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Postal system on the brink of major financial crisis

So many Americans have shied away from mailboxes and post offices since anthrax surfaced that the volume of mail handled by the US Postal Service has dropped by about 10 percent, costing at least US$500 million in lost revenues and pushing the battered postal system to the brink of financial crisis, postal officials said on Tuesday.

Today the Postal Service is expected to ask Congress for a bailout, similar to the one given the airline industry, to cover the billions of dollars postal authorities say it will cost to make the mail safe.

The diminishing volume of mail could not have come at a worse time for the postal system.

Despite rate hikes in January and July, the Postal Service closed the fiscal year that ended Sept. 30 with a US$1.65 billion shortfall, and it expects to lose at least an additional US$1.35 billion this year.

The financial situation was so bad that even before the first anthrax-laced letter was postmarked, postal authorities had filed a request to increase the cost of a first-class stamp again, this time by US$0.03 to US$0.37.

Now adding to the postal system's current woes, authorities say, will be the billions of dollars it will cost to buy the new equipment needed to sanitize incoming mail against the anthrax bacteria and to protect postal workers who may come into contact with anthrax or other biohazards.

At a meeting of the postal board of governors on Tuesday, the postmaster general, John Potter, called the weeks since the terrorist attacks on Washington and New York "one of the most difficult and sad times in postal history."

Two postal employees died after contracting anthrax, three have been hospitalized and more than 16,000 have been put on medication as a precaution.

Independent sources estimate that the total cost of reacting to the anthrax emergency and the terrorist attacks could be US$8 billion. Postal authorities have not yet named a figure, but Potter has said that if a congressional bailout does not cover most of the cost of responding to the anthrax attacks it might be necessary for the Postal Service to raise postal rates even higher than previously planned to make up for any shortfall.

The postal service has already received US$175 million in federal assistance to purchase 4.8 million respirator masks, 88 million pairs of plastic gloves and other quick-fix safety enhancements for its 800,000 employees.

And on Tuesday, postal authorities said they had reached a US$24 million deal in which Ion Beam Applications Inc of Chicago would sanitize mail at Ion's Bridgeport, New Jersey, operation for three months starting this week or next.

The decline in mail volume since early October follows a similar dip in the weeks immediately after Sept. 11, when the airlines -- which carry some of the nation's mail -- were grounded and business came to a temporary and damaging halt.

The drain on postal revenues -- totaling about US$800 million in the entire period since Sept. 11 -- extends a corrosive cycle that the Postal Service has been fighting for more than 20 years.

As alternates like Federal Express, fax machines and the broad range of Internet services have emerged to steal away some of the first-class mail that is most profitable, the Postal Service has tried to cover lost revenues by continually raising rates.

Yet, each rate hike provides more incentive for businesses with the option to switch to some other method of communicating with customers -- causing a further decline in first-class volume and laying the groundwork for even more rate hikes.

"The Postal Service is in a literal free fall at this point," said Dan Moll, deputy staff director of the House Committee on Government Reform, which has overseen the Postal Service since a reorganization at the beginning of the current session of Congress.
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