The U.S. Postal Service lost $2.4 billion in the third quarter of 2009 as mail volume plummeted for the 10th consecutive quarter, according to data released by the Postal Service today.

The Postal Service handled 41.6 billion pieces of mail during the quarter, which ended June 30. That's a 14.3 percent drop — 7 billion pieces of mail — compared with the same period in 2008. Year-to-date mail volume is down 12.6 percent, the largest decrease since 1971.

Total losses for the first nine months of the year are now a staggering $4.7 billion — and postal management expects that number to climb above $7 billion by year's end.

"This is a critical moment for the Postal Service," said Carolyn Gallagher, chairman of the Postal Service Board of Governors, at its regular meeting this morning. "The unprecedented drop in mail volume has had a negative impact on our finances."

The deficit comes despite a major push to cut costs. Joe Corbett, the Postal Service's chief financial officer, said the agency slashed 88 million work hours so far this year — the equivalent of removing 57,000 full-time workers.

Much of this year's deficit is caused by the Postal Service's obligations under the 2006 Postal Accountability and Enhancement Act, which requires the agency to pay billions of dollars into a trust fund for retiree health benefits. The Postal Service owes $5.4 billion this year. Management is hoping for relief from Congress; the House and Senate are considering bills that would reduce the Postal Service's obligations by allowing the agency to pay benefits for current retirees using money already in the fund. That would save about $2.3 billion this year.

The House bill, HR 22, cleared committee earlier this month; the Senate version, S 1507, was approved in committee last week, and could come to a vote this week.

"We should be clear about the causes of the problems. … The economy has taken its toll," said Postmaster General John Potter at a news conference after the meeting. "And huge pre-funding obligations for the Postal Service retiree health benefits have raised our costs by more than $5 billion per year. We simply cannot afford these costs."

Potter said that if the bills do not become law before Sept. 30 — the end of the fiscal year — the Postal Service will not be able to make the required trust fund payment.

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