USPS cut FY2026 loss 12.7% to $6.5B, and still needs Congress

The U.S. Postal Service cut its fiscal 2026 operating loss 12.7% to $6.5 billion, narrowing the red ink by $2.5 billion from last year, and still told Congress the agency's own cost work cannot fix what it calls an outdated business model.

Operating revenue rose 3% to $83 billion, driven by expansion of Ground Advantage — the economy parcel product with two-to-five-day service standards — strength in marketing mail, temporary parcel transportation surcharges and a First-class price increase. Those gains were partly offset by declining volume of First-class mail and parcels.

What shippers pay next is the bigger story.

What changes for parcel shippers on Jan. 17?

Two weeks ago the Postal Service filed notice, first reported by e-commerce news site Value Added Resource, that it will introduce a permanent fuel surcharge in January for package shipments to offset the cost of diesel truck fuel and jet fuel.

That notice lands as the temporary 8% transportation surcharge — the first the agency has ever imposed, in effect since April after the Iran war triggered a run-up in oil prices — is scheduled to end Jan. 17, along with peak season handling fees.

The mechanics matter for anyone writing parcel rates into a contract:

• Ground Advantage and Parcel Select surcharges will be based on diesel prices
• Priority Mail and Priority Mail Express will use jet fuel prices
• Negotiated contracts may carry customized fuel terms
• The USPS has not disclosed the surcharge formula

Parcel shippers, then, trade a flat 8% surcharge that expires mid-January for a fuel-linked line item, with the exact index still undisclosed.

Why is a $6.5 billion loss still a crisis?

Because the controllable loss — which excludes mandated obligations outside management's control — fell only $344 million, to $2.4 billion. Total expenses of $85.8 billion came in just $200 million, or 0.23%, from the budget target, in a stretch of very high fuel prices.

Daniel Tangherlini, a board member elected chairman during the meeting, argued that gap against budget showed how much progress management has made. The arithmetic behind it: a $2.4 billion increase in operating revenue and a $2.7 billion decrease in workers' compensation and retirement expenses outweighed increases in other costs. Transportation expenses for the year rose $225 million, yet Postmaster General David Steiner said the agency hit cost goals for the past six months despite fuel and inflation headwinds.

Segment revenue, compared with the prior-year third quarter:

• Shipping and packages: revenue up $1.7 billion, or 5.1%, on a 5.3% volume decline
• Marketing Mail: revenue up 5.3% on a 1.1% volume decline
• First-class mail: revenue up 1.2% on a 5.1% volume decline

Service performance held up in the fourth quarter:

• First-class on-time performance 90.7%, against 88.9% a year earlier
• Average days to deliver 2.4, down a tenth
• Bulk mail on-time performance flat at 94.3%

Management also booked 19 million work hours of reductions, streamlined networks, optimized air and surface options, and deferred payments to retirement funds to conserve cash.

"Our improved operational precision comes from our network transformation efforts, expert decision-making, and rapidly improving end-to-end visibility across all operations. But we can still do better, and we will as we bring technology to our operations," Steiner told the board of governors, which was live streamed.

What is management asking Washington for?

Officials say short-term fixes cannot paper over structural problems. Their asks:

• Remove uneconomical mandates, including six-day-per-week service
• Raise the $15 billion borrowing limit so the agency can access capital for upgrades against private-sector parcel carriers
• Spread responsibility for retirement payment allocations to the U.S. Treasury Department
• Expand pension investment opportunities beyond Treasury bonds alone
• Adopt private-sector practices for handling workers' compensation claims
• Help subsidize operations for the first time, and ensure Congress allocates funding as intended

The stakes are dated. The Postal Service has previously said it could be insolvent by 2031, when the retiree health benefit fund is exhausted. Officials have long told the Postal Regulatory Commission that slow approval of price and operational decisions leaves them uncompetitive against more nimble private carriers.

Chief Financial Officer Luke Grossman put it plainly: "Our actions alone cannot resolve the challenges brought on by an outdated business model. We will continue to do our part but we need meaningful legislative, regulatory, and administrative reforms to propel the Postal Service toward long-term financial sustainability."

Who is pushing back?

Keep US Posted, an advocacy group of newspapers, magazines and greeting card publishers, urged lawmakers to reject parts of that agenda, arguing the 2021 business transformation plan has been a loser and that service should not be cut to close the deficit. The group counts seven price increases in five years, at rates above inflation, which it says drained mail volume and revenue despite pandemic funding and liability changes under the Postal Service Reform Act of 2022.

"Congress must act to increase accountability, incentivize productivity and increase regulatory oversight. Without that action, a devastating cash crisis is unavoidable. The answer should not be another blank check without actionable reforms. Otherwise, USPS could soon be headed for a massive taxpayer bailout," said Executive Director Kevin Yoder. He also wants rate hikes limited to once a year and capped to the Consumer Price Index.

Steiner, 18 months into the job, said the first month of the new year brought positive volumes and double-digit revenue growth, with October volumes turning positive on election mail and higher package counts, and the agency expects significant revenue growth in shipping and package services in fiscal 2027.

The near-term rate path is now fixed: the 8% surcharge and peak season handling fees both end Jan. 17, a permanent fuel surcharge replaces them, and a $6.5 billion annual loss keeps the pressure on Congress to act before the next pricing cycle does.