For years, the massive delivery contract with Amazon.com has been one of the few bright spots in the financial reports of the US Postal Service (USPS). Now, as the agency seeks to address billions in persistent losses by opening its last-mile delivery services to more logistics providers, this move may cost it its biggest customer.

The USPS is facing an unprecedented financial crisis. With declining demand for letter mail, its losses continue to widen—reaching a staggering $9 billion in the 12 months ending September this year.

"Our cash flow situation is undoubtedly precarious. Barring any unforeseen circumstances, we will exhaust our cash reserves within 12 to 24 months," USPS Commissioner David Steiner recently admitted in an interview. He emphasized that cost-cutting measures alone cannot resolve the current financial turmoil.

The Amazon contract generates approximately $6 billion in annual revenue for USPS—a lifeline the agency can ill afford to lose. However, USPS has decided to open access to its distribution centers through a competitive bidding process for other logistics partners. Amazon has explicitly stated that this could lead to a significant reduction in its collaboration with USPS.

"We have been negotiating for nearly a year to renew this partnership, which began over three decades ago," said Amazon spokesperson Steve Kelly. "After prolonged discussions, we were surprised to learn that USPS intends to redefine the terms through public bidding. This shift introduces uncertainty and disrupts our delivery network. We are evaluating all options to ensure uninterrupted service for customers."

**Universal Service Obligation: Strength and Weakness** The very reason Amazon favors USPS—its universal service obligation—is also the root of the agency's financial woes. US law mandates that USPS must provide nationwide delivery at uniform rates, covering urban, rural, and remote areas, where costs are prohibitively high. For Amazon, outsourcing last-mile delivery to USPS often proves cost-effective.

Yet, even Amazon's critical contract cannot bridge USPS's funding gap. In its latest annual report, USPS warned: "Without additional funding, our liquidity will be insufficient to meet legal obligations, repay upcoming debts, or invest in critical infrastructure... Forcing these expenditures would severely jeopardize our core postal mission."

Elena Patel, a senior economic fellow at the Brookings Institution and postal finance expert, noted that while integrating more logistics providers into USPS's network could boost revenue operationally, the risk is substantial. If negotiations with smaller logistics firms alienate Amazon, the consequences would be dire.

"I don’t know the specifics of the negotiations, but losing Amazon would undoubtedly worsen USPS’s financial position," Patel said.

Previously buoyed by e-commerce growth, USPS's parcel volume has recently declined by nearly 6% in the past fiscal year—though it remains five times higher than two decades ago. Meanwhile, letter mail volume has plummeted.

Patel argues that Congress should continue funding USPS's universal service mandate—requiring $60 to $100 billion annually—as it aligns with national interests.

"USPS was founded to provide affordable delivery to every corner of America, subsidized by its exclusive letter-mail monopoly," Patel explained. "But in the digital era, letter-mail revenue no longer covers universal delivery costs. This model is broken."