The solution to Canada Post’s financial woes and murky future, according to one observer, is just two words: Sell it.
“I’m not sure you can do any tweaks,” said Vincent Geloso, an assistant professor of economics at George Mason University in Fairfax, Va.
“The best you can do is make them suck not as bad. That’s essentially it. There’s no way around that,” Geloso, who is also a senior fellow at the Fraser Institute, told CBC News.
“It’s better if we just go down the route of selling it off.”
Canada Post’s recent labour strife has renewed focus on what changes might have to be made to adapt to the future. Suggestions have included less frequent mail delivery, limiting home delivery and beefing up its parcel mail business.
But some argue more drastic action is needed, such as selling off or privatizing the Crown corporation.
As postal workers return to work on Tuesday morning, questions remain about how the national mail service can adapt to the changing needs of Canadians.
Even before the month-long strike by more than 55,000 postal workers, the national mail service had been under the spotlight for its grim financial situation. Back in May, Canada Post said it could run out of operating funds in less than a year.
Yet taxpayers are not on the hook for its losses; Canada Post is funded by the sale of postal products and services. Still, it has been losing money since 2018. In the last six years, its losses have totalled $3 billion, including $748 million in 2023.
The corporation has blamed this on declining revenue from delivery of letters and parcels, despite an increase in the volume of package deliveries. Meanwhile, the cost of delivering mail and parcels is increasing.
Canada Post has also struggled to compete with more privately owned delivery companies.
Any other company — facing such losses and declining demand — would be forced to innovate and reduce costs, or would otherwise be bought out or go bankrupt, Geloso said in a recent article in The Globe and Mail.
Because of its monopoly over most of the letter market, Canada Post “lacks this incentive,” he wrote, and can “simply pass the burden onto consumers by raising prices.”
Instead, he says that the federal government should look to how some European countries have adapted their postal services.
End postal monopolies
For example, the European Commission, which is responsible for proposing and monitoring new EU laws and policies, said in 2013 that the delivery of all letters, regardless of weight, was open to competition. (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 lead of Belgium, the Netherlands and Germany which have privatized their postal operations.
Because of the pressures of competition, those national postal services have focused on controlling their costs, he says, the sort of focus “Canada Post will never have as long as it’s a Crown corporation with a monopoly.”
Geloso, however, doesn’t mention the U.K.’s Royal Mail, which was privatized in 2013 and has struggled to adapt as the number of people using it continues to decline steeply. (Earlier this week, the U.K. government approved the sale of Royal Mail’s parent company to a Czech billionaire.)
Despite privatization, the Royal Mail has lost millions of dollars annually and been repeatedly fined by U.K. regulator Ofcom for failing to achieve its delivery targets.
Those shortfalls are related to the British government requiring Royal Mail to deliver to over 30 million U.K. premises, six days a week, says Paul Simmonds, former assistant professor at the Warwick Business School,
“This requirement… has long been a major and expensive thorn in Royal Mail’s side,” Simmonds wrote last year for The Conversation website.
Marvin Ryder, an associate professor at the DeGroote School of Business at McMaster University in Hamilton, says privatization of a postal service brings legislation and an oversight group to make sure “your mission as a country is still being accomplished by the post office.”
The regulations and stream of orders from that group have a significant effect on profit, meaning these privatized postal services make little money, he said.
Publicly funded mail delivery systems have been privatized in other countries, including the U.K. and Germany. While Canada Post is a Crown corporation, it is not funded by taxpayers and is expected to stay in business through the sale of its services, although it is required by law to deliver to all Canadian addresses. But is it time to privatize it? Marvin Ryder, an associate professor of marketing at McMaster University, spoke to CBC News about the prospect.
“Even though these models are tried, it’s not clear to me at all that there’s one shining example of something that’s really brilliant,” Ryder said.
Ian Lee, an associate professor at Carleton University in Ottawa, who wrote his PhD thesis on the future of Canada Post, says it’s difficult to compare Canada with European countries because of the latters’ high population density.
“That changes the economics… that changes everything,” he said. “And that’s why using European examples doesn’t work. It doesn’t work because they’ve got phenomenal densities.”
“[Those] analogies aren’t legitimate because the cost structure of Europe is so radically different because of their densities.”
Privatization of 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 lock, stock and barrel, who wants to come in and do the other?”
