Canada Post is a failing business. If it continues on its current trajectory, without bail-outs the business operation will lead to bankruptcy. However, repeated government bail-outs will only prolong the inevitable. A dim report from the Industrial Inquiry Commission makes it clear that drastic action is needed to rescue what can be rescued, transform what needs to be transformed, and shut down what needs to be shut down. Ultimately, Canada will likely end up in the same position as Denmark, where the country's postal service PostNord will end all letter deliveries at the end of 2025.

What is ailing Canada Post is structural change: letter mail is declining rapidly, and delivering letter mail is increasingly costly. As the chart below shows, in 2023 Canadian households received only half the volume of letter mail it received in 2014. This 50% decline is ruinous to Canada Post unless it can raise prices accordingly, or cut costs radically. But raising prices would only further weaken demand, and much of the cost structure does not scale down in proportion to demand. The death spiral is inevitable.

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With another postal service strike looming, Canadians will find mail even less reliable. Already, banks and utilities, government offices and businesses, rely on electronic communications for their communications. Federal and provincial governments are trying to transition to direct deposits for payments and phase out sending cheques by mail. Direct marketing mail is also declining as advertisement is shifting more on more to online places including social media. Letter mail is becoming increasingly irrelevant in our economy, while parcel deliveries continue to increase thanks to sprawling online retail businesses.

Canada Post has a letter mail monopoly and is in turn committed to delivering letter mail to all Canadians through its Universal Service Obligation (USO). As Canada's population is growing, the universe of addresses has further increased, adding to the strain of delivering fewer letters to more homes. This is clearly unsustainable. It would either require heroic subsidies or sky-high postage rates.

So what needs to be done about Canada Post? The parcel mail business is already a separate business unit—Purolator. It competes against others (e.g., UPS, FedEx, DHL, Intelcom) and effectively it should be spun off as a separate business. In turn, Purolator needs to be fully liberated to compete on its own against other companies on equal terms. Its market share dropped from 62% in 2019 to 29% in 2023, as competitors undercut its prices. Without transformation, even Purolator is doomed to fail. The remaining parts of Canada Post are letter mail and direct marketing mail, accounting for about one third and one-sixth of Canada Post's revenue. This business part needs to be transformed or shuttered.

The ICC report offers some recommendations about the immediate need for transformation. Amending the Postal Charter could free Canada Post from impossible-to-meet delivery standards. Community mailboxes should replace door-to-door delivery wherever possible. Canada Post needs to be able to hire more part-time workers to provide more flexible delivery solutions. These are all sensible recommendations, but they fail to fully take into account that the business model itself is weakening continuously.

Transformation of Canada Post's letter mail operation is only a stop-gap measure as letter mail will continue to decline due to electronic substitution. Canada Post can reduce service frequency from daily delivery to perhaps twice-a-week for some and once-a-week for the most costly locations. Canada Post would also need to raise postage rates, but here it is hamstrung by regulation that does not allow the company to charge rates that cover their cost. Canada Post executives should communicate clearly what postage rates ought to be to cover the full cost of service. Raising prices or cutting costs will stop the bleeding temporarily, but not permanently. Massive lay-offs are inevitable; Canada Post's workforce of more than 68,000 workers is unsustainable in size.

The radical solution is to change the 1985 Canada Post Corporation Act and terminate the USO. Denmark is simply ahead of the curve, as Danes have abandoned letter mail even faster than Canadians. Canada Post can simply not survive financially in its current form. The writing on the wall says that letter mail is doomed. Canadian politicians need to wake up to the harsh reality of the marketplace, and level with Canadians on the cost of mail delivery. The patient Canada Post cannot be kept alive on an infusion of federal cash indefinitely; painful surgery is needed. If Canada goes the way of Denmark, your mailbox may very well become a relic of the past.

Many Canadians would be unhappy to see Canada Post disappear, but nostalgia does not pay the bills. There is also concern about services for rural or remote communities. There are business solutions for a streamlined commercial service to such communities, but any mail services to sparsely-populated areas will always be more costly, and it is not immediately apparent that there is a social benefit to subsidizing such services. Even in a world without public mail service there will still be demand for some letter services—but such services will ultimately need to happen at full cost, supported by a viable business model. A competitive market for letter mail will emerge eventually, and customers paying the full cost of service will weigh carefully when sending a document physically will be needed, and when sending a document electronically is sufficient.

Beyond the immediate crisis about Canada Post, there are also questions about labour standards in the mail services industry, which includes courier and parcel companies. The reason why private companies have raced ahead of Canada Post's Purolator is their reliance on low-cost labour. Unionization rates outside Canada Post and Purolator (where employees are typically members of the Canadian Union of Postal Workers) appear to be low. Some DHL employees are represented by Unifor. While Canada Post's unionized workforce enjoys superior employment conditions compared to many companies in the private sector, there is an apparent need to improve working conditions throughout the private sector, especially for part-time workers. There is more to fix in the mail and parcel delivery industry than Canada Post alone.