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Executive Summary 

The USPS Board of Governors (BOG) met to review FY25 financial results and service performance, and to discuss the ongoing transformation under the “Delivering for America” plan. The key takeaway is a continued push for revenue growth and increased flexibility to address growing financial challenges.

Financial Performance & Outlook

• FY25 Financials: The USPS reported a Net Loss of $9.0 billion in FY25, which was $0.5 billion less than the prior year but still $2.1 billion (30%) over the original plan. The Controllable Loss increased by 50% to $2.7 billion.
  • Revenue Growth: Total Operating Revenue was $80.5 billion, an increase of 1.2% year-over-year, driven largely by growth in Ground Advantage and strategic price increases.
• FY26 Forecast (IFP): The unaudited FY26 Integrated Financial Plan (IFP) forecasts a 2.9% increase in total revenue and aims to lower the Net Loss by 10% to $8.1 billion.
• Competitive Price Changes: A Competitive Price Increase for packages is set for January 18, 2026, with the highest increase in Ground Advantage at 7.8%.

USPS FY25 Net Loss and Controllable Loss

Despite achieving modest revenue growth in Fiscal Year (FY) 2025, the U.S. Postal Service (USPS) experienced a significant loss, driven primarily by structural costs, unique balance sheet obligations, and lower-than-expected package revenue.

The financial results for FY25 (October 1, 2024 – September 30, 2025) presented a bleak picture:

1. Net Loss

The Net Loss represents the total loss after factoring in all operating expenses, non-controllable structural costs, and retirement obligations.

• FY25 Net Loss:$9.0 billion 
  • This loss was $0.5 billion less than the FY24 loss of $9.5$ billion.
  • Crucially, the $9.0 billion loss exceeded the USPS’s own FY25 Integrated Financial Plan (IFP) target of $6.9 billion by $2.1 billion, or 30% over plan.

2. Controllable Loss

The Controllable Loss measures the financial shortfall based solely on expenses that USPS management can directly influence, such as compensation, benefits, transportation, and other operating costs, excluding non-cash and non-controllable items, such as FERS/CSRS amortization.

• FY25 Controllable Loss: $2.7$ billion 
  • This represents a 50% increase in the controllable loss compared to the FY24 controllable loss of $1.8$ billion.
  • The increase reflects lower-than-expected revenues from the package business.

Summary of Operating Expenses

While operating revenue increased, total operating expenses still exceeded revenue, leading to a loss from operations. Notable operating expense figures include:

• Total Operating Expenses: $89.8 billion 
• Compensation and benefits: $55.8 billion 
• Transportation expense reductions: Transportation expenses were $8.4 billion, reflecting reductions of $422 million compared to FY24 due to network optimization efforts.
• Loss from Operations:$9.2 billion 

The USPS Board of Governors (BOG) and the Postmaster General (PMG) are urging Congress and the Postal Regulatory Commission (PRC) for immediate and long-term legislative reforms to address the severe structural and statutory cost pressures.

The five key items called out by Chairwoman McReynolds are:

1. Reform of the Civil Service Retirement System (CSRS) Amortization: Policy makers need to reform the CSRS and its amortization methodology. The USPS OIG estimated in 2018 that the Postal Service had potentially overpaid its share in the ballpark of $80 – 111 billion.
2. Investment Flexibility for Retiree Funds: The USPS wants to remove restrictions requiring full investment of retiree health and savings funds in the U.S. Treasury.
   • The BOG noted that OIG reports suppose that if the Postal Service had been allowed to invest its retirement funds in a diversified mix of 60% stocks and 40% bonds, the total retiree assets at the end of FY 2022 could have been $1.2 trillion.
3. Workers’ Compensation Reform: The workers’ compensation plans need to be aligned with private sector practices. The USPS estimates a loss of $517 million in FY23 and $698 million in FY24 due to the current requirements.
4. Increased Market Dominant Price Flexibility: Congress is asked to reevaluate the market dominant price setting rules to allow postal management greater flexibility in pricing.
5. Raise the Borrowing Limit (Most Urgent): Called the “immediate need and most urgent” item, the USPS needs to raise the statutory borrowing limit from the $15 billion that was set in 1991 (and is already maxed out).

These reforms are viewed as necessary for the long-term financial viability of the organization.

Strategy, Service & Modernization

• PMG Strategy: PMG Steiner emphasized the need to “grow, not just cost-cut,” to achieve financial viability.
• Monetizing the Last Mile: The core strategy is to better utilize and monetize the “first and last mile” asset, including negotiating deals with companies like UPS for expanded last-mile coverage and aiming to become the most convenient returns facilitator.

Service Performance (FY25 Q4):

• First-Class Mail and Marketing Mail composite scores were slightly lower than the prior year, but a larger volume of mail was delivered early, resulting in a lower average days to deliver for both.
• Mail Shape/Entry: Letters and Destination-Entered mail continue to perform better than Flats and End-to-End (origin-entered) mail.

Marketing Mail – 

First-Class Presort Mail – 

 

 

 

 

Potential Service Interruptions

• Grounded MD-11s: A recent cargo jet accident led to the grounding of MD-11 jets by carriers like FedEx and UPS (who carry about 89% of USPS air product). This is expected to have some temporary impact on USPS First-Class Mail and Package On-Time scores.

Historical Mail Volume Decline (FY15 – FY25)

The data confirms that the decline in mail volume is a major contributor to the USPS’s financial challenges, with both major mail categories experiencing significant drops.

1. First-Class Mail (FCM)

First-Class Mail has experienced a steeper overall decline than Marketing Mail during this ten-year period. This decline is largely driven by the adoption of electronic alternatives (e.g., email, online billing).

FCM Category/Volume Decline (FY15 – FY25)

• Total FCM-33.52%

• Single Piece (e.g., stamp letters)-53.61%
• Presort L&C (e.g., business mail)-21.36%

Key Trend:

• The Single Piece category (mail sent by individual customers) has fallen much faster than the Presort Letter and Card category (mail sent by businesses), indicating that transactional and personal correspondence has been the hardest hit by electronic diversion.

2. Marketing Mail (MM)

Marketing Mail (or advertising mail) has shown slightly more resilience but still experienced a substantial decline, especially in the flat-shaped mail category.

MM Category/Volume Decline (FY15 – FY25)

• Total MM-29.10%
• Letters MM-20.50%
• Flats MM (HD, SAT, CR, and Flats)-41.5%

Key Trend:

• The decline in MM Letter volume has been significantly lower than the decline in MM Flats volume.
• The loss in MM Flats volume (41.5%) is the largest contributor to the overall Marketing Mail volume decline. This trend is particularly relevant to the service results, as MM Flats historically perform below letters in on-time delivery.

FY25 Revenue and Volume Changes (Year-over-Year)

Comparing the revenue and volume changes for First-Class Mail (FCM) and Marketing Mail (MM) in Fiscal Year (FY) 2025 to the prior year (FY24) shows that price increases successfully offset the volume declines to generate revenue growth in both categories.

The overall results for the year ending September 30, 2025 (FY25), compared to FY24 were:

Key Observations:

 

1. First-Class Mail (FCM):
   • FCM volume declined by $2.2 billion pieces, or -5.0%.
   • Despite the volume loss, FCM revenue increased by $370 million, or 1.5%. This shows that the strategic price increases for FCM were effective in growing revenue even as volume shrank.
2. Marketing Mail (MM):
   • MM volume declined by $764 million pieces, or -1.3%.
   • MM revenue increased by $350 million, or 2.3%. This indicates that the price increases were implemented effectively on this high-volume mail category to overcome the small volume drop and generate revenue growth.
3. Shipping & Packages:
   • Volume in this competitive category declined by $415 million pieces, or -5.7%. The decline is attributed in part to challenges in Q4 from tariffs.
   • Revenue still increased by $315 million, or 1%, due largely to growth in USPS Ground Advantage and strategic price adjustments.

In summary, the USPS saw revenue growth in all three major product categories (First-Class, Marketing Mail, and Shipping & Packages) in FY25, despite volume declines in all three. This result is consistent with the USPS strategy of using price flexibility to offset volume erosion.

USPS and Industry Events

• Thanksgiving, November 27th – Federal Holiday NO In Home Mail Delivery
• Christmas Day, December 25th – Federal Holiday NO In Home Mail Delivery
• New Years Day, January 1st, 2026 – Federal Holiday NO In Home Mail Delivery
• Winter MTAC January 13th – 14th, 2026  – Washington DC
• NAPM Annual Conference – February 17th – 19th, 2026 – Orlando, FL
• DTAC Spring meeting, March 4th – 5th, 2026 – Sarasota, FL  
• MFSA Annual Conference, March 19th – 21st – Irving, TX
• MAILCOM Spring Conference, March 23-25th – Las Vegas, NV
• NPF 2026 May 3rd – 6th, 2026 – Phoenix AZ

Questions?

For more information on these topics or other postal questions, contact GrayHair Software at engage@grayhairsoftware.com

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