Canada Post losing millions: Ottawa economist says it’s ‘not competitive’

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Can Canada Post bounce back?

Small businesses worry about looming Canada Post strike

Kristy’s take: How often do you send and receive mail?

Canada Post continues to be in a dire financial situation, prompting the company to modernize its operations and the union representing more than 55,000 employees to call for another strike. An Ottawa economist says the company needs to become competitive.

“A strike won’t change the fact that they’re not competitive yet,” Ian Lee, an associate professor with the Sprott School of Business at Carleton University told CTV Morning Live Wednesday.

• Canada Post makes new offers to union ahead of strike deadline

The Crown corporation hasn’t made profits since 2017. It lost $3 billion since then. According to its latest annual report, it lost $748 million before taxes in 2023. In 2022, it lost $548 million.

The annual report recommends ending the daily door-to-door delivery among other services. The Canadian Union of Postal Worker (CUPW) has issued a strike notice, noting that workers could be off the job Friday at midnight.

The Crown corporation has been facing new realities, and it needs to adapt, Lee adds. He says restructuring, downsizing and franchising are necessary.

He says a new strike could be devastating.

Company has to pivot to parcels

“Canada Post is in a death spiral because of the collapse of letter mail. People don’t write letters anymore, and it’s documented in the audited annual reports from 5.5 billion letters a year in 2006 down to 2.2 billion and still declining. It’s not static. In other words, it’s going down. There’s going to be less letters next year and less even the following year.”

Lee says this reality means Canada Post’s revenues are on the decline, which implies the company has to pivot to parcels. But the problem is the Crown corporation isn’t competitive in parcels. He anticipated letters to vanish as young and middle-aged people are “completely digitized.”

E-commerce is another new reality facing the corporation, he says.

Unsustainable model prompting dire need to restructure, downsize

Lee says there is a dire need to become efficient. He notes that the company is currently unsustainable, citing its current size and the number of workers.

“We have to come to the modern age, really,” he said. “I mean, does the Crown corporation need that many workers? Lee said.

“The CFO stated this in the audited annual report. He said it was designed to deliver 5.5 billion letters, and they’re delivering about 2 billion and declining. There is a massive downsizing that is going to be coming to Canada Post.”

Though the company is no longer delivering what it once did, Lee says, there is light at the end of the tunnel. To get there, it has to go through restructuring to become a smaller organization, Lee suggests.

He compares the sizes between Canada Post and other companies. He says parcel companies in Canada have between 5,000 and 10,000 employees.

He says Canada Posts operations are massively more expensive than its counterparts.

“Why? Because the model is completely different, with a parcel, to state the obvious, and I don’t want to insult any of your listeners, you only take the parcel to you when there’s a parcel to take to your door,” he said. “With letters, you go to 17 million addresses, five days, 52 weeks a year, even if there’s no mail to deliver. That’s massively more expensive than a push system of parcels where you only go there when there’s a parcel to deliver.”

‘Painful disruptions’ ahead for small businesses

Lee anticipates “painful disruptions” ahead for small businesses. He says those businesses do not have the resources bigger companies have.

While Canada Post can be cheaper than private companies, Lee say it’s because small business will eventually have to switch.

He explains why Canada Post charges less, and simply it’s because the Crown corporation’s business model is not sustainable or profitable.

“Let me be really blunt, Canada Post is underpricing every service it offers because it’s losing billions. That’s the evidence that they’re underpricing, so the price that people are paying to Canada Post is not a break-even sustainable price,” Lee said.

Can Canada Post stop the death spiral?

Lee says the Crown corporation is able to stop the death spiral. He says it can be done through convincing the government to stop home delivery, which can save around $500 million a year.

“Twenty-five per cent of Canadians who live in the most privileged neighborhoods in Canada, (such as) Rockcliffe get home delivery. The Glebe, where I live, gets full home delivery. There’s no justification for me getting home delivery when people in the suburbs don’t,” Lee said.

Lee also recommends franchising the post offices across the country, and getting rid of the universal service obligation that mandates mail delivery to the door five days a week and 52 weeks per year to 17 million addresses.

CUPW is calling for the strike as a response to the company’s desire to hire part-time workers for weekend deliveries. Full-time postal workers currently get overtime pay for weekend work. Other outstanding issues include worker pay, benefits and pensions. Friday’s potential strike comes six months after a 32-day strike in November and December, where millions of parcels and letters were held up during the busy holiday season. It ended after federal intervention.

On Wednesday, Canada Post presented new offers to CUPW, including an increase to the wage offer, better income replacement for leave under the short-term disability program and six added personal days locked into the collective agreements.

The union asked the company to take two weeks to consider the offers. Canada Post declined CUPW’s request.

“We will be taking the time to carefully analyze and review the offers,” CUPW told CTV News Ottawa in a statement.

“Canada Post walked away from the bargaining table for a third time over a week ago. Given the delay, we hope that these offers will be substantive and respect the needs of workers as well as the communities we serve. The offers must ensure a stronger public post office, both for now and for the future.”

Watch Kristy’s take: How often do you send and receive mail?

With files from CTV News National’s Daniel Otis