Australia Post is begging the government for billions in subsidies as it stares down the barrel of $6.6bn in losses over the next 10 years.
Half year results revealed a $151m loss on its letters business for the past six months – 57 per cent worse than the same period last year. Australia Post lost $328m on letters last year and that is expected to blow out to $350m for FY15.
Chief executive Ahmed Fahour says the government either needs to stump up the cash or allow the mail carrier to slash services and charge more for letters if it is to survive.
“They either fund the next 10 years of losses, which could amount to $6bn, or we’re out of business,” he told Fairfax radio.
“Either we get a massive injection from the government to keep the business going, or they give us the permission to manage the business and therefore no subsidy is required and the business can continue.”
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Fahour wants to be allowed to increase delivery times by two days and have customers pay a premium to keep the current delivery time – a two speed service similar to what it charges business.
He also says the current 70c stamp cost is less than the cost of providing the service and needs to rise.
“We've said that we need a decision this financial year. Right now we're in February and the clock is ticking,” Fahour said.
He says the changes will allow the company to focus its resources on competing with the growing number of multinational parcel companies entering Australia.
According to a government investigation last year, unless it is reformed Post is expected to lose $12.1bn on letters in the next 10 years.
Australia Post’s profitable parcel business has until now been able to prop up the ailing mail arm, but with mail volumes falling since 2008 and by 8.2 per cent this half-year – the largest fall ever – and parcel volume growth weakening to four per cent it can no longer balance the scales.
As a result, the mail carrier made only a $98m profit this half-year, down 56 per cent on last year, and is expected to make the first loss in the 30 years since it was corporatised for the full year.
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