What is happening at An Post? Losses year after year, suspension of its direct-mail business for five weeks at Christmas and again at election time, repeated assertions that there is no need for postcodes, reduction in quality of service for single-piece mail, and non-payment of sustaining progress to their staff, writes Alex Pigot
Is the company a basket case or on a financial knife-edge?
The answer is emphatically no.
The company is sitting on a huge property portfolio last valued in their balance sheet in 1985 and has just sold its mobile phone top-up companies at a €70 million profit - so its balance sheet is financially solid and there's cash in hand.
It is not, or at least it should not be, losing money and here's why.
Its losses, according to ComReg, (the Irish postal regulator), during the 2001-2004 period were €65.2 million whilst its accruals for restructuring totalled €91.5 million. Since staff numbers have not reduced these accruals must be relatively intact.
And in the same period it has provided delivery services in Ireland to foreign postal operators (such as Royal Mail) which have lost An Post €5 million (see An Post regulatory accounts 2001-2004) under commercial agreements ComReg describes as "inappropriate".
In other words, if it did not accrue costs which it has not had to pay for and sorted out its agreements with foreign postal operators An Post would have recorded a trading profit of €121.4 million for the last four years.
Suspension of direct-mail services at Christmas and election time is a historic issue which has never been readdressed. In 1985, when the direct-mail service was introduced An Post did not have automated sorting machines and therefore a huge extra volume of mail would at that time have delayed election or Christmas mail. This is no longer the case - and the introduction of downstream access will solve it in any case.
Reduction of quality of service is linked to three things - firstly, automated mail machines do not process single-piece mail well and need banks of human "video coders" to identify machine-unreadable addresses; secondly a lack of postcodes; and thirdly, in my personal view, non-payment of sustaining progress and restructuring procedures which both negatively affect staff morale and their willingness to give the quality of service they always have.
So why is An Post asking for a price increase (it wants to increase the price of a standard stamp, for example, from 48 to 60 cent)?
An Post says in its application that the reason it is increasing its tariffs is because it is losing money and volumes are falling. It says that if it increases prices then its income will increase while admitting mail volumes will fall by 10 per cent in 2006 and 2007. (It is proven in Ireland that mail volume will fall with price increases from the experience of the Irish postal industry following the price increases in 2002 and 2003).
Isolde Goggin, chairwoman of ComReg, in the current consultation paper open to all those who have an opinion on Irish postal services (available at www.comreg.ie) writes about An Post: "It needs to focus on stimulating its mail volumes, reducing its unit costs and tariffs, while generating its projected cost savings . . . In ComReg's opinion the reduction in volume and the consequent increase in unit costs [resulting from An Post's tariffs increase proposals] would potentially undermine An Post's ability to provide an affordable universal service in the medium to long term."
In other words she is saying that An Post, if it increases its tariffs, will no longer be able to provide a five-day-a-week collection and delivery service to businesses and citizens on a commercial basis.
What will occur is a terminal spiral of falling volumes and increasing prices which will lead eventually to no postal service being provided at all.
In May 2005 An Post's four unions (the CWU, CPSU, PSEU, AHCPS) commissioned a detailed report by economist Paddy Walley which argued that a lesson could be learned from the way cheaper air fares had increased volume.
In July 2004 the WIK study, commissioned by the EU, stated "there is an unrealised potential for further letter post growth in Ireland" and said that price increase "may have deterred mailers".
So why instead of asking for price increases does An Post not follow the advice of its regulator, its unions, its customers, the EU and its own UN affiliated umbrella body, the Universal Postal Union?
An Post is part of the social fabric of this country. If it is to provide us, the citizens and businesses of this state, with a high quality, affordable postal service in the future, and its staff with meaningful and valuable jobs, then it must realise that increased prices and decreasing volumes are not the answer.
It should renegotiate its international inbound mail agreements, introduce postcodes and new products such as downstream access to drive up volume, pay sustaining progress and finally reduce and rebalance tariffs on an ongoing basis so that all its tariffs abide by the EU directed tariffs principles of affordability, non-discrimination and being geared to cost.
Alex Pigot is managing director of TICo Group, a bulk mail producer, and chairman of the Irish Direct Marketing Association