Sleet and snow can't stop the Postal Service – but Saturdays can

In one of its boldest cost-cutting measures yet, the United States Postal Service (USPS) announced Wednesday that it will eliminate Saturday mail delivery later this year, a move that should save the agency $2 billion in costs annually.

Saturday mail delivery is scheduled to stop the second week in August. However, the Postal Service said it will continue to deliver packages on Saturdays, citing recent growth in its package and shipping business. Package delivery has increased by 14 percent since 2010, according to the USPS, while annual mail volume slid 11.5 percent during that same period, as e-mail, online bill payment, and other Internet services rose in popularity. 

“The Postal Service is advancing an important new approach to delivery that reflects the strong growth of our package business and responds to the financial realities resulting from America’s changing mailing habits,” said Patrick Donahoe, postmaster general and USPS chief executive officer, in a press conference Wednesday.

Under the new schedule, Saturday mail pickup and delivery at street addresses will cease Aug. 10. But mail delivery to PO boxes will continue six days a week, and post offices currently open on Saturdays will not change their hours.

The schedule change, which the Postal Service is pursuing without congressional approval, marks a dramatic new step in the agency’s bid to close a yawning budget gap. The Postal Service reported an annual loss of $15.9 billion in fiscal 2012 – three times the loss recorded in 2011 – and defaulted on billions of dollars in retiree health benefits payments.

This year the agency needs to close a $20 billion budget gap. It hopes that $2 billion of that will come from ending Saturday letter delivery. Most of the projected savings would occur through a reduction in the size of the workforce by 45 million work hours, or 22,000 jobs. The agency said it planned to eliminate jobs through attrition and reducing part-time hours, not layoffs.

“This announcement today is one part of a much larger strategy to return the Postal Service to long-term financial stability,” Mr. Donahoe said. Since 2006, he added, the agency has reduced its workforce by 193,000 people, or 28 percent, mostly through attrition. It also reduced costs by $15 billion by consolidating mail processing facilities, eliminating 21,000 delivery routes, and reducing hours in more than 9,000 post offices across the country.

This year, the agency plans to turn its focus to employee health benefits, its largest expenditure. As a result of a congressional requirement imposed in 2006, the Postal Service must set aside $5.5 billion each year for 10 years – a total of $55 billion – to cover future medical costs for retirees.

As such, the agency’s biggest cost-saving potential may not be related to service changes but to addressing legislation concerning retiree health payments. Donahoe said he plans to work with Congress to resolve the agency’s health-care costs, and would like Congress to enable the Postal Service to establish its own health-care plan.

Other cost-cutting measures include consolidating mail-processing centers and trimming post office hours, says Sue Brennan, a spokeswoman with the USPS. “We’re not closing post offices; instead we are reducing hours at our smallest offices,” she says, adding that the Postal Service is “encouraging small-business owners to open village post offices,” in which local businesses offer select postal products and services to complement those offered at traditional post offices. 

Nonetheless, dropping Saturday mail delivery remains the agency’s most high-profile move. Surveys by the Postal Service and major news organizations indicate that some 70 percent of Americans support the switch to five-day delivery as a way for the Postal Service to reduce costs.

Art Schwartz of Guttenberg, N.J., is among them. “Obviously, I’d rather get mail Saturdays, but I’d also rather the post office doesn’t go bankrupt,” he says outside an Edgewater, N.J., post office Wednesday. “If what they’re doing is going to save post offices, then go ahead and eliminate Saturday deliveries. I don’t see it as a major disruption.”