2009-10 Annual Report - Australia Post

CORE BUSINESSES
LETTERS &
ASSOCIATED SERVICES
For the fi rst two centuries of Australia Post’s operations, letters were the primary focus and profi t-maker, but
in recent times this scenario has changed. Volumes are now declining in the face of cheaper, faster electronic
alternatives, while delivery costs are rising as the nation’s population expands. Australia Post is striving to
ensure that it continues to deliver a reliable, affordable letters service for all Australians into the future despite
the prevailing challenges. We are reducing costs by working more effi ciently, and maintaining revenues by
promoting the intrinsic value of mail as an effective communications option.
HIGHLIGHTS OF 2009–10
We continued to operate one of the world’s most reliable
and affordable letter services.
We delivered 96.1 per cent of domestic letters on time
or early.
We delivered 97.9 per cent of bulk mail on time or early.
Defying market conditions, revenue for our innovative
letters businesses, eLetter Solutions and Decipha, rose
by 18.4 and 0.8 per cent respectively.
Our place in the market
Australia Post handles three key categories of mail:
• transactional mail (transactions between businesses and their
customers, such as bills, invoices, accounts and statements)
• promotional mail (brochures, catalogues and other
marketing communications)
• social mail (greeting cards, postcards and personal letters).
Mail has long had to compete with other forms of communication, from
the telegraph in the nineteenth century to electronic alternatives, such
as email, in the twenty-fi rst. While mail is no longer the dominant means
of communication that it once was, it remains an effective and reliable
communication channel with unique physical qualities appreciated by
senders and receivers alike. Australia Post is continuing to work in
partnership with the mail industry to develop, support and promote
solutions that add to the value and effectiveness of the mail channel.
Letter volumes and revenue
During 2009–10, the subdued global economy not only reduced
business activity generally but also accelerated customer migration
to an increasing number of cheaper and faster electronic alternatives.
Hence, the downturn in mail volumes across all categories continued
during the year, including a fall of 5.5 per cent for addressed domestic
letters and a fall of 3.4 per cent in overall revenue for the letters &
associated services portfolio.
Basic postage rate increase
While letter volumes are declining, costs continue to rise as the number
of addresses to which Australia Post must deliver expands rapidly –
in 2009–10 more than 100,000 addresses were added across
the nation. Although every effort is being made to reduce costs while
maintaining our service levels, it has been necessary to raise the
basic postage rate (BPR) to help balance the equation.
In July 2009, the Australian Competition and Consumer Commission
(ACCC) opposed Australia Post’s draft notifi cation proposing an increase
of fi ve cents to the BPR, from 55 to 60 cents. A revised application
provided further clarifi cation on the changing marketplace for letters and
Australia Post‘s concerted efforts to improve productivity. In May 2010,
the ACCC announced that it had no objection, and the BPR was raised
to 60 cents in June 2010.
Even with this price rise, Australia Post will not profi t from its reserved
letter service, as the cost of providing the service exceeds the revenue
we earn from it. For example, sending a letter from Brisbane to Perth
costs around 70 cents (which is what a stamp would cost had the BPR
risen in line with infl ation over the past two decades). While Australia
Post is reluctant to increase the price of stamps, price increases are
occasionally necessary to make a reliable, uniform postal service
available to the entire community. Despite the price increase,
Australians still enjoy the third-lowest BPR among OECD countries.
Delivery performance and community service
Australia Post’s letters business is unique in being partially protected.
Under the Australian Postal Corporation Act 1989 (Cwlth), letters that
weigh 250 grams or less, or that cost less than four times the basic
postage rate, are reserved to Australia Post. In return for this protected
service, we are required to meet a series of community service
obligations (CSOs), all of which we met or exceeded in 2009–10.
(See page 98 for a complete description of our obligations and
how we performed against them.)
One of the key CSOs we must meet is 94 per cent on-time delivery
for non-bulk letters. Once again, we exceeded this target, delivering
96.1 per cent on time or early. Almost all of the remaining 3.9 per cent
of letters were delivered the following day. We also monitor our delivery
of bulk-lodged business mail, 97.9 per cent of which was delivered on
time during 2009–10.
Our delivery performance fi gures are independently monitored and
audited. Global monitoring company Research International assesses
our performance and audit fi rm Deloitte Touche Tohmatsu independently
certifi es the results.
Bulk mail services
Australia Post’s bulk mail services include Unaddressed Mail, PreSort
Letters, and Print Post. Our major mail customers continue to value the
convenience and cost savings of sending promotional and transactional
mail in bulk, though volumes are declining in line with the letter service
overall. Bulk mail currently comprises 51.7 per cent of our domestic
letter volumes.
AUSTRALIA POST ANNUAL REPORT 2009–10 | REPORT OF OPERATIONS 15