Management’s Discussion and Analysis of Financial Condition and Results of Operations 

Revenue and Volume
On December 20, 2006, the President signed P.L.109-435. In accordance with that law, the categorization of our products has been updated to reflect the new Mailing Services and Shipping Services groupings. For example, First-Class Mail now also includes First-Class Mail International and is part of Mailing Services. Shipping Services include Express Mail and Priority Mail as well as certain services formerly included with international mail and package services. We have identified changes in categories in the discussion that follows.

2008 was an extremely difficult year for both the U.S. economy and the Postal Service. Declining mail volume is a symptom of the ailing economy. The hard-hit financial sector of the U.S. economy led decliners not just in the stock market, but in the mailing arena as well. Operating revenue for 2008 was $74,932 million, an increase of $154 million from last year, while volume of 202.7 billion pieces declined by 9.5 billion pieces, or 4.5%. The volume decline accelerated as we progressed through 2008, reaching a peak decline of 3.2 billion pieces in the fourth quarter.

Revenue for the first seven and a half months of 2008 was affected by the May 2007 price increase of 5.4%. The remainder of the year was affected by the May 2008 price increase of 2.9%. Although the volume decrease in 2008 was significant, the price increase held revenue flat compared to 2007.