Change coming for Canada Post as Crown Corporation bleeds money

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OTTAWA – Canada Post is at a tipping point. With letters declining, package delivery going to competitors and the Crown corporation having lost $3 billion in the last six years, something will soon have to change about how Canadians get their mail.

The Crown Corporation released its financial reports earlier this month, showing that it lost $748 million before taxes in the last year. In 2006, Canada Post delivered seven letters per week to the average address; it now delivers two. That has reduced overall volumes from 5.5 billion letters in 2006 to 2.2 billion last year.

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Today, there are no taxpayer dollars going into Canada Post, the corporation’s exclusive monopoly on letter mail has previously allowed it to cover costs and even bank surpluses in previous years, but those surpluses have been eroded and, come early next year, the corporation expects its reserves will fall below requirements.

Canada Post’s president and CEO, Doug Ettinger, said in his annual report that something has to change.

“Canada Post is now at a critical juncture — modernize and revitalize to serve a rapidly changing country or fall behind and struggle to keep it all going,” he said.

While letter mail has declined, online shopping has exploded and, initially, Canada Post was successful in pivoting to that market. In 2019, Canada Post handled 62 per cent of parcels delivered in this country, but now that’s down to just 23 per cent as new companies enter the market.

Postmedia, which owns National Post, is also in the parcel delivery business.

Jon Hamilton, the corporation’s vice-president of strategic communication, said new competitors have entered the market that have more flexibility to deliver on evenings and weekends, with lower costs.

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“Because Canadians have moved to online shopping and there’s been tremendous growth, that’s obviously attracted a lot of new competitors. And our market share has quickly declined in just the last few years,” he said.

Hamilton said Canada Post is working with the government and with its unions on a path forward. He said they’re open to considering any kind of changes that could stabilize their finances.

“We need to look at everything and look at what other countries are doing with their postal systems and understand what’s important. What do we need to maintain and what needs to change?”

Canada Post has mandates it is currently obliged to follow. In addition to providing delivery to Canadians five days a week, it is mandated to deliver letters within set time frames and has to have postal outlets within 15 kilometres of 99 per cent of Canadians.

Canadian Union of Postal Workers President Jan Simpson said the financial problems at Canada Post are a real concern, but she believes the corporation should be considering becoming bigger rather than smaller, moving into postal banking as some other countries’ postal agencies have done, or providing check ins on seniors.

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She said Canada’s big banks don’t serve many rural or remote communities and Canada Post could fill that void.

“We saw that during COVID, many banks have left these communities and for those that are still within communities, the fees are very high. So there’s many people who are underbanked throughout this country,” she said.

CUPW is in negotiations with Canada Post now over contracts that expired late last year and early in 2024. Simpson was also critical of $15 million in bonuses that the corporation awarded to executives.

“You’re saying that you’re having financial hardship, but you’re awarding yourself bonuses. I mean, that’s just shocking to me.”

Canada Post’s financial report doesn’t specifically identify what changes they are considering, but it could mean changes to how mail is delivered, moving to less frequent deliveries or slower delivery times for letter mail. The corporation could also close post offices and make other changes to save money.

They could also make changes to how parcels are delivered, moving to weekend or evening deliveries as many private firms offer.

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Simpson said moving away from regular door to door delivery would be a mistake.

“When under the Harper government, we went to community mailboxes, we took away our competitive advantage; Canada Post is going to every door, every day.”

During the 2015 election, the Liberals promised to end a Canada Post program, which was then underway, converting addresses from door-to-door home delivery to community mailboxes. When they came to power, the Liberals stopped that program, but didn’t restore door-to-door service to places that already lost it.

Canada Post’s financial report shows, 24 per cent of Canadians currently get their mail delivered to their front door, while 34 per cent receive their mail through a community mailbox and 28 per cent receive it through centralized points like an apartment building lobby.

Door-to-door delivery is by far the most expensive, costing $284 per address per year on average. Community mailboxes cost $162 and apartment lobby delivery cost $130.

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Public Services and Procurement Minister Jean-Yves Duclos was asked about the looming financial problem for Canada Post after the financial statements were released.

He said the government will wait to see what Canada Post comes up with as potential solutions.

“We first need to see what options they’re going to present, what options they’re going to recommend, what options they are going to develop with their workers,” he said. “There is an opportunity to increase revenues, given the significant increase in the need for package delivery across Canada. There is also an opportunity to decrease cost by working with unions and workers.”

Ian Lee, a professor at the Sprott School of Business at Carleton University, said Canada Post should have seen these changes coming sooner.

“You could see this train wreck coming from a decade and a half or more,” he said. “These are economic trends occurring, just like the trend that killed video stores and bankrupted Blockbuster Video.”

He said the trends are all moving in the wrong direction for Canada Post; letter mail will continue to drop and there will continue to be tough competition for parcels.

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“We’re not going to go back to writing letters. We’re not going back to the analog age. This is the future.”

Lee has written extensively about Canada Post and made recommendations in the past for a complete overhaul. He said he would reduce the frequency of mail delivery and move all addresses to community mailboxes to save costs.

He said the government has to move on this quickly, because it has to prepare for a much smaller Canada Post with many fewer employees.

“A future Canada Post is going to be 10,000 to 15,000, maybe 20,000 employees. It’s not going to be 65,000 because there isn’t enough business,” he said.

National Post
rtumilty@postmedia.com

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