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Holiday e-commerce deals may deliver surge in U.S. Postal Service revenue

By Elvina Nawaguna

WASHINGTON (Reuters) - The U.S. Postal Service, bleeding millions of dollars daily, is hoping the 2013 holiday season will boost its finances through a partnership with Amazon.com, a surge in online shopping and the timely release of a new stamp featuring a whimsical Yule gingerbread house.

The holiday shopping and card- and gift-sending season usually is a busy time for the USPS, which expects a 12 percent jump in package volumes to 420 million this year from last year's holiday season, it said.

The service is struggling financially as mail volumes tumble because more Americans now communicate and pay bills online, and as massive payments into its future retirees' healthcare fund mandated by Congress take a toll.

Yet the potentially lucrative deal with online shopping giant Amazon to deliver packages on Sundays positions USPS to compete more favorably in the $186-billion annual e-commerce market. Retail sites must use ground delivery services to get purchases to their destination.

Parcel delivery is "the part of the business that the Postal Service needs to rely on to become sustainable," said Rick Geddes of Cornell University who has written about USPS.

The National Retail Federation expects holiday online sales in November and December to increase by about 15 percent from those months last year, to approximately $82 billion.

Amazon's arrangement with USPS applies only to deliveries in select large cities including San Francisco and New York, which will help it in those cities versus its main competitors, FedEx Corp and United Parcel Service Inc, that offer no Sunday delivery.

USPS has focused on package delivery as a key growth area. In its third quarter that ended June 30, revenue from deliveries grew 22.6 percent from the previous year.

While this holiday's e-commerce alone is unlikely to significantly improve USPS's long-term finances, partnerships with companies like Amazon and an arrangement to sell its services out of Staples Inc stores will make it more competitive, said Geddes.

The agency also expects to lure more customers with new free package insurance and free tracking on priority mail, features it introduced in August, and hopes the gingerbread house stamp will encourage more people to send greeting cards.

The carrier lost nearly $16 billion last year and is seeking legislative relief to allow it to manage its own healthcare system and to find more innovative revenue sources.

Without legislative flexibility to run its own affairs, innovate and raise revenue, Postmaster General Patrick Donahoe has said the agency could require a taxpayer bailout of nearly $50 billion by 2017.

A Postal Service spokeswoman said details about revenue and package volume expectations from the Amazon partnership are confidential.

(Reporting by Elvina Nawaguna; Editing by Marilyn W. Thompson and Philip Barbara)

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