Australia Post says it is at a "crossroads" and it expects to report a full-year loss for the first time since 2015 as letters continue to decline.
The government-owned enterprise announced on Wednesday it made a profit before tax of just $23.6 million for the six months to December 31, down 88.2 per cent from the same time last year.
Australia Post said its letters losses soared 171.5 per cent to $189.7m for the first half.
Revenue was down 2.4 per cent to $4.69 billion, with letters revenue down 5.7 per cent to $881.9m, despite a number of one-off mailouts such as state election materials, cyber attack and interest rate notifications.
Parcel and services revenue dipped 1.6 per cent to $3.8b as e-commerce volumes moderated following the end of COVID-19 lockdowns.
A postage rate hike announced last month that raised the cost of mailing letters from $1.10 to $1.20 will only partially offset its losses from letters, the company warned.
"For more than a decade, Australia Post has been flagging concerns about the long-term viability of the business as it currently operates," group chief executive managing director Paul Graham said.
"During the COVID-19 lockdowns we benefited from a considerable boost to our parcels business, which has now abated and revealed the unsustainable nature of the status quo.
"We are at a crossroads and the headwinds facing our business have never been stronger.''
Letters were in an "unstoppable decline" because of digital communications, yet the cost of delivering them was rising thanks to the increasing number of delivery points, he said.
By the end of the decade, the average Australian household will receive less than one letter a week, Australia Post estimates.
Mr Graham said Australia Post was working to streamline its product portfolio as part of its Post26 strategy to make the business financially sustainable.
