AusPost's crisis inflection point

By Stephen Bartholomeusz

Australia Post has said the letters business could soon be losing $1 billion a year and the BCG analysis found that even if the rate at which volumes fell were at the lower end of its forecasts, and Australia Post’s non-regulated businesses met its forecasts, the letters business would lose $10. 9 billion over the next decade and Australia Post $4 billion overall.

If it can’t reduce the losses to more manageable proportions, Australia Post won’t be able to fund and maintain its very successful parcels business, which operates in competitive markets, or its retail network or its growing digital presence without massive and open-ended financial support from taxpayers.

Australia Post’s leadership has been talking about their fear, indeed conviction, that the losses in the letters business may soon explode – that the business is nearing a “cliff.

In a speech to the Australia Israel Chamber of Commerce, Fahour said Australia Post’s letters business, which lost $218 million in 2013, would lose more than $300 million in the 2014 financial year.

The Australia Post thesis is that, with both major political parties committed to having 80 per cent of government communications with citizens online by 2017, its letter volumes will fall off a cliff.

What Australia Post has asked for and is almost certain to get (given that it involves regulation, not legislation) is the tools to reduce the scale of the losses and, in effect, to manage the decline and eventual demise of the business.

Australia Post, of course, operates under a set of regulated community service obligations (last reviewed 16 years ago) that require it to deliver letters five days a week to 98 per cent of all addresses.

More to the point, in the six months to June the losses in the letters business were greater than the profits from the rest of Australia Post’s operations, which include its highly profitable parcels business.

Read more here: Business Spectator


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