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What Basis for Long-distance Coach Fares?
Page 98
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The Three Systems of Assessing Charges; kci. Per Mile a Suitable Figure to Show a Reasonable Profit With a Petrol-engined Vehicle
By S. T. R.
IOBSERVE that the East Midland Traffic Commissioners have stated that they find it difficult. to discover any basis of agreement amongst operators for the fixing of fares for longdistance services. Each operator, they observe, seems to have his own ideas on the subject. A question was asked as to whether fares for express services could not he arranged on the basis of id. per mile It was suggested that there appeared to be grounds for suspicion that undercutting alone was the measure by which fares were fixed, aS, in many cases, these were from 6d. to Is. below the rail rates.
it seems that there should be no difficulty in reaching eome agreement concerning fares for long-distance work, at least as regards services that are regularly operated throughout the year. The coaches used are practically all of the same size. Given reasonable care and proper, but not extravagant, expenditure on maintenance, the costs of operation should be practically the same, if I except the difference between petrol-engined and • oil-engined vehicles (to that aspect I • shalt refer later).
There are three sets of conditions which govern the calculation of fares. The first is that which takes into consideration only costs of operation, plus gross profits. In the second method, fares are fixed on the basis of what the service will fetch, An Irrational Basis.
Thirdly, there is the influence of competition to be considered and the practice of fixing fares, not according to any rational basis, but Merely so as to undercut a competitor.
All three are more or less legitimate methods of proceeding, although the third is likely to lead to disaster if not used with a considerable amount of discretion. Even the second is dangerous if, in order to attract custom, fares be set so low as to be unremanerative. The only safeguard against loss in either of the above circumstances is for the operator to have precise and accurate data on which he can reckon his fares.
One penny per mile has been suggested. At any rate, it was stated that if Id. per mile was agreed as a basis, the railway companies would withdraw their objections to many proposals for long-distance services. This method of assessing fares is merely a a40 peculiar foim of that indicated in No. 3. The railway companies have cut their fares as a means for competi tion with the road. .Now, in order further to enhance their own prospects of success, they magnanimously agree not to place any artificial obstacle in the way of their road-transport competitors, provided that the latter, for their part, will agree not to attempt to compete on a basis of fares.
This, to me, appears to raise only one point: Is Id, .per mile a fair rate for long-distance coich operation? It seems to me that, in the case of services (such as the ones we are considering) which must he operated throughout the year, taking the good seasons with the had, id. per mile is about the minimum that will show. a reasonable net profit for a year.
An Average of 2,000 Miles a Week.
It is fair to take an average mileage of 2,000 per week for vehicles engaged on this class of work. That figure provides for one journey in each direction daily in connection with a series of medium to long-distance routes from 100 to 290 miles between terminals, Some vehicles will cover a greater distance and some a smaller, but I think 2,000 a fair average.
For the operating cost of the vehicle itself, exclusive of any administrative or other expenditure, the figure which is given in The Commercial Motor Tables of Operating Costs, namely, 8.28d. per mile (I am referring to petrol-engined coaches) will serve as the basis for calculation, (This comprises 6.09d. per mile for running costs and 4.387d. for standing charges per 2,000 miles.) In calculating the administrative and other expenses we are admittedly on less safe ground.
One item of considerable importance is sometimes overlooked, and that is the necessity of providing a spare coach. This, under present-day operating conditions, is necessary at least in the proportion of one spare vehicle to 10. (The proportion may, perhaps, be less in a large fleet. in which it is possible to ,swing vehicles over from service to service, according to conditions.) This involves an expenditure approximating to £500 per annum, com
prising £57 12s. for taxation, £300 for obsolescence (as distinct from depreciation, which takes the place of obsolescence when a vehicle is regu
laxly used), 160 for garaging and sundries, and 420 per annum for the insurance of the vehicle, apart from passenger risks. Those items are equivalent to an annual debit against each of the 10 vehicles actually in Ser vice of £50. • Establishment costs, including directors' lees, manager's salary,
clerical and other wages, office rent, uniforms bunchy licences and insurances, will total £2,000 per annum. In an establishment operating 20 vehicles. in all, that sum is equivalent to LIN per annum per vehicle.
In addition, there are the sundry expenses involved in operating long-clistante coaches, such as the cost of keeping drivers lodged at termini, and so on, which total about £1 per week per vehicle, or £50 per annum. The grand total is 1200 per annum per vehicle, 24 per week, which is id. per mile. This means that the total cost, per vehicle-mile, of the service itself, is 8fd. Add a proportion for tickets which are sold through agents and the total is approximately 9c1. per mile.
'There is still the profit to be added. I think a reasonable minimum figure is Id. per mile, so that the total revenue must be at least 10d. per mile run if the service is to pay. If a full coach be relied upon for every. journey in both directions, .3d. per passenger per mile would afford that minimum.
40 Per Cent. of Vehicle Capacity.
Unfortunately, that is far from being the case. During the season this might be a reasonable expectation, but in the " off " period, which, in most cases, is nearly two-Thirds of the year, the number of passengers is sometimes small indeed. The individual operator reading these notes can check that figure from his record of tickets sold.
If he makes the calculation over a period of not less than a year, he will probably find that 40 per cent. ex preises the average load ratio, and it so happens that on that basis id. per mile is suitable.
A compression ignition engined vehicle shows an economy, as compared. with the petrol-engined coach, of approximately id, per mile, This obviously cannot be passed on to passengers in the form of a fare reduction if it be insisted that the fare be calculated on the basis of a flat rate per mile. It means, then, that there is an additional profit available.