Royal Mail figures published

Royal Mail posted an increase in profitability for the first half of the year up to September 2009. The Postal Company said that its modernisation programme is a key reason why postal workers staged national strikes in October however it helped boost operating profit by £7m to £184m in the six-month period.

Various modernisation techniques were introduced including a walk-sequencing machine which involves a device which organises letters into the order the postmen and women will deliver them the next morning. Adam Crozier, the chief executive of Royal Mail, said the profits and improved delivery figures on record in the spring proved modernisation of the letters business was working.

The figures reported although they show an increase in profitability it also shows a decline in mail volumes . Mail volumes fell about 8 per cent in the period. This decrease resulted in an increase in rivals' volumes such as TNT Post UK and UK Mail are gaining share. To date, one in three letters is handled by rival companies, Royal Mail admitted.

The figures reported here do not include the effect of October's industrial action by 121,000 staff. This could mean that Royal Mail might lose more share to competing companies. Let's wait and see what the next results will report.

Failing to Act is Acting to fail

It is interesting and at the same time a pity to read how a company can drive away huge clients and lose money without taking immediate action to tap the source of the problem. I'm speaking about Royal Mail and the strikes which have been on and off since last July. This left a sizable dent on the image of Royal Mail, a reliable postal partner, as well as its bottom line.

Two huge companies, Amazon.co.uk and ebay.co.uk have take action to avoid being caught in the issue both directly and indirectly. Whereas Amazon has decided to act directly (given that it contract the postal provider itself) ebay is using lobbying to try to diminish the impact that such strikes are having on sellers depending on Royal Mail.

It was announced that Amazon is searching an alternative mail partner that will ensure as minimal disruption as possible to its services in the run up to the Christmas period, which is seen as vital after the recession. This could lead to Royal Mail losing a contract of a reported value of about £25 million (Amazon is the second largest client of Royal Mail). Apart from this, one needs to consider the extensive damage that these strikes are having on the brand of Royal Mail. While companies are starting to look at alternatives (which will give a boost to competition), many customers are trying to avoid Royal Mail as it is slow and inefficient.

In my opinion, although the company should not give in to any request made by Unions (who sometimes use strike measures as a threatening tool), it must sit around a table with the representative of its employees and Unions and try to find a solutions as quickly as possible. The sooner this is done the less the harm Royal Mail will suffer...Should it decide to wait and see it might face a higher damage then if it gave in to union request.

P.S. This will be my last article for the next two weeks as I won't be having access to Internet...will see you soon.