Australia Post CEO Ahmed Fahour said the organisation is trying to avoid the fate of photography company Kodak by offering services such as digital mailboxes, parcel delivery and two-speed letter deliveries.
Speaking at the Committee for the Economic Development of Australia (CEDA) State of the Nation conference in Canberra, Fahour told delegates that its letter business is expected to lose $300 million in 2014.
"Beyond that, we are projecting an annual loss of $1 billion per annum. That is a hole that is far too big to be filled by profitability from our parcels business.
"Without reform, we will need to fund the losses in our letters service through asset sales. We don't want to be the next Kodak," he said.
According to Fahour, it has had an 8-10 per cent growth in parcels volumes over the past few years, all driven by online shopping.
"Our profit in the non-regulated parcels business has doubled over the past three years. We have invested $600 million to expand the capacity of our parcel service so we can deliver more efficiently for Australian businesses," he said.
However, he said that without reforms now it will no longer be able to continue the "social role" that 'posties' and post offices have played for more than 200 years in Australia.
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"We have not received $1 of tax payer subsidies in the past 25 years. In the past four years we have been able to fund the $600 million of letter losses from our own earnings," Fahour said.
In 2013, Fahour announced that Australia Post's traditional mail business would lose $200 million as one of Australia's most recognised brands adjusted to the online world.
"Our projections show that with letter volume declines now accelerating to between 8 and 11 per cent per annum, our letter services, under current momentum, will lose $350 million this year and could grow to over $1 billion annually in losses," he said at the time.
To help Australia Post stay afloat, Fahour said there are plans to grow the retail trusted services and StarTrack parcel business.
This plan also involves what he called "multi-speed delivery" of letters. For example, Fahour discussed the idea of three-day week postal services or a five-day "fast track" service.
"We have already introduced this offering for business and government customers who are responsible for sending 95 per cent of our mail. Our multi-speed offering was introduced for those clients on June 2, 2014," he said.
Fahour added that it now wants to "offer all Australians" a choice of letter service with different delivery speeds and that the services should be "priced to recoup the cost of delivering them".
In May 2014, Australia Post announced that its digital mailbox service left beta testing and had been formally released.
The digital mail service, intended to be a more secure version of email for bills and other important documents, went into public beta in 2013.
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