The article is behind a paywall so I can't see the math, but there is a difference between average cost and incremental cost. How much is the postage for the 1.6 million packages and how much extra does it cost to deliver them?
Imagine if it costs $7 to deliver one package and only $1 extra to deliver the second. If each sender pays $2, does that mean the second package lost the post office $2 = $2 postage - average package cost of $4? Or did the USPS profit $1 = $2 postage - $1 incremental cost? I have no idea without seeing the math.
Back in the day we used to call that marginal cost, but you are exactly right.
The Post Office is making money on the Amazon deliveries. And they are getting a much better capital utilization rate by using existing facilities, both buildings and vehicles.
I was shocked to see a Post Office truck pull up to my front door and deliver a package about a year ago. Now it is common. And there is another benefit. The drivers are becoming pleasant to deal with. A few years ago, the surly factor was high for postal workers. Now with email and electronic payments threatening first class mail, and the specter of unemployment on the horizon, postal workers see package delivery as a job preserver. And they have started to understand they need to compete with UPS and FedEx.
It is absolutely amazing the attitude adjustment having to compete brings.
It is required by law that USPS parcel delivery not be priced below cost, but:
In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace. First-class mail effectively subsidizes the national network, and the packages get a free ride. An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver. It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam.
Article also says two thirds of Amazon's domestic deliveries are made by USPS.