The U.S. Postal Service has reduced its air shipments by more than 90% over the past two years, Postal Service Chief and CEO Louis DeJoy said in prepared remarks to the agency’s board of governors last week. Postmaster General Louis DeJoy said the cuts will allow the agency to cut about $1 billion in air shipment costs annually.

DeJoy said more than 95% of first-class mail and packages are now shipped via the USPS's less expensive ground delivery system as the Postal Service continues to move away from air shipping.

The U.S. Postal Service is making rapid progress in reducing demand for air shipments, which it relies on top provider FedEx. The move is part of a decade-long transformation plan for the Postal Service to right-size its finances and better compete with major carriers.

According to the USPS’ financial report, shipping expenses fell 6.2% year-over-year in the quarter ended June 30. This was due to a 27.6% decrease in air shipping expenses as overall package volumes fell and shifted to road shipments.

DeJoy said despite the strategic changes, the USPS' service remained strong throughout 2023, with 98% of Americans receiving mail and packages in less than three days.

The USPS is also overhauling its network coverage. DeJoy said the USPS aims to open nine more regional processing and distribution centers and renovate 27 local processing facilities and 60 additional sorting and distribution centers to reduce excess processing costs for transportation and waste while improving service performance and market opportunities.

Although the agency has made progress in reducing shipping costs and improving its network, it still faces high inflation and cuts in advertising spending, which has affected marketing mail volumes. Second-quarter operating income fell 0.9% year-on-year to $18.6 billion, while operating expenses increased 9.6% year-on-year to $20.5 billion.

"Continued increases in costs in multiple areas of our business posed a challenge," Chief Financial Officer Joseph Corbett said in a statement. "We continued to manage costs within our control, such as reducing work hours by 6 million compared to the prior year and focusing on transportation and other operating costs."

DeJoy said that to help improve the Postal Service’s financial outlook, it is considering “continued aggressive reductions in operating costs” — he said the Postal Service has already significantly reduced hours — and increasing revenue from package deliveries.

The Postal Service has made clear in its transformation plan that it wants to compete more effectively with package delivery companies FedEx and UPS and attract more commercial shippers to counter the impact of declining mail volumes.

USPS Ground Advantage, launched in July, is an example of the Postal Service's efforts to boost revenue. The two- to five-day ground shipping service was formed by combining three existing delivery options. "The elimination of Retail Ground, Parcel Select Ground and First-Class Parcel Service simplifies our operations and shipping processes while expanding the addressable market size of the parcel industry we serve," DeJoy said.

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