The Australia Post kerfuffle dives right to the heart of two factors: the relevance of postal services in this digital age and also the Government’s obligations to the nation.
The Australia Post kerfuffle dives right to the heart of two factors: the relevance of postal services in this digital age and also the Government’s obligations to the nation.
Taking the first one first; it can not be denied that letter deliveries worldwide are declining. The volumes are still huge – billions and billions of envelopes delivered annually – but all countries are showing decline. Parcel delivery is growing; benefiting from the very thing that is hurting letter mail; online activities.
The first government postal service to be privatized was Germany’s Deutsche Bundespost in 1995. Now called Group Deutsche Post-DHL (DP) it is the world’s largest logistics company, having acquired DHL and other private logistics companies. When DP inherited East Germany’s postal service after reunification, it was bankrupt. Privatization, assiduous investments, diversification and typical German savvy when it comes to organization, have created a global giant, profitable and stock-exchange listed, with annual sales of around AUD$90 billion (at today’s exchange rate), and nearly half a million employees.
DP is lead by the very capable Frank Appel, a doctor of neurobiology, who is the second highest remunerated ‘postal’ CEO in the world. The first is our very own Ahmed Fahour of Australia Post at $4.8 million, thanks to his Rudd government appointment in 2009. So, Australia has the highest remunerated postal chief in the world for a loss-making $5.8 billion revenue business, whereas Germany has the second for a $90 billion profit-making business. And DP still manages to deliver 64 million letters each day in Germany – in Australia it’s around 12.5 million.
Cock-eyed
This cock-eyed scenario does not apply solely to a Germany-Australia comparison. Take a look at these international postal organizations, their revenues and CEO remuneration (in today’s Australian dollars):
US Postal Service ($94 billion): CEO Megan J Brennan, compensation around $503,000
Italy Post Italiane ($39 billion): CEO Francesco Caio, compensation around $1.6 million
France La Poste ($35 billion): CEO Philippe Wahl, compensation around $1.2 million
UK Royal Mail ($21 billion): CEO Moya Green, compensation around $3.3 million
Canada Post ($8.6 billion): CEO Deepak Chopra, compensation around $560,000
NZ Post ($1.5 billion): CEO Brian Roche, compensation around $1.17 million)
Of the above, all except Royal Mail and DP are government-owned although some are run as if private companies and others are planning to privatize. It’s interesting to note that Canada is a comparable market, although $4 billion larger than Australia’s, but it turns a profit to taxpayers and its CEO gets paid one-eighth of our postal CEO. However, Chopra is trying to halt home deliveries and have bulk ‘community’ drops – amidst much opposition. Even the modest NZ Post turns a profit.
The albatross around the neck for all post operations is paradoxically the one they complain about when real competition enters their spheres. Letters. They say they lose money on letters but when competitors are forced upon them, they howl – as in the UK’s example where deregulation in 2006 opened mail processing up to TNT (now Whistl), DP, Hermes, Yodel and others. It hasn’t all been plain sailing, with Whistl recently suspending door-to-door deliveries in favour of using Royal Mail for the ‘final mile.’
Sprats and mackerels
But back to Germany – DP does not seem to have a problem with letter deliveries and this is because they have cleverly de-leveraged their dependency on them. A stamp for a standard letter is equivalent to 99 cents, with bulk rate discounts encouraged for direct mail users, with who it cooperates closely. Competitors to DP account for a large slice of mail processing. In short, letters to DP are a low profit ‘sprat’ to catch the higher-profit ‘mackerels’ of parcels.
In Italy, France and Canada, salvation for their postal organizations is coming by way of diversified services such as insurance, savings accounts and other financial products. It is these that are subsidizing essential mail services, along with in some cases, government subsidies.
Mail processing and delivery is an essential service, just like roads. If a government or local authority said “Oh, Parramatta Road is not profitable for us, let’s close it,” all hell would break loose. There are some things that a government simply must do as part of its mandate for being elected, and mail delivery is one of them. The government knows this because it is a major mail user, despite the myGov online initiative which has been a colossal failure. Government is of the people, by the people and not of the internet by the internet. Lord knows, politicians are faceless enough already without further ensconcing themselves in ivory towers near Lake Burely Griffin.
Bulk and direct mail producers have invested millions of dollars in the latest high-volume inkjet web presses such as those from HP, Canon, Screen, Ricoh, Kodak and Xerox. Associated finishing equipment from the likes of Pitney Bowes and Muller Martini adds to the investments. Their customers are staring a 43% price increase in the face and that will mean only one thing: lower volumes, job losses, bankruptcies and economic loss. With email in boxes becoming increasingly spammed and full of junk, totally transposing proper commercial and essential mail to this method does not make sense. What happens when a bill is sent by email but not paid? You get sent a letter of demand, not an email of demand because they know you will probably never open it. And if you are summonsed to court, it is by registered mail.
It worked for Telstra
The answer is a far more efficient Australia Post with vision, diversification and, in my view, privatization. Along with privatization must come opening up all mail to healthy competition. Post offices must remain but perhaps as parts of larger operations, such as OfficeWorks for example. Mail costs and essential policy can still be controlled by government regulation; in the privatized world if you want the gravy you have to take some of the gristle too, as with toll roads and CTP insurance.
For the clues how to do it, perhaps Australia Post and the Minister for Communications should look no further than Deutsche Post and Royal Mail. It will take ticker to do it but Telstra was once part of the PMG department and is now a healthy stand-alone listed company, thriving in competition.
Whatever happens, it needs action with vision; and fast. Lumping a 43% impost on consumers and business mail users is disingenuous and a solution coddled up by clueless, visionless, inadequate management on mega-salaries.