After billions of dollars in losses, Canada Post warns it could run out of cash

Canada Post ended the week with more gloomy financial news, announcing an operating loss of C$221 million for the first three months of the year. Earlier this month it announced that it had lost $748 million last year.

The state-run postal service has racked up more than $3 billion in losses since 2018, and offered a bleak outlook in the 2023 annual report it released this month.

“We anticipate larger and increasingly unsustainable losses in future years,” he wrote, adding that without borrowing another $1 billion and refinancing $500 million of current debt, it would run out of cash early next year.

“Canada Post is at a critical moment in its history,” the company wrote, with a candor not often seen in annual reports. “With increasing financial pressures, its long-standing role as vital, publicly owned national infrastructure for Canadians and Canadian businesses is under significant threat.”

For decades, the post office’s biggest problem has been that more and more people and businesses are not sending letters, which was once their main source of income. In 2006, Canadian households received an average of seven letters per week. Last year, that number was two.

Online shopping offered some hope during the pandemic, when it became the only way to buy many products. Although Canada Post lost $779 million in 2020, much of it in pandemic-related costs, package shipments were up 50 per cent from the previous year and carrier demand outstripped capacity.

Those gains proved fleeting, in part because the rise of the package business brought with it a new form of competitor. In addition to unionized companies like UPS Canada, which have a similar cost structure, Canada Post now faces a growing number of small businesses that rely on low-paid workers, who do not receive benefits.

Just before the pandemic, the post office delivered 62 per cent of all packages in Canada. Now he manages only 29 percent. That business is being squeezed from both sides. In addition to price pressure from competitors, packages cost the post office much more to handle and deliver than letters, and require substantial investments in equipment. Therefore, profit margins are small.

Canada Post CEO Doug Ettinger said in a statement that the service would need to be modernized and that he was discussing plans with the government.

“Canadians understand that our business model must change,” he wrote, adding that “an operating model designed to deliver almost 5.5 billion letters in 2006 cannot be sustained with the 2.2 billion letters we delivered last year.”

Ettinger did not say what form those changes might take. When I asked Canada Post for more details, it responded in a statement that “any discussions regarding delivery or other major changes are only in their preliminary stages.”

In 2016, a government-ordered review of Canada Post offered many suggestions that seem politically difficult. He urged an end to the moratorium on the closure of rural post offices, which was introduced in 1994 after a public backlash. He proposed moving large numbers of households from door-to-door delivery to community mailboxes, a return to the “super mailbox” program that became so unpopular that Prime Minister Justin Trudeau’s government eliminated it almost immediately after taking power in 2015. a recommendation to examine salary and pension costs seemed a recipe for labor conflict.

Canada Post is not alone in its struggles; Other postal systems may give an idea of ​​what might be coming here.

Britain’s Royal Mail, which was privatized in 2013, had an adjusted operating loss of 419 million pounds (about $729 million Canadian) last year. One regulator recently proposed reducing deliveries from six days a week to just three.

(Read: Mail 3 days a week? The idea meets resistance in Britain.)

But as soon as the idea emerged, Prime Minister Rishi Sunak said he was “absolutely committed” to the six-day-a-week schedule required by law.

(Britain’s Post Office, which operates postal establishments and remains government-owned, is embroiled in scandal and under official investigation after hundreds of branch managers were wrongly accused of theft due to software problems. )

While Brits, like Canadians, use the mail much less these days, the idea of ​​fewer deliveries is still very unpopular. That could have influenced the immediate rejection of the proposal by Sunak, who this week called elections for July that are likely to remove his party from power.

Any substantial changes to Canada Post are sure to be equally complicated. It is still unknown whether Trudeau, another leader trailing by double digits in the polls, will want to take on that responsibility, with elections scheduled within a year.


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Originally from Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported on Canada for The New York Times for two decades. Follow him on Bluesky at @ianausten.bsky.social.


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