An Post sales just topped €1 billion - so why does it want to cut services?

The Journal

16 hours ago

Paul O'Donoghue
THE HUMBLE POSTAL service has been a fixture of Irish life for generations.
That now seems at risk.
A major row last week over the future of An Post grabbed news headlines – including
claims and counterclaims
over the financial health of the organisation.
Around the time when the postal service was due to appear before an Oireachtas committee, the An Post CEO said a minister leaked information from Cabinet.
Meanwhile, rumours swirled of an organisation in a bad economic position. Very exciting stuff.
But when you look past all the heat and noise, one key point emerged -
An Post wants to cut mail delivery days.
The details still have to be ironed out. But reports suggest mail would be delivered on fewer days per week as a way of cutting costs.
However, this report emerged at the same time as An Post confirmed fairly encouraging numbers for 2024.
Last year, sales at the organisation topped €1 billion for the first time ever, up from €922 million in 2023.
It also reported a profit of €5.6 million, compared to a €20 million loss the year before.
So if the company is growing and profitable – why does it want to cut mail delivery days?
Shifting mail habits
The simple reason – delivering traditional mail, such as letters and postcards, every day of the week isn't particularly lucrative anymore.
Mail volumes are falling – with a wealth of communication options such as phones and email, people don't use letters as much as they once did.
An Post reported that mail volumes fell 7.6% in 2024. Maybe a one year decline of about 7% doesn't sound particularly big?
But the problem is the long-term trend.
Say a number drops by 7% each year for a decade. After 10 years, it will have roughly halved.
And mail volumes have been falling for longer than that -
go back to An Post's 2010 annual report
, and it also reported a 7% drop in mail volumes.
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The point being – Irish people send far fewer letters now than they did 10 or 20 years ago. Because of this, there's less mail revenue for An Post.
This has been somewhat compensated for by the rise in parcel deliveries from people shopping online, which has boomed since Covid.
An Post reported that parcel deliveries jumped by 12.6% in 2024.
Which comes back to why An Post wants to cut mail delivery days. It wants to focus more on the side of its operations which is growing and makes more money – parcels. Not the part which is shrinking – letter delivery.
Cutting costs
The logic of delivering mail on fewer days is to minimise costs.
For example – say it costs An Post €500 to send out 1,000 letters in a day (these numbers are pulled out of the air for illustration purposes).
If it delivers letters five days a week, it spends €2,500. If it could deliver all those letters in four days instead, it only costs the organisation €2,000. And the same number of letters get delivered.
An Post alludes to this in its 2024 annual report, saying customers are 'demanding reliability over speed'.
This also means there is logic to An Post's decision to
recently raise stamp prices
, even as mail volumes fall.
Delivering higher-priced mail on fewer days makes more financial sense than delivering lower-priced mail every day.
In tandem with this, the organisation will increasingly focus on its growing parcel deliveries.
International trend
This proposal to reduce delivery days is not unique to An Post.
Postal services across the world are looking at similar measures in the face of falling traditional mail volumes.
In New Zealand, the state postal service only delivers three times per week to urban areas, and five per week to rural addresses.
Last year, New Zealand's government
proposed reducing this even further
, to two days in urban centres and three in rural areas. Again, to cut costs.
The organisation also plans to have parcels and mail delivered by the same person.
Denmark has taken things even further again. PostNord, the country's state-run postal service,
will cease all letter deliveries by the end of 2025
.
The country's Transport Minister not-very-reassuringly reassured people they will still be able to send mail via the 'free market'.
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The announcement came in the same week that Germany's Deutsche Post announced it will
cut 8,000 of its 187,000 workforce
.
Why are all these countries doing this? Postal services tend to be state owned. With the fall in mail volumes, the postal services often start making financial losses, even with the growth in parcels.
Once losses start mounting, the choice for governments is either to subsidise/invest in the service, or cut it. And many are choosing to cut.
Some insight into the numbers was provided earlier this month by the UK's Royal Mail. While the body is privately-owned, it's dealing with the same issues as the state-owned postal services.
Ofcom, the UK's postal watchdog,
has given it the all-clear to cut mail deliveries
for 'second-class' letters to every other weekday and not on Saturdays.
It said doing this would reduce Royal Mail's costs by at least £250 million a year – a significant amount for an organisation which only recorded an operating profit of £149 million in 2023.
An Post future
To bring this back to An Post.
The €5.6m profit it made this year might sound good. And it is, for an organisation operating in a very difficult market.
But given its sales of €1 billion, An Post has a profit margin of less than 1%. That's a very slender buffer which could easily be erased by any number of economic shocks.
Ofcom's figures give some indication of the financial benefit of cutting mail delivery days. So it's easy to see why An Post would want to follow suit.
It's also worth noting that a report from Grant Thornton just a few months ago suggested that the post office network
needs funding of €15m annually over the next five years
, up from its current €10m per year. If it doesn't get it, there are warnings of widespread post office closures.
While An Post reported good numbers in 2024, its long-term future is still uncertain. So management wants to put it in as secure a financial position as possible.
Now, are the proposed changes good for An Post customers or workers? Probably not. Consumers will get a reduced service, while employees face delivering the same volume of mail on fewer days.
But while An Post is publicly owned, it operates as a business. Given that, its proposals are very much in line with global trends.
There's an argument that An Post should be run more as community service, delivering mail every day, even if it doesn't make the best business sense.
However, that isn't how the company is set up now.
Until its operating mandate changes, An Post will aim to run itself in a way that puts it in the most secure financial position possible.
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