30 Jan 2013

NZ Post expects to lose money if changes not made

8:28 am on 30 January 2013

New Zealand Post says its postal business will start losing money within the next four years unless it reduces mail deliveries to compensate for a fall in demand.

The state-owned enterprise wants to change its Deed of Understanding with the Government to reduce letter deliveries from six days to three days a week, and replace some of its 880 stores with electronic self-service kiosks.

While its postal business has grown and it has cut costs, New Zealand Post says that is not enough to compensate for a massive decline in mail volumes.

New Zealand Post says almost a quarter fewer letters were posted in 2012 than ten years ago due to the growing use of email and texting.

And the decline is picking up pace with volumes forecast to be just half of those posted in 2002 within five years.

The state-owned enterprise says its postal business will start losing money in 2016-2017, and potentially before then.

Chief executive Brian Roche says the business has no other options.

"We have to actually make substantial gains. We are at break even at the moment; we can't price our way out of this."

Mr Roche says there will be job losses among mail processors, posties and shop workers but he declined to put a number on it.

If the Government agrees to change New Zealand Post's service obligations, the reductions could start as early as the middle of next year.

But Mr Roche says he cannot rule out seeking further mail delivery cuts in the future pointing to the fact that Christmas card deliveries were 20% down on the previous year which he says is a sign of a general decline in physical mail.

Business New Zealand says the proposed changes to mail delivery won't have much impact on businesses who need to post bills and letters.

Chief executive Phil O'Reilly says many companies have moved online, which has contributed to the decline.

Mr O'Reilly says most businesses would be happy with the change because it secured the future of the post service for those who rely on it.