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The solution to Canada Post’s financial woes and murky future, according to one observer, is just two words: sell.
“I’m not sure you can make any adjustments,” said Vincent Geloso, an assistant professor of economics at George Mason University in Fairfax, Va.
“The best thing you can do is make them not so bad. That’s basically it. There’s no way around it,” Geloso, who is also a senior fellow at the Fraser Institute, told CBC News.
“We’d better just sell it off.”
Canada Post’s recent labor disputes have again focused on the changes that may be needed to adapt to the future. Proposals included less frequent mail delivery, limiting delivery to home addresses and boosting its parcel mail 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, the question remains how the nation’s postal service can 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. In May, Canada Post said it could run out of operating funds in less than a year.
Still, taxpayers aren’t on the hook for his losses; Canada Post is financed by the sale of postal products and services. However, it has been losing money since 2018. Over the past six years, its losses have totaled $3 billion, including $748 million in 2023.
The corporation blamed the decline in revenue from letter and package delivery, despite an increase in package deliveries. Meanwhile, mail and package delivery costs are rising.
Canada Post is also struggling to compete with more private delivery companies.
Any other company — faced with such losses and falling demand — would be forced to innovate and cut costs or else be bought out or go bankrupt, Geloso said in recent article in The Globe and Mail magazine.
Because of its monopoly over most of the letter market, Canada Post “lacks that incentive,” he wrote, and can “simply shift the burden to consumers by raising prices.”
Instead, he says the federal government should look at how some European countries have adapted their postal services.
Abolish postal monopolies
For example, the European Commission, which is responsible for proposing and monitoring new EU laws and policies, he said in 2013 that the delivery of all letters, regardless of weight, was open to tender. (In Canada, only Canada Post can deliver letters.)
Such open competition would end monopolies and do more to control costs, Geloso says.
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 pressure, those national postal services have focused on controlling their costs, he says, the kind of focus that Canada Post will never have as long as it is a Crown corporation with a monopoly.
Geloso, however, does not mention Britain’s Royal Mail, which was privatized in 2013 and has struggled to adapt as the number of people 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 privatisation, Royal Mail has lost millions of dollars annually and was repeatedly fined by UK regulator Ofcom for failing to meet its delivery targets.
Those shortfalls are linked to the UK government requiring Royal Mail to deliver to more than 30 million UK facilities, six days a week, says Paul Simmonds, a former assistant professor at Warwick Business School.
“This request… has been around for a long time major and expensive a thorn in Royal Mail’s side,” Simmonds wrote for The Conversation website last year.
Marvin Ryder, an associate professor at McMaster University’s DeGroote School of Business in Hamilton, says privatizing the postal service brings legislation and an oversight body to ensure that “post office continues to fulfill your mission as a country.”
Regulation and the flow of orders from that group significantly affect profits, which means that these privatized post offices make little money, he said.
Publicly funded mail delivery systems have been privatized in other countries, including the UK and Germany. Although Canada Post is a Crown corporation, it is not funded by taxpayers and is expected to stay in business by selling its services, even though 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 outlook.
Although these models have been tried, it is not at all clear to me that there is one shining example of something that is really brilliant, Ryder said.
Ian Lee, associate professor at Carleton University in Ottawa, who wrote his doctoral thesis on the future of Canada Post, says that it is difficult to compare Canada with European countries because of the high population density of the latter.
“It changes the economy … it changes everything,” he said. “And that’s why using European examples doesn’t work. It doesn’t work because they have phenomenal densities.”
“(Those) analogies are not legitimate because the cost structure of Europe is so radically different because of their 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 delivering packages – not letters.
“So if you want to sell it with no problem, who wants to come in and do the other thing?”
