BUSINESS

Profits in the mail

Canada’s post office is now in the black

JOHN DALY June 19 1989
BUSINESS

Profits in the mail

Canada’s post office is now in the black

JOHN DALY June 19 1989

Profits in the mail

Canada’s post office is now in the black

BUSINESS

For many Canadians, it is an astonishing prospect: the post office delivering mail on time—and making money in the process. But this week, Canada Post Corp. president Donald Lander will send an annual report to Parliament that will show that the post office has earned a profit for the first time in more than 30 years.

Lander will also show mail delivery is becoming more reliable and he will repeat a commitment made in last April’s federal budget that Canada Post—which has lost $1.6 billion since it became a Crown corporation in 1981—will return $300 million in profits to the federal treasury over the next five years.

Lander said last week that Canada Post’s profit for the fiscal year ended last March 31 will be greater than the $26 million predicted in the April budget.

Some analysts say that it could reach $50 million. But at the same time, such critics as the Consumers Association of Canada claim that the profits are largely a result of price increases and cutbacks in service rather than reduced costs and improved productivity. For his part, Canadian Union of Postal Workers (CUPW) president Jean-Claude Parrot, who is currently negotiating new contracts for 46,000 employees, says that management is attempting to save more money by replacing union members with cheaper, nonunion labor.

Meanwhile, Harvie Andre, the federal minister responsible for Canada Post, reaffirmed last week that he has not ruled out ending the post office’s 121-year-old monopoly on first-class mail delivery and selling portions of it to the private sector.

Lander said that Canada Post’s profit is due in part to an increase in the volume of mail—by six per cent to almost 8.3 billion pieces last year. Canada Post is also

delivering more mail on time: Lander said that 94 per cent of pieces mailed within cities are delivered within two days; within the same province, 95 per cent are delivered within three days; and between provinces, 96 per cent are delivered within four days. In 1987, the corresponding on-time delivery figures were 83 per cent, 79 per cent and 85 per cent respectively. But Dale Botting, a spokesman for the Canadian Federation of Independent Business, said that Canada Post’s delivery standards are too low. Said Botting: “We shouldn’t get too excited about two-day rather than one-day delivery.”

Lander said that increased postal rates are responsible for some of Canada Post’s improved earnings. The firstclass letter rate jumped to 30 cents from 17 cents after Canada Post became a Crown corporation. Since then, it has climbed to 38 cents. However, Lander says that he will keep

future increases within the rate of inflation. Still, David McKendry, director of the regulated industries program of the Consumers Association of Canada, said that Canada Post “should be making a lot more money given the very high postal rates.”

Since 1981, the cost of competing communications services has declined—long-distance telephone rates have dropped by more than 25 per cent, and local rates are the same as they were in 1983. McKendry also said that Canada Post has reduced costs by lowering the quality of its service—phasing out full-service rural post offices and eliminating home delivery in new subdivisions in favor of superboxes. He added that even a $ 50-million profit will be tiny compared with Canada Post’s total revenues, which will exceed $3 billion this year.

For his part, Parrot said that some profits have been generated by closing unionized postal stations and replacing them with nonunionized franchise outlets. More than half of Canada Post’s 14,000 public outlets are operated under contract by local businesses. Lander said that the franchising program is designed to improve service to users, who prefer postal counters in drug and convenience stores, which are closer to their homes and which are often open for longer hours than older downtown postal stations. But Parrot said that “only the contractor who pays people $5 an hour benefits from franchising.” Unionized workers earn about $14.25 an hour, or $29,000 a year.

Meanwhile, some business people and economists say that Canadians would be better served if the federal government withdrew Canada Post’s monopoly on first-class mail delivery. Michael Walker, executive director of the Vancouver-based Fraser Institute, a freemarket economic think-tank, said that “only the fear that the customer is going to take his business down the street” will force Canada Post to keep its costs to a minimum.

Andre said last week that the government has “not ruled out any options” concerning Canada Post. He noted that the post office already competes for almost half its business— in such areas as parcel and household flyer delivery and the payment of utility bills. He said that he would be willing to consider eliminating Canada Post’s first-class monopoly or selling portions of it if some way could be found to guarantee service to remote and rural areas. But Lander said that any privatization initiative will have to come from the government.

Meanwhile, Parrot and his national executive board are preparing their proposals for a new contract to replace those that expire on July 31. As a result of a narrow referendum victory last January, CUPW now represents 21,000 letter-carriers and 1,000 mechanics, as well as traditionally more militant inside workers. Lander said that Canada Post is pleased to be dealing with one big union. But Botting said that business leaders fear that “a mega-union could lead to a megastrike.” And with that, the prospect of a more drastic reform at Canada Post could become a reality.

JOHN DALY