Armchair rides out the eashflow
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Peaks and dips in seasonal business-or in exchange rates for foreign currencydon't worry Armchair; who make up fleet to capachy whn short-term leases. By Noel Millier
THE ARMCHAIR Passenger Transport Company of Brentford Middlesex, has long been one of the best known London tourist coach operators and is renowned for a clean up-to-date fleet of coaches.
Armchair, like many operators relies on tourists for most of its business and most of these tourists are in complete incoming groups from various overseas destinations. The Armchair coach fleet caters for small and large groups requiring the full range of coach services — from airport transfer to extended tour.
In these days of economic recession and uncertainty, the strength and weakness of• various currencies have a marKed effect on the pound which in turn affects the attractiveness of the UK to foreign tour sts.
The size of a coach fleet is obviously governed by demard. To overcome the seasonal aspects of the industry, Armchair leases additional coaches through coach dealer Arlington of Potter's Bar.
The Armchair fleet is curren ly 38 coaches, of which approximately a quarter are leased. The leased vehicles are taken for approximately nine months, although the period varies from year to year. By November of the previous year Armchair managing director Simon Newman decides his requirement for the next season's leased vehicles The vehicles are usually delivered approximately two weeks before they are required in order to iron out any possible teething troubles. Leasing costs are obviously higher than buying vehicles outright but the arrangement has its advantages.
The current owned Armchair fleet is made up of predominantely AEC Reliances with reduced seating capacity for extended tour work. These are supplemented with some 55-seater AECs and 25-seater Bedfords.
The leased fleet is also made up of standard 53-seat 11metre Bedford YMT coaches with either Plaxton. Duple or Van Hool bodies, depending on availability.
The leased vehicles are particularly intended to supplement the current fleet by performing such duties as airport transfers and shorter-distance day tours. By leasing vehicles Armchair is able to cost its operations accurately without having to take account of depreciation or risk a slump in either the secondhand coach market or the tourist industry.
The leased vehicles are normally brand-new and as they are only operated for nine months, they are covered by the manufacturer's warranty. Maintenance costs and downtime are kept to a minimum so maximum vehicle utilization can be achieved by Armchair which normally operates on the basis of one driver, one vehicle.
The leased vehicles are serviced approximately every 5000 miles and on average, cover 29,000 miles a year. By leasing easily sellable, relatively low-mileage young coaches the system usually has advantages for the coach dealer, too, since he gets a well-maintained stock of popular model coaches during the winter selling period.
Ex-Armchair leased coaches have been supplied to other operators on a second-lease basis or as a short-term back-up to a main fleet. Among the operators now using exArmchair vehicles is British Airways.
Armchair's current owned fleet is budgeted to last between four and six years. Generally speaking, heavyweight AECs are kept for six years and the lightweight Bedfords four.
One problem that can reduce the advantages of leasing is late delivery of vehicles from the bodybuilder. This has already caused problems and Armchair has had to re-lease temporarily some of last year's leased fleet. This is less satisfactory as it negates the advantages of operating vehicles under warranty and although the vehicles are still very respectable and modern, as the mileage increases, so does the need for maintenance.
Armchair Passenger Transport was founded in about 1961 and is a company within the E. H. Mundy Group. Simon Newman joined the company as managing director in 1975 at which time the supplementary leasing of vehicles commenced. Not least of the attractions of leasing is the fact that the scheme does not require a heavy capital investment. Armchair used capital during this period to expand not only its fleet but also its premises.
The Armchair premises now consists of hard-standing for coaches and a purpose-built closed-in workshop which already has been extended to Portakabin-typeaccommodation. They are secure and fully equipped and include the operator's own fuel facilities. Brentford is situated between the West End of London and Heathrow Airport — almost an ideal base for a coach operation.
Changes in the relationship between the pound and foreign currencies have resulted in a general down-turn in what had been a steadily developing market for London coach operators, the incoming tourist business. The fuel crisis has made a bad situation worse, and prompted Armchair into aiming for other markets.
Mr Newman does not see
Armchair looking at all downmarket and is not interested in contract or school-type work, but does see an increasing market for high-quality coach travel in the business conference field, and has already got some conference group work.
Short-term leasing differs in mahy respects from long-term leasings but can be an alternative to hire purchase, long-term leasing or outright purchase of neh vehicles. It allows operators to r de the peaks of the business and keep a low vehicle age profile Without the heavy capital investments involved in the purchase of new vehicles..
Short-term leasing has been, and continues to be, profitable to the successful Armchair operation and although it appears an expensive way of operating coaches, the extra expense is more than compensated by the safeguards against excessive vehicle maintenance costs and the lack of risk during these times of financial uncertainty.
From the dealer's point of view the only difference between leasing vehicles and sellinc._ them outright is that they utually guarantee to buy them b ek after the lease period. It is for that reason that they like the vehicles to be basic run-of-themi I type machines with normal maximum seating capacity.
The dealer sells the coach to a finance company who leases it to the operator for a rental. The finance company sells the coach back to the dealer at the end of the period for a price which naturally takes into consideration depreciation and vehicle wear. This figure is reflected in the lease-hire costs.
The dealer ends up at the end of the lease period with high
capacity type coaches of the most popular configuration to sell easily. Dealers are likely to avoid leasing more specialist vehicles such as executive coaches.
• Arlington has leased vehicles at a number of different operators at present including National Travel (London) and British Airways. Most leasing deals are for larger periods than the Armchair arrangement and sane heavyweight vehicles are leased for four and a half years.
British Airways have also taken a number of previously leased vehicles to help them over short-term vehicle shortages.
Operators such as National Travel (London) and other organizations are also able to lease vehicles to their advantage as by leasing it is unnecessary to realise large capital sums as the leasing payments can be completely met by revenue.
For the small, newly established operator leasing is not an easy way out and it is likely that any finance company would need to be convinced that the lessee could more than adequately meet the hire payments for the term of the lease with assured revenue.
In the longer term, leasing can provide for bus and coach operators alike a method of running on revenue without having to break into reserves or borrow the necessary capital for brandnew vehicles. Limited long-term leasing is also a method of maintaining a low fleet age profile.
It is, however, inescapably more expensive than purchasing vehicles for a planned life but can be used profitably to avoid the continually spiralling effects of inflation.