Friday, 4 July 2008

Fuel Costs put marginal bus services under threat

Peter Shipp, the owner, Chairman and Chief Executive of EYMS, the main bus operator in East Yorkshire has called on the government to remove the requirement for bus operators to pay fuel duty - the current rebate does not cover all the duty charged on fuel. If not marginal routes are at risk along with more fare rises. From the EYMS press release:

“To restore the 9p shortfall would go some way towards helping
operators with the horrendous rises in fuel costs we are all suffering at the
moment and which risk more fare rises and service cuts. We have already
had to increase fares by about 5% in May, but we are now paying about £55,000
more for diesel each week than in January 2007, and at best the fares increase
can bring in only about one-third of that weekly amount.”

“We are also having to look very carefully at some marginal and
loss-making bus routes, and we shall be making an announcement shortly.
Such routes have in the past been supported by the profits we make on other
routes, but those profits are now being slashed and our ability to subsidise the
poor routes is greatly reduced.”

This blog agrees with Peter Shipp - the government want more people using public transport - scarpping the rebate will help to maintain services and therefore public transport passengers.

Stagecoach have also been forced to increase fares on the X62 Hull to Leeds service due to the rising fuel prices.

1 comment:

Anonymous said...

Two things to mention here:

1. The claim operators make about the cost of fuel "spiralling out of control" is a little rich since they negotiated their current-day fuel prices up to a year ago; therefore it is next year when the pinch will be felt.

2. There comes a point when the number of free concessionary travellers actually sees increased profit for the bus operator. Take the following as an example:

Service 1 leaves its terminus at 10am and pre-April 2008 carried 20 people: 4 of them fare-paying adults and 6 of them local concessions. The adults contribute a fare of £1.50 each (= total £6.00). The concessions, while travelling for free, cost ERYC £1.00 each, assuming a 66% reimbursement rate. Six of these = £6. Therefore £6 + £6 = £12 for the journey.

Now, with the free-for-all, boundary-less concessionary scheme in England, an increase in patronage is seen, albeit by those who travel for free; so let us say 20 people now travel on the same journey: say 6 adults (@ £1.50 each = £7.50) and 14 concessions (free though assuming a 66% reimbursement rate = £14). Now £7.50 + £14 = £21.50, i.e. significantly more than the £12 made prior to the April 2008 scheme.

Peter Shipp's EYMS company runs at a much reduced profit margin to the other, larger operators, primarily because his company has strong links with traditions: retaining small, costly depots that are smaller than other companys' outstations. Thus he has been most vociferous in the trade press as the *potential* is there for less revenue to be received as a result in the new scheme. What, say, if the free-for-all hadn't resulted in increased numbers and if fewer people used his services? He'd be able to absorb the costs a lot less than neighbouring operator Stagecoach; indeed it's no coincidence that EYMS announced its cut-backs first for this reason. However EYMS's 'beef' is mainly the cost of fuel with the concessionary scheme thrown in as well. You'll note Peter Shipp quotes the £55,000 increase in fuel but mentions nothing about the cost the concessionary scheme is having, primarily because there isn't one and stating that profits are up as a result of the scheme, in the same press release as the cutting back of services due to fuel costs, would not be well received.

One of the main culprits is EYRC and Hull City Council, both of whom were, as I understand it, leaving their reimbursement rate decisions to the latest possible point in time before informing operators what they were likely to receive, though local government bureaucracy is one thing we can all rely on as never changing!