Australia Post could lose up to $1 billion a year on letter delivery, CEO Ahmed Fahour has warned, flagging that side of the business is facing imminent cutbacks and major structural changes.
As part of the shake up, a two-speed system, regular or priority, for letter delivery will be introduced in June next year. Customers will pay extra for first class stamps for priority delivery, echoing the system in the UK and New Zealand.
Fahour said Australia Post had reached a critical point where losses from letter services had overtaken the profit from commercial parcels and retail. All but 5% of the mail delivered now comes from business and government.
“Our projections show that with letter volume declines now accelerating to between 8 and 11 per cent per annum, our letter services, under current momentum, will lose $350 million this year and could grow to over $1 billion annually in losses,” he said.
“We believe we need to change today, while we are strong, so that this transition is done in an orderly way and so we can protect the community’s equity in our business. If we wait another 12 months it might be too late as the large losses from letters will overwhelm the organisation.”
There is good news though: the online shopping boom means the company will deliver parcels on Saturdays and extend guaranteed next-day Express Post letter and satchel delivery to households six days a week from the end of 2014.
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