’ve said that we need a decision this financial year. Right now we’re in February and the clock is ticking,” he said.

Mr Fahour said Australia Post had never been subsidised and had always paid dividends to the government, but the world had changed.

“Either we get a massive injection from the government to keep the business going, or they give us the permission to manage the business and therefore no subsidy is required and the business can continue,” he said.

Letter volume decline accelerated to 8.2 per cent, year-on-year, which is the largest decline recorded since Australia Post’s letter volumes started falling in 2008.

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