August 13, 2012 (RARC-WP-12-014)

The U.S. Postal Service is currently facing a financial crisis. The combination of the great recession and increased competition from electronic diversion has created the “perfect storm” of rapidly declining mail volumes. While severe, the Postal Service’s predicament does not seem to be entirely unique. There are many parallels to the freight rail industry, which suffered a significant loss of market share to the trucking industry in the 1950s, while it was burdened with an overbuilt network.

This paper, Parallel Tracks: Lessons from the Railroad Industry, provides a comparison of the two industries. While the recovery of the freight rail industry does not necessarily provide a blueprint for the Postal Service, the comparison provides some interesting insights into the prioritization of recovery efforts. Unlike the freight rail industry, which at the time of deregulation had great potential for strong productivity improvements and revenue generation, the first and foremost element of postal recovery needs to be cost containment — addressing retiree prefunding issues and rightsizing the network. It is unlikely that the Postal Service and its stakeholders can wait over 50 years for a full recovery. The prioritization of restructuring and speed of recovery are of utmost importance to reestablishing the Postal Service as a key enabler in communications and commerce. To read more about the comparison of the freight rail industry and the Postal Service, download the full report below.

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