The solution to Canada Post’s financial woes and bleak future, one observer says, is just two words: sell.
“I’m not sure you can make any tweaks,” said Vincent Geloso, an assistant professor of economics at George Mason University in Fairfax, Virginia.
“The best thing you can do is make sure they aren’t that bad. That’s essentially it. There’s no way around it,” Geloso, who is also a senior fellow at the Fraser Institute, told CBC News.
“It’s better if we just go the route and sell it.”
The recent labor dispute at Canada Post has put renewed focus on what changes may need to be made to adapt to the future. Suggestions have included less frequent mail delivery, limiting home delivery and strengthening the parcel delivery business.
But some argue that more drastic measures are needed, such as selling or privatizing the crown corporation.
As postal workers return to work Tuesday morning, questions remain about how the national postal service will adapt to the changing needs of Canadians.
Even before the month-long strike by more than 55,000 postal workers, the national postal service was in the spotlight for its dire financial situation. Back in May, Canada Post said it could run out of operating funds in less than a year.
Still, taxpayers are not responsible for the losses; Canada Post is financed through the sale of postal products and services. Nevertheless, the company has been making losses since 2018. Over the past six years, losses totaled $3 billion, including $748 million in 2023.
The group attributes this to falling revenue from the delivery of letters and parcels, although the volume of parcel deliveries has increased. Meanwhile, the cost of delivering mail and packages is rising.
Canada Post has also had difficulty competing with more private delivery companies.
Any other company facing such losses and falling demand would be forced to innovate and cut costs or otherwise be acquired or go bankrupt, Geloso said in a statement current article in The Globe and Mail.
Because of its monopoly over most of the mail market, “Canada Post lacks this incentive,” he wrote, and can “simply shift the burden to consumers by raising prices.”
Instead, the federal government must pay attention to how some European countries have adapted their postal services.
No more postal monopolies
For example, the European Commission, which is responsible for proposing and overseeing new EU laws and policies, said that in 2013 The delivery of all letters, regardless of weight, was competitive. (In Canada, only Canada Post can deliver letters.)
Such open competition would end monopolies and do more to control costs, says Geloso.
But he says Ottawa could go further by following the example of Belgium, the Netherlands and Germany, which have privatized their postal operations.
Because of competitive pressures, these national postal services have focused on controlling their costs, he says, a type of focus that “Canada Post will never have as long as it is a crown corporation with a monopoly.”
However, Geloso does not mention Britain’s Royal Mail, which was privatized in 2013 and has struggled to adapt as the number of users using it continues to plummet. (Earlier this week, the British government approved the sale of Royal Mail’s parent company to a Czech billionaire.)
Despite privatization, the Royal Mail Lost millions of dollars annually and been fined several times by the British regulator Ofcom for failing to meet its delivery targets.
These shortfalls are linked to the British government requiring Royal Mail to deliver to over 30 million British businesses six days a week, says Paul Simmonds, a former assistant professor at Warwick Business School.
“This requirement…has been in place for a long time a main subject And expensive “Royal Mail is a thorn in its side,” Simmonds wrote for the website The Conversation last year.
Marvin Ryder, an associate professor at McMaster University’s DeGroote School of Business in Hamilton, says privatizing a postal service brings with it laws and an oversight group to ensure that “your mission as a country continues to be fulfilled by the postal service.”
This group’s regulations and order flow had a significant impact on profits, meaning these privatized postal services made little money, he said.
In other countries, including the United Kingdom and Germany, publicly funded postal delivery systems have been privatized. Although Canada Post is a Crown corporation, it is not funded by taxpayers and is intended to stay in business by selling its services, although it is required by law to deliver to all Canadian addresses. But is it time to privatize it? Marvin Ryder, associate professor of marketing at McMaster University, spoke to CBC News about the prospect.
“Although these models are being tried, it’s not at all clear to me that there is a shining example of something truly brilliant,” Ryder said.
Ian Lee, an associate professor at Carleton University in Ottawa, who wrote his doctoral thesis on the future of Canada Post, says it is difficult to compare Canada with European countries due to Canada’s high population density.
“This changes the economy… this changes everything,” he said. “And that’s why using European examples doesn’t work. It doesn’t work because they have phenomenal density.”
“(These) analogies are not legitimate because Europe’s cost structure is so radically different due to its density.”
Privatizing Canada Post is certainly feasible, but it raises questions, including who would want to buy it, Ryder says. The private sector has so far only shown interest in parcel delivery – not letters.
“So if you want to sell it completely, who wants to come in and do the other thing?”
