Still, year-to-date, the Postal Service had losses totaling $3.9 billion, and the agency said that without help from Congress its financial woes will worsen.
The report for the financial quarter ending June 30 comes as Congress considers proposals to fix the agency's finances. The agency lost $16 billion last year and is trying to restructuring its retail, delivery and mail-processing operations.
Over the first nine months of its fiscal year, the Postal Service said 104 mail processing facilities were consolidated, career employee work hours were reduced by about 41 million and operating hours at 7,397 post offices were reduced.
The service wants to end most Saturday and door-to-door mail delivery. It also is seeking to reduce its congressionally mandated $5.6 billion annual payment for future retiree health benefits. The agency says ending Saturday mail delivery would save $2 billion each year.
Joe Corbett, the agency's chief financial officer, said in a statement that "without comprehensive postal reform legislation signed into law, our hands are tied and we expect multibillion dollar annual losses to continue."
The third-quarter loss was far less than its $5.2 billion loss for the same period last year. Postal officials said its cost-cutting and efficiency moves helped lower losses, along with a $918 million decrease to its workers' compensation expenses due to interest rates.
Shipping and package revenue continued to be a bright spot for the agency, increasing 8.8 percent compared to the same period last year. That helped operating revenue rise 3.6 percent to $16.2 billion in the third quarter, compared to last year's third quarter.
First-class mail revenue, the Postal Service's most profitable category, declined by 0.9 percent compared to the same period last year. Total mail volume was 37.9 billion pieces, down from 38.3 billion pieces for the third quarter last year.
The Postal Service for years has been wrestling with declining mail volume and a 2006 congressional requirement that it make advance payments to cover expected health care costs for future retirees for 75 years in advance, something no federal agency does. The agency expects to miss a $5.6 billion health care payment next month at the end of its fiscal year. It defaulted on two similar payments last year.
The pre-funding requirement for future retiree health benefits accounts for the brunt of the agency's red ink and underscores the urgency for Congress to end the mandate, postal officials say. About $11.1 billion of last year's $16 billion agency losses were due to the annual health care payments.
Earlier this year, the agency backpedaled on its plan to end Saturday mail delivery after running into opposition in Congress.
The National Association of Letter Carriers says ending Saturday delivery would hurt small businesses along with rural residents and the elderly, who depend more heavily on the mail for prescription drugs and other goods.
Postal officials also want permission to ship beer, wine and spirits to compete with private shippers such as FedEx, saying it could bring in as much as $50 million a year. The service also favors gradually ending most door-to-door deliveries in favor of curbside and cluster box service to save money.
Congress is beginning to tackle two plans to help the Postal Service.
A Senate bipartisan proposal would let the agency end Saturday delivery in a year and make changes in how pensions and retiree health care costs are calculated in an attempt to stabilize the agency's finances.
It also would impose a two-year moratorium on closing mail processing plants. The agency also would be allowed to ship alcohol. Hearings on the bill are expected after Congress returns from its summer break next month.
The House Oversight and Government Reform Committee recently approved a bill to end Saturday delivery and to change how pension and retiree health costs are calculated to curb the agency's losses. The GOP measure did not win any Democratic votes. The bill also directs the agency to gradually shift from door-to-door delivery to cluster box and curbside delivery as a cost-cutting move over the next decade, something which many House Democrats oppose.
The Postal Service is an independent agency that receives no tax dollars for its day-to-day operations but is subject to congressional control.