The U.S. Postal Service (USPS) recorded a net loss of $5.1 billion for its fiscal 2011 year, which follows an $8.5 billion net loss for its fiscal 2010 year – red ink largely the result of Congressionally-mandated payments to pre-fund retiree benefits.

In fact, USPS noted 2011 losses would have topped $10.6 billion had it not been for passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.

However, that retiree health benefit pre-funding payment is now due by Nov. 18 and unless additional legislation is enacted, the Postal Service will be forced to default on this payment, noted Patrick Donahoe, postmaster general & CEO, in a statement.

USPS added that operating revenue dropped to $65.7 billion in fiscal 2011 compared to $67.1 billion in fiscal 2010, alongside a drop in operating expenses to $70.6 billion compared to $75.4 in fiscal 2010.

That drop in expenses is due in part to a reduction in work hours by 34 million despite an increase of 636,500 delivery points, noted USPS, which pointed out that since 2001, it’s reduced work hours by 28%, while delivering to almost 14 million additional addresses.

Donahoe also pointed out that first-class mail volume – the USPS’s largest and most profitable part of its operation, representing 49% of its overall revenue – continues to decline, significantly reducing the agency’s revenues despite increased demands for its other shipment services.

Total 2011 mail volume declined by 3 billion pieces, or 1.7%, with first-class mail continuing its year-over-year decline from $34.2 billion in 2010 to $32.2 billion in 2011 (a 5.8% drop).

“The continuing and inevitable electronic migration of first-class mail underscores the need to streamline our infrastructure and make changes to our business model,” said Joe Corbett, USPS CFO, in a statement. “Since peaking at 213 billion pieces in 2006, our volume has continued to decline each year.”

By contrast, USPS shipping services revenue, which includes priority mail and express mail, increased $530 million in 2011 or by some 6.3%. Revenues from standard mail service increased by $495 million or 2.9% as volumes increased by 2 billion pieces (a 2.6% gain).

“The Postal Service can become profitable again if Congress passes comprehensive legislation to provide us with a more flexible business model so we can respond better to a changing marketplace,” Donahoe noted.

“To return to profitability we must reduce our annual costs by $20 billion by the end of 2015,” he said. “We continue to take aggressive cost-cutting actions in areas under our control and urgently need Congress to do its part to get us the rest of the way there.”