Under the Canada Post Corporation Act, the corporation is allowed to request financial assistance from the Minister of Finance.Amir Salehi/The Globe and Mail
Canada Post is in discussions with the federal government about its increasingly precarious financial situation, and is seeking help from Ottawa to resolve a liquidity issue that could affect its operations.
In a public filing on Tuesday, Canada Post said it expects to deplete its cash reserves in the first half of 2025, and is “working with the federal government to explore available options” that would help “mitigate liquidity pressures.” The Crown corporation’s cash position has eroded significantly over the past five years because of losses from its dwindling letter-mail operations, coupled with high labour costs – specifically large employee pension contributions.
The filing was made to the federal Industrial Inquiry Commission, which was established in December to manage a long-standing labour dispute between Canada Post and the Canadian Union of Postal Workers.
A point of concern for the corporation is the maturing of $500-million in bonds that were issued in 2010 and have to be repaid to bondholders in July, 2025.
Under the Canada Post Corporation Act – which sets out the mandate of the national postal service – the corporation is allowed to request financial assistance from the Minister of Finance. While Canada Post is a Crown corporation, it is not taxpayer-funded and has an operational mandate to be self-financing.
Canada Post did not respond to a query from The Globe and Mail about the details of its discussions with Ottawa, nor did Public Services and Procurement Canada, the ministry that oversees the postal service.
Canada Post and the Canadian Union of Postal Workers have been in heated negotiations over a new collective agreement since November, 2023. More than 55,000 postal workers went on strike late last year, but were ordered back to work by Ottawa in December after the work stoppage lasted a month.
The strike highlighted the concerns of postal workers over the changing structure of their work force, including a disproportionate growth in the number of temporary workers. Canada Post has been pushing the union to agree to the hiring of a greater number of part-time employees who work flexible hours – as opposed to full-time employees – arguing that high labour costs are inhibiting the corporation’s ability to compete with private mail carriers.
In December, Labour Minister Steve MacKinnon directed the Canada Industrial Relations Board to extend the existing collective bargaining agreement until May, 2025, to give both sides more time to iron out issues around work force structure, which Canada Post has portrayed as existential to its long-term viability as a national postal service. The Labour Ministry established an industrial inquiry commission headed by independent mediator and arbitrator William Kaplan to examine the business model of Canada Post and the structural issues that have prevented a resolution of the labour dispute.
The commission’s first set of hearings will start on Jan. 27. Before then, Canada Post and CUPW filed submissions to Mr. Kaplan that outlined their respective bargaining positions. Canada Post’s request that the federal government help with its eroding cash situation was included in its submission package.
According to financial projections laid out in its submissions, Canada Post anticipates that its losses will grow from $900-million in 2025 to $1.7-billion in 2029. The corporation has said that it has lost $3-billion between 2018 and 2023.
Canada Post says it is losing money because it has to fulfill its service obligation as a national postal carrier to deliver mail to all homes across the country (more than 17 million addresses), even as letter mail per address continues to dwindle in number.
Its parcel delivery business – the biggest source of revenue for the company – is gradually losing market share to private competitors such as DHL, UPS and Amazon because Canada Post rarely delivers packages on weekends.
The corporation says its competitors’ low-cost business model that relies on contract delivery workers is why it will not be able to remain competitive in the long run. In its submission to Mr. Kaplan, Canada Post called the existing collective agreement with CUPW “rigid” because it had to pay employees overtime for weekend delivery.
But CUPW has long argued that Canada Post is vastly exaggerating its financial plight.
In its own submissions to the Industrial Inquiry Commission, the union said that Canada Post’s annual reported financial losses need to be closely scrutinized with the assistance of an independent financial auditor. According to the union, Canada Post has previously made “self-serving but inaccurate financial projections,” even misrepresenting its financial results.
Specifically, the union cites the example of Canada Post’s reported $3-billion loss between 2018 and 2023. Part of that loss, according to the union, was to settle violations to pay-equity rules to the tune of hundreds of millions of dollars. The union said that Canada Post itself has admitted that it would have been profitable in 2018, had it not made a $280-million retroactive pay-equity payment that year to cover violations dating back to 2016.
The union also noted that Canada Post’s non-capital investments and administrative expenses ballooned by $444-million between 2017 and 2023, with the corporation providing no detailed explanation as to why these expenses increased so dramatically.
The union has suggested that Canada Post raise its postage rates to bring in more revenue, pointing out that Canada has one of the lowest postage rates among countries with national postal services.
“During the past six years, Canada Post has frequently cited its financial losses in the context of obtaining concessions from its employees. What it has not done is explain why, in the face of mounting financial losses, it has not acted to raise postage rates as the vast majority of postal services have done,” CUPW said in its submission.