An iconic slice of Canadian life – the postal worker dropping letters through the door – is slipping into the past as financially troubled Canada Post scrambles to find its footing in the Internet age.
Faced with a persistent decline in letter-mail and a massively underfunded pension plan, the money-losing federal Crown corporation announced drastic measures on Wednesday designed to get back to profitability and ensure its survival.
The changes include the phase-out of home delivery for the five-million Canadian households that still get it and moving them to community mail boxes over the next five years, and hiking the cost of stamps by more than one-third to 85 cents from 63 cents, effective March 31.
The post office, which is expected to lose $1-billion a year by 2020, will also privatize more postal stations and cut 6,000 to 8,000 jobs as workers retire.
Canada Post insists the changes, which will save it $700-million to $900-million a year, are not just about restoring the company’s financial health. They are also about shaping postal service for the needs of Canadians as much of what they do moves online, including banking, bill paying, shopping and most communication. “They want to pay for the system as a user, not as a taxpayer,” Canada Post spokesman Jon Hamilton said.
But experts say the savings will eventually help Canada Post reduce its $6.5-billion pension deficit without borrowing or turning to the federal government. For Ottawa, it is a way to approach a thorny problem while alienating as few voters as possible and not investing any more cash.
“This is a very risky strategy to go very hard on service cuts and hard on price increases, and then hope that’s going to give you a short-term fix for your borrowing and pension-plan obligations,” said Michael Warren, a former Canada Post chief executive and a proponent of privatizing the Crown corporation.
Canada Post could have cut household mail delivery to three times a week from five – an option suggested in a recent Conference Board of Canada report commissioned by the post office. But many businesses still want daily delivery. It also could have closed more rural post offices, or eliminated costly rural mail, but those options would have upset rural voters.
In a statement, Transport Minister Lisa Raitt endorsed Canada Post’s plan, pointing out that the postal service has a mandate to be financially self-sufficient.
“In today’s digital age, Canadians are sending less mail than ever,” said Ms. Raitt, who is responsible for the post office. “The Government of Canada supports Canada Post in its efforts to fulfill its mandate of operating on a self-sustaining financial basis in order to protect taxpayers, while modernizing its business and aligning postal services with the choices of Canadians.”
NDP MP Peter Julian said the timing of the announcement – coming a day after the end of the fall session of the House of Commons – shows the government expected the announcement would be very unpopular and wanted to avoid answering questions. “I think Canadians will be profoundly appalled,” he said following a meeting of the NDP caucus.
The NDP also expressed concern over how the loss of home delivery would impact elderly and disabled Canadians.
After the change, Canada’s mail service will pale next to that of many other countries, including Britain, which still has twice-a-day delivery. About a third of Canada’s 15.3-million households get home delivery, with the share dwindling over the past 30 years. The rest go to community mail boxes, post offices or rural mail boxes. Canada Post said it has no plans to change delivery to apartments, condominiums and rural areas. Home delivery of larger parcels will also continue.
Just like milk and bread delivery, mail at home is a “legacy” of an earlier era, said Mount Allison University president Robert Campbell, who chaired a 2008 federal advisory committee on the Crown corporation. “The idea of having an army of people trudging up and down every street in Canada, delivering less and less mail at each address seems crazy,” he said.
The dilemma is that forcing millions of Canadians to walk or drive to community mail boxes could accelerate the problem Canada Post is trying to solve: mail volume that has been declining by 4 to 5 per cent a year. Letter mail, traditionally the core of Canada Post’s business, will become secondary to parcels, advertising mail and its Purolator courier subsidiary.
The announcement, made in the midst of the holiday mail spike, drew condemnation from seniors’ groups, postal employees, business groups and the opposition NDP and Liberals. But many people took it in stride.
Despite the extra time it will take to stop at a community mailbox, Michael Lee Hing – who works in compliance and finance for a Calgary investment company – said he understands Canada Post needs to make changes due to decreased mail volume.
“Maybe it will reduce some of the junk [mail] I receive,” he said. But he added that he worries about seniors and the disabled.
Engineer Zach Dunnewold said he will miss having mail delivered, but it will not make much difference. “It’s not as convenient, but it’s not a big deal,” he said.
Canada Post, he added, “can’t spend taxpayers’ money if it doesn’t make sense. So in that sense, I agree with it.”
With reports from Bill Curry in Ottawa and Kelly Cryderman in Calgary
The amount of mail delivered through Canada Post has declined steadily over the past several years, according to its 2012 annual report. The amount of mail delivered to each address declined by 23.6 per cent between 2008 and 2012. Meanwhile, the number of addresses they must deliver to has grown by around 150,000 each year.
Volume (in billions)
SOURCE: Canada Post Annual Report (2012)
Profit and loss
The amount of mail shipped through Canada Post and its subsidiaries, dubbed the Canada Post Group of Companies, varies throughout the year and reaches its higher point during the fourth-quarter holiday season. But Canada Post notes in its second quarter financial report that its "fixed costs do not vary in the short term with these changes in demand for its services."
Canada Post Group of Companies consolidated profit (loss) from operations
In millions of dollars