Losses grow at An Post monopolies

Profits at services run by An Post in competitive markets are subsidising growing losses in its monopoly businesses, the State company said yesterday.

The company reported a €6.7 million pre-tax loss for 2001, which its chairman Mr Stephen O'Connor described as "challenging and difficult".

An Post expected an overall deficit of €37 million this year and a €27 million deficit in 2003. It has a recovery programme but will not return to profitability until 2004.

The projected deficits are linked to once-off restructuring costs of €21 million this year and €32 million in 2003 when the company aims to reduce its workforce by 1,140. An operating loss of €16 million is expected this year.

The loss in 2001 occurred despite a 9 per cent increase in revenues to €625 million. Costs rose by 12 per cent to €631.5 million, reflecting the impact of the Programme for Prosperity and Fairness (PPF).

"The PPF is a hammer-blow to a low-margin business such as ours," said An Post chief executive Mr John Hynes. He hoped the telecoms regulator, Ms Etain Doyle, would sanction an increase in the cost of international and domestic postage by the end of the year.

He also said the company was seeking an increase in the fees paid by the Department of Social, Community and Family Affairs for its distribution of social welfare payments. Mr O'Connor said: "We have an income and we have a cost problem. No business can sustain a position where its costs exceed its revenues, particularly when the outlook, without remedial action, is for a continuation of this trend and a widening of the gap between costs and revenues."

The disclosure of losses in An Post's businesses reserved from competition revealed an anomaly at the company because the monopoly elements in any business are generally expected to generate strong profits.

But Mr Hynes produced extracts from regulatory accounts produced for Ms Doyle that showed postal services reserved from competition lost €15 million. Domestic mail services reserved from competition made a €1.7 million profit, while outbound international mail lost €5.6 million and inbound international mail lost €11.1 million.

Meanwhile, obligatory services open to competition made a profit of €8.4 million.

Mr Hynes said the international losses meant Irish consumers were subsidising larger post office companies in the EU. This would not be addressed until the company secured a rise in international tariffs.

The post offices division lost €13 million and a similar loss is expected this year.

In addition to staff reduction in its mail sorting division, An Post has introduced a severance package for postmasters on its loss-making network of sub-post offices.

This deal sees the transfer of contracts for over-the-counter post office business to agents who will be paid on a per-transaction basis. The initiative follows the Government's refusal last year to subsidise the network enabling retiring postmasters to gradually withdraw from the business.