An Post under threat as finances worsen

An Post has warned that its ability to provide a national postal service is under threat because of the company’s worsening financial situation.

An Post under threat as finances worsen

The company’s chief executive, Donal Connell, has called on the postal sector’s regulator, ComReg, for a review of the existing prices cap on postal charges.

In a recent letter to ComReg, Mr Connell said the company was continuing to sustain substantial losses in providing a national mail delivery and collection service due to increasing costs and falling revenues.

An Post suffered a €32.3m loss last year.

“I cannot over emphasise the importance and urgency of this matter,” said Mr Connell.

The An Post chief executive said the company had been able to cross-subsidise such losses in the past from other income but was now clearly unable to do so.

“This situation threatens the financial stability of the company and places the provision of the universal service obligation in jeopardy,” said Mr Connell.

He attributed An Post’s deteriorating financial situation to a number of factors, including a recent Labour Court award which gave staff a 2.5% pay rise which will cost the company €11.2m to implement. It has also incurred an extra €2.3m in pay costs since the start of the year as a result of a second Labour Court decision relating to the consolidation of allowances into basic pay for some staff.

An Post had also suffered a greater than predicted decline in the number of mail items posted in the last two years. Overall mail volumes are down 35% since the peak of 2007. It has estimated there will be a further decrease of about 5% to 6% in mail volumes this year.

Mr Connell warned that the price An Post can charge for incoming cross-border mail from outside the EU was fixed by international agreements made by the State and was too low to cover the company’s costs.

In June, ComReg expressed concern at the large losses suffered by An Post as a result of processing and delivering international inbound mail.

Mail posted in other countries for delivery by An Post in the Republic accounts for almost 40% of the company’s total losses in providing a universal postal service.

In 2015, An Post reported that it suffered a deficit of €13.2m on processing and delivering international inbound mail.

An Post’s cash reserves have fallen by about €300m over the past seven years to just €50m at the end of 2015.

In a separate letter to ComReg, An Post’s director of services, Brian McCormick, said significant adverse developments which had affected the company were largely outside its control.

He claimed the restoration of regular pay increases, without any changes to the price cap, would place An Post in an “unaffordable and unsustainable” situation.

An Post admitted it had proven difficult to achieve savings in order to improve efficiency, as required by ComReg in the past few years.

Mr McCormick said that overall target savings of 10% were now becoming “increasingly challenging, if not unachievable”. The move by many banks and utilities to electronic billing is also a significant factor.

“It is likely that An Post is now experiencing the first significant signs of e-substitution at a structural level which will result in further significant volume decline,” said Mr McCormick.

He pointed out that the €0.72 domestic stamp rate was significantly below the EU average of €0.93.

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