Letter posting by Australians is in "terminal and structural decline", Australia Post chief executive Ahmed Fahour said after the postal group delivered its first annual loss in more than 30 years.
"We are a parcels company more than a letters company," Mr Fahour said, as a 10.3 per cent drop in the posting of ordinary stamped letters in 2014-15 pushed Australia Post into a $222 million after-tax loss compared with a $116 million profit a year earlier.
Mr Fahour said it was "alarming" to see the rate of decline in ordinary letters rise to 10.3 per cent from 5.7 per cent a year earlier, and that losses in its mail business were so big they had overwhelmed profits from the postal group's parcels and retail businesses. 
"This year the losses in mail were so large that even the very powerful and strong commercial businesses of Australia Post could not offset those losses," he said. 
The mail business reported a loss of $381 million.
Volumes of addressed letters have fallen 36 per cent in the past seven years and, for the first time in 206 years, Australia Post's parcels business contributed more than half of its total revenues of $6.37 billion.
But the Communication Workers' Union (CWU) accused Mr Fahour of "walking away from mail" and said the financial figures were not as bad as they appeared.
The $222 million net loss includes provisions of $190 million to pay for the retraining and redeployment of employees working in the postal group's letters operations as it restructures its letters services, and for possible redundancies. 
Mr Fahour was "loading up the balance sheet" to try to get approval from the competition watchdog for an increase in the price of stamps, said Martin O'Nea, spokesperson for the Victorian branch of the CWU.
Australia Post received regulatory approval from the government on Thursday to introduce two speeds of letters services, regular and priority.
The group wants to raise the basic postage rate to $1 from 70&cent; for consumers in   January but first needs to secure the approval of the Australian Competition and Consumer Commission (ACCC). Concession-card holders will still be able to buy stamps at 60&cent;.
Price increases on other categories of mail had hurt mail volumes, Mr O'Nea claimed.
"The ACCC should take a measured and conservative approach and maybe introduce staggered price increase over a three-to-five-year period," he said.
Mr Fahour said the price increases were necessary to stem Australia Post's financial losses and that the group's "greatest opportunity" was in parcels due to continued growth in online shopping and the falling Australian dollar.
Parcel exports to Asia have been rising as Asian consumers buy more Australian goods.
Revenues from parcels rose 3.6 per cent to $3.21 billion in 2014-15.
But Mr Fahour warned that competition was "intensifying" in the parcel deliveries sector as more international companies, such as Japan Post, entered the local market.
Japan Post acquired logistics group Toll Holdings, which delivers express letters and packages, this year.
Australia Post will provide more details on its financial results in its annual report, which will be released in mid-  October.
It will not pay a dividend to the federal government this year. It paid a $79 million dividend to the government in 2013-14.
Australia Post will soon launch a new marketing campaign promoting the message that it "loves delivering".