(Adds details on financial results, USPS financial struggles, and deal with Amazon.com)
WASHINGTON, Nov 15 (Reuters) - The U.S. Postal Service (USPS) said on Friday its 2013 fiscal-year loss narrowed to $5 billion from nearly $16 billion in the prior year.
The Postal Service said it benefited from growth in its shipping and packages business as well as aggressive cost-cutting that included a drastic reduction in employee hours.
Package services have remained a promising business as more people shop online and need carriers to deliver the goods. Package volumes grew by 210 million pieces this year.
Earlier this week the Postal Service announced a potentially lucrative partnership with online retail giant Amazon.com Inc to deliver packages on Sundays in some large cities including New York and San Francisco.
The USPS also said that for the first time since 2008 operating revenues rose, to $66 billion from $65.2 billion last year.
Still, this was the seventh consecutive year of overall USPS losses as first-class mail volumes continued to tumble, with more Americans communicating and paying bills electronically.
First-class mail, or stamped mail, its most profitable product, fell by 2.8 billion pieces in 2013.
The USPS is also struggling to make massive payments into its future retirees' healthcare fund, which was mandated by Congress in 2006.
The USPS has continued to seek legislative relief from the healthcare prefunding mandate and for flexibility to innovate and find other ways to raise revenues, but so far legislative action has remained elusive.
With few days left on the U.S. Congressional calendar, it was unlikely any bills addressing USPS issues will pass by year's end.
"We've achieved some excellent results for the year in terms of innovations, revenue gains and cost reductions, but without major legislative changes we cannot overcome the limitations of our inflexible business model," Postmaster General Patrick Donahoe said in a statement.
(Reporting by Elvina Nawaguna; Editing by Karey Van Hall, Lisa Von Ahn and Jeffrey Benkoe)