An Post has told the Government that it faces significant losses this year and in 2004, despite reassurances it gave late last year that there was no need to develop a survival plan for the company.
It is understood the losses now being projected by accountants at An Post could be worse than the trading loss last year of €17.9 million.
Managers at An Post are now working on a fundamental review of the business, which will be presented within weeks to the Minister for Communications, Mr Ahern.
The losses are likely despite last Saturday's increase in the price of a stamp by seven cents to 48 cents.
Records released under the Freedom of Information Act reveal that the Government sought a survival plan for the company once it became clear that it was heading for a record loss last year.
The files show there was an intensive exchange of correspondence between the Government and An Post in the last year.
The head of Mr Ahern's Department asked the company whether it was on target to achieve specified savings last year and if not "what remedial steps are proposed".
Weeks later the then chief executive, Mr John Hynes, said in a confidential report to the Governnment last December that the company was operating within the parameters of its existing financial plan.
"We would argue that there is no case, at present, for the preparation of a survival plan for the business."
He was responding to a letter from Mr Ahern's Department which highlighted serious concern at the deterioration in An Post's financial position.
The Department said in its letter that "the outlook for the company looks bleak with the possibility of cash-flow difficulties by 2004 if not sooner" if An Post did not receive a price rise and deliver significant cost cuts.
But Mr Hynes defended the company's position.
"We recognise your legitimate concerns regarding An Post's ability to stay on track within our ongoing plan to restore An Post to profitability and are happy to provide you with additional information and regular briefings to give you comfort in this regard," he said.
While An Post said at the start of the year that it would make a profit of €1 million in 2003 under its old business plan, the projections of new losses have emerged in the latest review of the business from which a new business plan will be developed.
An Post is now led by the former ESB executive, Mr Dónal Curtin, who took over when Mr Hynes retired last July.
The implications of the review for the company's 10,000 employees are not yet clear, but An Post has already set aside €52.5 million to pay for the departure of 1,050 workers.
The release of many additional files held by Mr Ahern's Department is subject to consultation with An Post.
Records already released show that the company has told the Government that "items which will adversely affect our profit number for 2003" have emerged. The company is understood to attribute the latest deterioration in its business on a failure to reach revenue targets, due to the economic downturn, and on its failure to deliver cost-savings.
An Post had also wanted its regulator, ComReg, to grant the latest price increase some 18 months ago. The records show that An Post saw the introduction of roadside letterboxes as a crucial cost-saving measure.
ComReg's statement that customers could not be forced to take roadside boxes was "considered very unhelpful by An Post", one note said.
The company told the Government last May that projected savings of €3 million this year would not be achieved. The initiative is under review by ComReg.