CP to post $billion loss

[tobyshitzu]

Canada Post operating loss to hit $1 billion by 2020

http://www.thestar.com/business/2013/04/23/canada_post_faces_1b_annual_operating_loss_by_2020.html

[toff3]

Art's statement

Another fact readily acknowledged by the "privatization" champions is that there is no way that privatization would ever result in lower prices

is manifestly, 100% untrue.

Privatization of Deutsche Post, the national postal system of Germany, began in the late 1990s. Between 1998 and 2008, the inflation-adjusted price of mail fell by 16.3% in Germany. It was either last January or January 2012 (I don't remember which) that the German domestic postal rate was increased for the first time in 12 years.

The cost of sending a letter from Germany to Canada is half - yes, half - the price of a letter from Canada to Germany. Compared to Canada Post rates, international Small Packet rates are ridiculously cheap.

To cite another example from a privatized postal service (TNT), international parcel postage in the Netherlands is way, way cheaper than in Canada.

And what's with all this talk about couriers? Privatizing CP does not mean turning it into a courier company.

Tom

[reallynicestamps]

And what's with all this talk about couriers?

Because Canada Post is not a monopoly and has not been for decades. The courier companies, both local and national/international are competing for the same customer.

While some courier services are more efficient than CP, specifically door to door tracking on all shipments, I can't think of one that is cheaper.

And that leaves out the important point that couriers do not service rural, northern or isolated communities. They subcontract those shipments.... to Canada Post.

As to the inflated wages, I think there is a lot of wishful thinking going on. Here is a sampling of wages.

http://www.glassdoor.com/Salary/Canada-Post-Salaries-E8747.htm

Notice that your postie and the retail clerk in your local post office is making just under $25 an hour. In Ontario, the minimum wage is $10.25 an hour. (The real minimum wage, at which an employer can count on the employee sticking around instead of constantly looking for better wages, is about $14 an hour.)

Part of that wage goes to the pension plan and to the health care plan.

Above all it is important for sellers in particular that our customers are not the minimum wage earners, they are those who do have enough disposable income to buy our books  and CDs and tchochkes.

[dipmicro]

Who is going to be on the hook for 1B loss ? May we assume that since mail is essential service, the agency may be bailed out by taxpayers.

In my opinion the CanadaPost should be divided, essential services should be socialized and subsidized (like healthcare) and commercial departments should be privatized and exposed to market economy unhindered by nonprofitable price-regulated essential services.

[art-in-the-making]

toff, the deutschposte example is an invalid comparison, if not an epic fantasy in technicolor.

It's like comparing one kid with a paper route of 100 papers, all in one apartment building in a city, to another kid who has a route of 25 papers all over one small town.

Germany has 3-4 times the addresses compacted into an area what, a tenth the size of Canada? Meanwhile, it still costs 40% more to send a letter in Germany today with their vaunted private PO than it does in Canada, with our publicly owned post office.

Not to even mention the transportation system in Germany, with all cities linked and interlinked.

The one thing really attractive about the DHL German Post Office is how they make package shipping to North America extremely inexpensive. (Although, try shipping the same package back to Germany from Canada with the same company - DHL and see what ridiculous price they give you LOL)

There may be a few reasons for a post office to have low-cost shipping for packages. It would be very smart for Canada Post to follow suit.

The example of municipalities is also of interest. I often think of how such savings and economies are promised by virtue of certain measures, especially *mergers*. LOL Anything merged between municipalities seems to double in cost immediately.

[treasure.hunter.d]

"to my local MPP..."

Try your local MP (federal) next time.

Canada Post is a federal crown corporation and the MPP (provincial) has nothing to do with it.

Sucks that you can't edit your posts. I realized that I typed one too many P's lol but realized too late...

[quettemistra]

They say that they cant survive under the current structure we are operating under. Nobody is buying stamps and mailing letters anymore. The loss of revenue that email has taken away could be replaced 10 fold if they offered Canadians a cheap service similar to USPS First-Class Package. Myself I would be spending thousands of dollars per year on this if they so offered it. But they don't. Instead they are ok with charging us $15 to mail a CD to Ontario from BC. The potential revenue that they are leaving untapped is quite mind-boggling.

Ridiculous.

[ggsale27]

The bright lights at CP just cannot see that offering more affordable options to Canadians will increase volume. Give us the option to add tracking to a letter for an extra buck, lower parcel rates, and people will start sending packages to family again. Every time they look at the bottom line, they freak out, cut services, and raise the remaining options something terrible. They just can't see that the more they raise prices, the less people will use them.

[art-in-the-making]

I agree.Canada Post should take the opportunity to experiment with some radical models while they still have the infrastructure in place to accommodate large scale initiatives.

They could also increase sales a lot by having tracked services to Europe and elsewhere equivalent to the services offered to the U.S. What's the difference, a couple of extra hours in a plane.

[toff3]

Art,

You accuse me of invalid comparisons and then you talk about the high cost of sending a package from Canada to Germany via DHL. That 's a courier service, for crying out loud, not the post!

Tom

[pierrelebel]

"Privatization of Deutsche Post, the national postal system of Germany, began in the late 1990s."

How about we look at a simple fact.  Not theory, not politics, just a simple fact.

Germany has a population of over 81,000,000 compared to Canada's 35,000,000

Germany's area at 357,000 square miles is less than a tenth of Canada at 3,854,000 square miles

On that basis, one would expect postage rates to be much cheaper in Germany than Canada.

Yet, despite having 25 times the population density of Canada, the basic cost of purchasing a stamp for a 20g letter within Germany is €0.55 (Cdn$ 0.71) compared to Cdn$0.63 in Canada for 30g

Anyone thinking Canadian postage costs would go lower with privatization is dreaming.

Anyone thinking some businesses or investors (who want to make money) would pay billions of dollars to purchase money losing Canada Post, assuming responsibilities for its liabilities and labour contracts (as required by law) and expecting lower postage costs as a results is dreaming.

[tobyshitzu]

Yes, take the one rate CP has that they don't control, which they were forced to keep rate increases below inflation for many many years by law,and use that as the basis for comparison...

CP already has many elements of privatized service, the outlets, final mile parcel delivery, the call center was contracted out years ago, fedex is contracted to fly all mail/parcels leaving canada.  The sole reason being it was cheaper to pay private sector who can do things far cheaper then the public service.  No reason it wouldn't be the same way if the a public service mailman brought mail from a privately managed sorting plant.  Which would be accompanied by an end of "exclusive privilege" so a competitor could take the business if there is a work stoppage

[pierrelebel]

"Yes, take the one rate CP has that they don't control"

OK - let's take the next rate - domestic up to 50g

Germany still has more than double the population of Canada, still has less than one tenth of the territory - basically 25 times the population density of Canada - and their rate €0.90 (Cdn$ 1.17) is still a bit higher than Canada Post (Cdn$ 1.10)

OK - let's check overseal airmail.

A 30g letter from Canada to Germany costs Cdn$ 1.85

A 30g letter from Germany to Canada costs €1.50 (Cdn$ 1.95)

"No reason it wouldn't be the same way"

You still have to find businesses or investors willing to invest billions of dollars in a money losing proposition. Good Luck with that.

The alternative of course is to invite those investors to buy Canada Post and allow them to raise the rates so they can make a profit.

[Anonymous]

It doesn't make any senses in how they can predict any loss by 2020?  The loss is blamed on the Canada Post employees for having a long strike and also blamed on the higher personnel for taking way too much salary than they need.

Another loss is blamed on Canada Post for increasing the postage rates which is out of control and off the wall.

I believe that if they lower the postage rates, we will see more volumes of mail.  I knew with the much lower postage rates, we would be doing well on eBay or any other sites. 

The postage rates on eBay is a major factor that the buyers look at and choose not to bid or buy on our items.

What Canada Post is doing is no longer making any senses.  They see the loss and thinking they need to increase the postage rates to make up, they need to step back and try to lower the postage rates and then they will see the increase volumes of mail.

It is not "unrealistic", it does make sense!

[toff3]

Comparison of Germany's postal system with Canada's is beside the point. Art-in-the-making made the demonstrably false statement that privatization inevitably leads to higher prices. I demonstrated the falsity using the example of Deutsche Post in Germany.

However, if we're going to compare German and Canadian postal rates, we should get our facts right.

Pierre is correct when he quotes a Deutsche Post rate of €1.50 or $1.98 (at today's exchange rate) for a 30 g letter from Germany to Canada. However, he avoided mentioning that this rate applies to a letter weighing as much as 50 g.

A typical letter weighs well under 20 g. The Deutsche Post basic rate is for a letter weighing up to and including 20 g. The rate for such a letter to Canada is €0.75 or $0.99. BTW, the domestic base rate is €0.58 or $0.77 (only 22% higher than the rate in Canada, not 40% as Art claimed in post #23).

Canada Post's basic letter rate applies to a letter weighing up to 30g, so practically every time a Canadian mails a letter he pays for weight that's not there. It's yet another example of the sneaky way CP tries to maximize its revenues (others are the obligation to use Expedited Parcel for >1 kg parcels to USA and the elimination of surface mail to USA).

Finally, Deutsche Post offers rates for oversize letters weighing up to 1 kg and Small Packets up to 2 kg, both internationally and domestically.

Fellow Canadians, read it and weep.

Tom

[pierrelebel]

"he avoided mentioning that this rate applies to a letter weighing as much as 50 g."

Here we go again. This is bad faith.

Can't you read?

The post starts with " let's take the next rate - domestic up to 50g"

[toff3]

Pierre,

You quoted a letter rate for domestic mail up to 50 g.

Anyway, it's beside the point. A letter weighing more than 20 g is a rare bird.

Canadians continue to be shafted by Canada Post.

Tom

[art-in-the-making]

We're splitting hairs here.

Fact is on all mail services, the German PO charges similar or higher rates than CP. Yet Germany has 25X more density of addresses, all of which exhaustively interconnected by high-speed rail and road grid.

Yet, even with the supposed great advantage of corporate ownership, the German PO charges as much or more for mail than Canada's! Obviously, Canada Post is a bargain!

As far as parcel prices to N.A. are concerned, there could be any reason for this. Perhaps DHL (which is the German PO) has empty planes coming thisaways. Perhaps it is a loss leader to try to squeeze out a couple of competitors, so as to raise prices to greater heights than ever. Or perhaps there is another competitor that the German PO has no choice but to match.

And the fact remains, that DHL charges an exorbitant rate to send the same parcel to Germany that it would send to Canada from Germany for something like a quarter or a tenth the price.

The only difference between corporate and crown corporation ownership is that corporate fat is lavished on a select few of elite execs and large shareholders whereas if there is any excess fat in a publicly owned post office it is spread out in modest quantities across thousands of workers, all of whom spend and pay taxes with these earnings. 

[toff3]

Art,

For Heaven's sake, cease and desist from comparing German postal rates with those of Canada and making unfounded statements such as

 Fact is on all mail services, the German PO charges similar or higher rates than CP

I'm sure you haven't fully researched the topic; I know I haven't.

Two facts that are not in question are:

1. Postal rates did not increase when Germany privatized its PO.

2. Postage on a regular letter from Germany to Canada is about half that on the same letter from Canada to Germany. 

Domestic German postal rates are of no concern to us Canadians.

However, Deutsche Post's (and other nations') pricing policy, insofar as it may differ from Canada Post's, may well be of interest.

So, for the umpteenth time, let's look at the failings of CP's pricing policy:

1. The unfairness of a 30 g (rather than a 20 g) weight limit for regular letters.

2. An overly restrictive, in terms of dimensions and weight, lettermail category.

3. Absence of a domestic Small Packet category.

4. Charging different rates for identical mail pieces transmitted by identical means (O/S Letter-post and Light Packet).

5. Limiting the weight of a Small Packet to USA to 1 kg when it's 2 kg to all other countries.

6. A zonal pricing scheme to a foreign country (USA) when that country does not reciprocate with a similar scheme.

7. Offering only air service to a bordering country (USA).

8. Obliging customers to use a priority service (Expedited Parcel) for parcels weighing more than 1 kg to USA.

I'm tempted to add the fuel surcharging to the list because I'm deeply suspicious of the fact that CP is the only postal administration in the world to indulge in this practice. However, I suppose that incorporating fuel cost in the base price (as all other POs do) leads to roughly the same result.

Note that the above has nothing directly to do with actual postal rates, which is a whole different kettle of fish. It has everything to do with fairness and regard for the customer.

I'm inclined to believe that a private company running the post office would operate a rational pricing scheme without the inequities and inconsistencies that pervade Canada Post's.

Tom

[pierrelebel]

"For Heaven's sake, cease and desist from comparing German postal rates with those of Canada"

???

Tom, you have been promoting privatization of Canada Post fort years. It is your post (#20) who invited readers to compare posting a letter from Germany to Canada:

"Privatization of Deutsche Post, the national postal system of Germany, began in the late 1990s. Between 1998 and 2008, the inflation-adjusted price of mail fell by 16.3% in Germany. It was either last January or January 2012 (I don't remember which) that the German domestic postal rate was increased for the first time in 12 years.

The cost of sending a letter from Germany to Canada is half - yes, half - the price of a letter from Canada to Germany. Compared to Canada Post rates, international Small Packet rates are ridiculously cheap.

Now you do not want folks to compare the cost of mailing a letter from Germany to Canada because you used your understanding that a letter should be under 20g to prove your point, not 30g or 50g as offered by both postal services where it clearly shows no advantage for the German Post Office?

You can't have it both ways. Reality is that in a country like Germany with a population density 25 times higher than Canada, privatization has not resulted overall in substantially lower postage cost for most people. The size of Canada and the population of Canada will not offer a higher density with its associated lower costs because the system is sold to private interests.

And you still have the problem of finding businesses with billions of dollars willing to invest in a money losing postal service.

" believe that a private company running the post office would operate a rational pricing scheme without the inequities and inconsistencies that pervade Canada Post's."

You may be right. Private business may decide that charging $10 for a specific service is better than charging $5 and $7 and 9 depending on so many inconsistent factors like Canada Post does.

Will Canadians be better off?

At the end of the day, private business needs to generate a profit, a return on its capital, in addition to cover operating costs.  To think that it is possible to achieve both without raising more money from those who pay for the service is not something they teach in business school.

What Canada Post needs is new senior management with a different mandate from the federal government. If it means we get mail two or three times a week instead of daily, so be it.  But that only cuts some of the mail carrier costs while negatively affecting some of the revenues. And what do we do with those newly unemployed mail carriers?

[dipmicro]

"population density" is worthless parameter in Canada because majority of the country is sparsely inhabited and mail coverage means that people sometimes have to travel 100km to general delivery office to pick-up their mail. What you really need to look at is "population distribution"

Look here: http://www.statcan.gc.ca/pub/91-003-x/2007001/4129908-eng.htm

Even better: http://www.statcan.gc.ca/pub/91-003-x/2007001/figures/4129885-eng.htm

Those big white areas are not covered by "door delivery". Looking at the density graphs it is obvious there is no demographic excuse for CanadaPost to perform poorer than other developed countries postal agencies.