In fiscal year 2026, the U.S. Postal Service (USPS) reduced its annual operating loss to $6.5 billion, a $2.5 billion decrease from the previous year. Postal officials say the steps taken internally to cut costs and generate more revenue are positive, but don’t restore the agency to long-term financial stability without broader government intervention.

On Tuesday, the company also reported financial results that showed a reduction in its controllable loss, which excludes expenses and obligations outside the control of management, of $344 million to $2.4 billion.

Operating revenue was $83 billion, an increase of 3% year-over-year. Growth was driven by growth in Ground Advantage, the USPS economy parcel service with delivery in two to five days, improved Marketing Mail performance, temporary parcel transportation surcharges and increased First-Class Mail prices. These improvements were somewhat offset by decreased volumes in First-Class Mail and parcel shipments.

Revenue growth takes centre stage

For Postmaster General David Steiner, revenue growth has been a primary objective since taking office 18 months ago. He believes that better commercial performance is key to putting the organisation on a sustainable financial footing.

“We are now meeting our revenue targets consistently, through pricing strategies, promotional campaigns, incentives and new product development in our mail business,” Steiner said at a livestreamed meeting of the USPS Board of Governors.

He also said that volumes turned positive in October, with double-digit revenue growth. The improvement was helped by election-related mail and increased parcel activity and management expects the positive trend to continue in the coming months.

The Postal Service also expects to see strong growth in revenues from shipping and package services in fiscal 2027.

Permanent fuel surcharge on the cards in January

It is also looking to protect margins from rising transportation costs and plans to introduce a permanent fuel surcharge on parcel shipments in January.

The move came roughly two weeks prior to the financial results, according to a notice identified by e-commerce news outlet Value Added Resource. It’s built to help cushion diesel and jet fuel price volatility.

The surcharge proposal follows the Postal Service’s first-ever temporary transportation fee, an 8% charge imposed in April after the Iran war helped push oil prices sharply higher.

That temporary surcharge is set to expire Jan. 17, as are the seasonal peak-period handling fees applied to parcels.

The new fuel fees will differ according to the service used. Parcel and Ground Advantage Certain shipments will be subject to diesel fuel surcharges and Priority Mail and Priority Mail Express will reference jet fuel prices. Individual contracts may have special fuel terms.

USPS has not yet released the formula used to determine the surcharge amounts.

Lower expenses help narrow the deficit

The improvement in the annual financial position also reflects a significant reduction in employee-related expenses.

Operating revenue increased by $2.4 billion, while workers' compensation and retirement expenses declined by $2.7 billion. Together, these changes more than offset increases in other expenditure categories.

Transportation costs nevertheless rose by $225 million during the fiscal year. Steiner said the organisation had achieved its cost-reduction targets over the preceding six months despite inflationary pressures and higher fuel prices.

Board member Daniel Tangherlini, who was elected chairman during the meeting, pointed to the agency's spending discipline as evidence of progress. Total expenses reached $85.8 billion, only $200 million, or 0.23%, above the budget target, despite exceptionally high fuel costs.

Chief Financial Officer Luke Grossman stressed that operational improvements alone could not overcome the weaknesses of the existing business model. He called for meaningful legislative, regulatory and administrative reforms to support the organisation's long-term financial sustainability.

USPS has previously warned that it could become insolvent by 2031, when its retiree health benefit fund is expected to be exhausted.

Parcel revenue rises despite falling shipment numbers

The financial results show varying trends across the Postal Service’s various lines of business.

Package and shipping revenue increased $1.7 billion, or 5.1%, compared to the same period a year ago, despite a 5.3% decline in volume.

Ground Advantage saw increased shipment volumes, while Parcel Services and Priority Mail were down. The Postal Service is also facing growing competition from Amazon and independent parcel carriers that are taking an increasing share of the package delivery market.

Other mail categories also had mixed results:

  • Marketing Mail revenue declined 5.3 percent and volume declined 1.1 percent.

  • First-Class Mail revenue increased 1.2%, volume decreased 5.1%.

These figures underscore the problem facing USPS: how to generate more revenue in a market where traditional mail volumes continue to fall and parcel competition is intense.

Service Enhancements and Network Reorganisation

USPS continued to take steps to reduce its operating costs and improve network efficiency for the fiscal year ending September 30.

The programme involved restructuring its transportation network, optimising air and surface delivery options, cutting working hours by 19 million and deferring payments to retirement funds to preserve available cash.

Management also pointed to better reliability of service, particularly in the wake of a peak shipping season last year. The upcoming peak season is expected by officials to be an important building block for better operational and financial performance in 2027.

First-Class Mail on-time delivery performance was 90.7% during the fourth quarter, compared to 88.9% for the same period last year. Average delivery time decreased by 0.1 day to 2.4 days.

Bulk mail performance was flat, at 94.3 percent.

Steiner said the progress was driven by network transformation, better operational decisions and a better end-to-end view across the organisation. Further improvements would be dependent on introducing more technology into postal operations, he said.

USPS wants more government involvement

Postal officials insist temporary measures cannot fix the structural problems plaguing the organisation, although its financial results have improved.

The agency is asking Congress to review a number of long-standing mandates and financial restrictions that it says limit its ability to compete with private-sector delivery companies.

It seeks to eliminate mandates for unprofitable services, such as the mandate to provide six-day-a-week delivery.

The USPS is also asking Congress to raise its current $15 billion borrowing cap so it can access more capital for infrastructure upgrades and investments it needs to better compete with private parcel operators. The agency is also seeking federal subsidies for operating costs, something it never had before.

Other proposed changes would move some of the responsibility for allocating retirement payments to the US Treasury Department, broaden pension investment options beyond Treasury bonds and give the USPS more leeway to adopt private-sector practices in handling workers’ compensation claims.

The organisation is also asking for assurances that the money allocated by Congress will be spent on its intended purposes.

Postal officials have repeatedly told the Postal Regulatory Commission that they lack the flexibility to change prices and make operational choices. They say the USPS is at a disadvantage to private carriers that can respond more quickly to market changes because of the long process of regulatory approval.

Industry group pushes back against more price hikes

Not all stakeholders support the postal service’s reform programme.

USPS agenda. Keep US Posted, an advocacy group representing the interests of newspapers, magazines and greeting card publishers, urged Congress to reject some parts of the USPS agenda.

The group says the agency’s 2021 business transformation plan has not delivered the expected results, and that reducing postal services is not a solution to the financial deficit.

It also points to seven price rises introduced over five years, at rates above inflation. The organisation said the increases have helped to reduce mail volumes and revenue, despite financial support through the pandemic and changes to pension liabilities that were introduced by the Postal Service Reform Act of 2022.

In the US, Executive Director Kevin Yoder posted, urging lawmakers to improve accountability, encourage productivity gains and increase regulatory oversight.

He cautioned that without the power to enforce reforms, throwing more money at a problem could lead to a massive bailout for taxpayers. It also argues that repeated price increases and service cuts will risk alienating more customers from the postal network, thus further weakening its financial position.

The suggested alternative is to limit postal rate hikes to one a year and to ensure prices are affordable to consumers and small businesses by linking any increases to the Consumer Price Index.

The battle illustrates the difficult choices the USPS has to make between making more money and the possibility that higher prices will lead to a faster decline in traditional mail volume.