The price of an ordinary stamp will have to increase from 72 cent to 80 cent if the postal service is to be maintained at its present level, according to chairman designate of An Post, Dermot Divilly.

He also revealed that only six rural post offices closed last year despite the common view that a far greater number shut their doors.

Mr Divilly told the Oireachtas Communications Committee that there were no plans to make significant cuts in the rural post office network even though about 23 per cent of post offices in bigger centres accounted for more than 60 per cent of turnover.

“An Post is a company with a fine heritage and a strong and trusted brand. Indeed, the recent RepTrak survey found that an Post is yet again the public sector company with the best reputation in Ireland,” said Mr Divilly.

Heowever, he said the traditional mail business now represented 59 per cent of total revenue, down from 69 per cent in 2008.

“While the An Post Group is currently profitable the current model whereby the profitable retail and other group businesses subsidise the loss-making mail business is, in my view becoming increasingly unsustainable and needs to be addressed urgently while the company is financially healthy,” said Mr Divilly.

He said the key issue was the cost of providing the universal service obligation for a five-day, next-day delivery of mail to every premises in the country.

“This is, in itself, loss making albeit that the company has been successful in reducing these losses of late through modest price increases and significant cost savings in the mails business,” said Mr Divilly.

Responding to a question from committee chair Hildergard Naughten, Mr Divilly added that if the same type of service is to be maintained, an alternative funding model will have to be found that will involve the company reducing its cost base.

“Pricing will have to increase to the average European level of 80 cent (Ireland is 72 cent currently) in the immediate term. In the medium term, the service specification will have to be reviewed if further major cost reductions are to be achieved.”

Mr Divilly, who has extensive experience in the private sector, said the reputation of An Post provided an opportunity to extend its services.

The introduction of a simple current account was one way that state payments could be made through the post office network rather than being channeled through the major banks.