$2 billion in 1 three month period? And they get dough from Amazon for Sunday deliveries as well? Somebody is getting very wealthy...................
Total operating revenue of the USPS is about $80 billion.
They get about $6 billion in last mile delivery of packages for Amazon.
6 = about 7.5% of 80
It can’t be said from that that someone at USPS is getting wealthy by the contract with Amazon.
However, it can be said, by some financial estimates, that Amazon’s $6 billion may not cover all costs (including administration and overhead) for the roughly 1 billion items USPS delivers under their contract.
Why? The same reason Amazon wanted someone else to make many of those last-miles of its deliveries. Getting $6 billion to deliver about 1 billion items is like saying $6 dollars an item. In the dense cities and many suburbs $6 dollars may cover the costs, but not likely so in long low-population-density rural routes and those rural routes get about 40% of those 1 billion packages USPS does for Amazon.
What will it take for Amazon, Fedex, UPS and USPS to price their services by location, and thus by actual unit costs relative to location???
Right now, if USPS demanded much higher rates from Amazon, it’s likely Amazon would simply not renew the contract.
Then again, it is likely that a 1st class stamp is not paying 100% of actual costs for a 1st class letter either. Why? It’s like I said above, there are certain fixed costs to a definite and defined delivery route, regardless of the number of pieces in the mail bag. The mail bag may be lighter, and therefor represent less revenue, but most of the cost for the route is the same.
What’s needed is privatization of USPS, so that “overhead” costs can be vastly cut back with more efficient management and operations, so that revenues can more than make up for the many fixed costs of actual delivery routes - capital investment, labor, fuel, maintenance.
Yes, I included capital investment as a fixed cost, which it is in just about any transportation company. Planning on necessary periodic replacement of some types of equipment requires that annual budgeting (and cost vs revenue understanding) has to be done so that last minute (end of life) capital is already available, to a point, and borrowing for capital goods is reduced as much as possible. The more that planning is not done, the more debt-interest eats into the expected return on capital, and net profits. Instead, a sound company plans on replacement of certain portions of its equipment, annualizes the cost of accumulating the funds for it, and builds those numbers into the costs against which it wants to achieve net revenue/profit.
I worked at a non-profit where we did that. I anticipated that age of equipment and advancement of technology and advancement of systems would mean about 30% of our IT equipment would be in need of replacing each year. If we did not actually spend that much, we accumulated it in a special capital (invested) account, so that when actual equipment upgrades were needed the funds were there. I brought that budgeting system in from a major private company I worked for previously.
Most transportation companies have to do enough of that kind of budgeting and revenue expectations (to also cover some of the capital costs) or they wind up spinning out to much revenue to servicing interest on borrowing and leases; like what happened with Spirit Airlines.