Solving the Problems of the Carrier
Page 32
Page 35
If you've noticed an error in this article please click here to report it so we can fix it.
Charges for Private Hire of Coaches
Applying the Figures Given in the Previous Article to the Consideration of Profitable Charges : Extensive Differences Shown According to Conditions of Operation
IN the previous article I pointed out that the conclusions at which I arrived in respect of running-cost figures, etc., were not to be taken as indicating the charges which the operator should make for coach hire, and I promised, subsequently, to deal with that aspect of the matter.
Recalling the conditions as set out in that article, there was, first, a coach operated for only six months in the year, covering 12,000 miles in that period. Secondly, a coach also operated for six months in the year, but covering 15,000 miles, and, thirdly, one operated for the whole year and covering 20,000 miles, averaging 480 miles per week during the summer seasoii, and 240 miles per week during the winter. '
I now add a fourth case, in which the vehicle covers 24,000 miles in a full year's ofieration, averaging 600 miles per week during the summer and 300 miles per week during the winter. These average mileages are only approximate. The fact that they do not exactly tally with the total mileage suggested for the six months and for the year, respectively, does not affect the calculations, or the results of them, In the following consideration of these examples of operation the actual figures for the first, second, and third cases are taken from the previous article, and I repeat them to help readers.
In the first case, in which the vehicle is operated for six months and Covers no more than 12,000 miles in that period, the running costs for a week's operation, in which the vehicle runs 480 miles, are as follow:-.-Petrol,£3 15s. 2d.; oil, 2s. 6d.; tyres, £3; maintenance, £1 10s.; depreciation, £20. The total is £28 7s. 8d. per week and the running costs are is. 2.2d. per mile.
The amount of £20 per week for depreciation may be queried by readers who have not read the previous article, in which it was carefully calculated that depreciation would be 10d. per mile. That is arrived at on the basis of four years' ownership of the vehicle, which cost, initially, £2,500. At the end of the four years it is sold for a little over £400. and the difference, less the cost of tyres, has to be written oil in 48,000 miles, which, under the conditions named, is all the running it will do during the four years.
Figures High When Based on
Six Months' Operation
The fixed expenses in connection with the operation of this vehicle were shown' to be £6 3s. per week for wages, £9 13s. 3d. for standing charges, and £4 per week for establishment costs. Both standing charges and establishment costs are high per week because the vehicle is employed only six months of the year, but, nevertheless, it has to be garaged and so on for the remaining six months. The total is £19 16s. 3d, per week, which, on the basis of a 48-hour week, is approximately 8s. 3d. per hour.
Now the foregoing are costs of operation including establishment costs, and the coach owner must add not less than 25 per cent, to those amounts for his profit. In the majority of cases he will have to pay 71, per cent, on the total charge out of this, as commission to the agent, if the engagements be so obtained. That means that he must charge Is. 5/d. per mile, and 10s. per hour for the use of his coach. Therefore, in the event of a journey involving 120 miles of running in an eight-hour day, the total charge will he made up of 120 times Is. 51d., which is £8.17s. 6d., plus eight hours at 10s.-£4, the total being £12 17s. 6d.
If, as is often the case with private-hire trips, the eightbons day be exceeded, then he must charge 10s. per hour for every hour over and above eight. For example, if 12 flours be taken; he must add another £2 to the charge, A30 making £14 17s. 6d. for the 12-hour day, plus the cost of 120 miles of running.
In the second example, in which the vehicle, whilst still employed for no moi-e than six months in the year, never
theless covers a total of 15,000 miles, with a weekly average of 600, the running costs per mile are slightly less. This is because of the diminution in depreciation cost brouglat about by the fact that, instead of having to base the depreciation on the total active life of 48,000 miles, with this owner, it covers 60,000 miles. The depreciation is thus 8d. per mile instead of 10d.
The actual figures, again taken from the previous article, are, for running costs for the week, £4 15s. 4d. for petrol, 4s. 6d, oil, £3 15s. tyres, Ll 17s. 6d. for maintenance, and £20 for depreciation. The total is £30 12s. 4d., for which the vehicle runs 600 miles, so that the actual cost per mile" is now only Is. Ofd.
Standing charges are, as I have said, approximately the same as before, and the charge per hour is also the same, namely 10s. The charge per mile, on the basis of ls. Old per mile actual cost, must be is. 3fd.
Under these conditions the charge for a run of 120 miles, completed in eight hours, is 120 times is. 31d., plus £4 for the eight hours at 10s. per hour, making a total of £11 12s. 6d. If the engagement be such that the vehicle is out for 12 hours, then the charge must be increased by an additional £2 for the extra four hours at 10s. per hour, and the bill will thus amount to 213 12s. 6d.
All-the-year-round Running Means Lower Weekly Charges Now we come to the third case, in which the vehicle is licensed and operated for the whole year, covering a total of 20,000 miles in that time. This example has to be dealt with in two parts; first, the summer, when the average mileage is assumed to be round about 480 per week, and then the winter, when it is assumed to be only 240 per week. Because the vehicle is engaged for only a short time, part-time-drivers' wages are paid.
The first thing to note is that the depreciation is now based on 80,000 miles and has dropped to 6d. per mile
instead of the 8d. or Md. The running costs, again taken from the previous article, are (per week) petrol £3 15s. 2d., oil 3s., tyres £3, maintenance.E1 10s., depreciation £12; total £20 8s. 2d.
For that total the vehicle has run 480 miles, so that the net cost is a shade under 10fd, per mile, and the charge, arrived at by adding 25 per cent, to the cost, is Is. Old. per mile. As the vehicle is operated for a year instead of six months, the standing charges and establishment costs per
week are considerably less than when the machine is operated for only six months of the year. The tbtal fixed charges now are wages, £6 3s.; standing charges, £5 18s. 3d.; establishment costs, £3; total, £15 Is. 3d. That, for 48 hours per week, is equivalent to 6s, 3d. per hour, and the charge should thus be 7s. 9d. per hour.
For the same kind of journey as was dealt with in the previous examples, where the vehicle runs 120 miles and is engaged for eight hours, the rate should be 120 times Is, Old., which is £6 5s., plus eight hours at 7s. 9d., making a total of £9 7s. If the journey takes 12 hours, then another four hours at 7s. 9d. must We added, making the total charge £10 18s.
In the winter this vehicle covers only 240 miles per week, and the running costs are as follow:-Petrol, £1 18s. 6c1.; oil, 2s. 6d.; tyres, £1 10s.; maintenance, 15s.; depreciation, £6; total, £10 6s., which is Is. Old. per mile.
The fixed expenditure comprises wages, say, 23 Ss.; standing charges, £5 18s. 3d.; establishment costs, 23; total, 212 3s. 3d.
The actual running cost is Mid, per mile, and the fixed. cost 5s. per hour, but the charges must be is. Oid. per mile and 6s. 6d. per hour, so that, for our familiar run of 120 miles in eight hours, the charge will comprise 26 Ss. for 120 miles at is. oict., plus 42 12s. for -eight hours at 6s. 6d., making 28 17s. in all.
If an extra four hours be run, making 12 hours in all, the charge must be increased by 6s. 6d., which is 21 6s., and the price will thus be 210 3s.
A matter of considerable importance arises here and substantiates the point I have always made that, for a fluctuating mileage and for a seasonal business, whether it be in the haulage of goods or the conveyance of passengers, it is much better to calculate depreciation on a per-mile basis and not on a per-week basis.
In the last two cases, dealing with the summer and winter operation of this vehicle, the depreciation is assumed to be 6d. per mile. If, now, the operator had, quite wrongly in my opinion, made the practice of depreciating the vehicle on the basis of time, per week it would have been 29.
Instead, therefore, of .debiting the vehicle with 212 per week depreciation during the summer months, he would have taken 29, and on that basis admittedly have been able to reduce his total costs and, in turn, his charges.
Higher Charges Possible During the Summer Months
In the winter, however, with a depreciation amount of £9 per week instead of 26, he would have had to increase his charges, and surely that is the opposite of what he would desire to do in order to attract custom. In the summer, when business is good, he is much more likely to be able to make his charges a little higher than would be acceptable in the winter when there are not so many people inclined to go for coach trips.
According to this method he is able to reduce his charges in.the winter, yet evenly and fairly cover the amounts he should set aside on account of depreciation.
This brings me to the fourth and last case in which the vehicle, working the year around, runs 24,000 miles per annum. It is assumed that, during the summer, the average weekly mileage approximates to 600, and in the winter to 300.
It should be appreciated from what has already been wrrtten that the only modification needed in the cost is that relating to depreciation, which, on the increased annual mileage, now drops to Sd. The running costs will therefore be Id. less than in the previous case, that is, 91c1. per mile, so that the charge should be 11id. per mile. The standing charges will not be affected.
On the 120 miles run the rate will thus be, during the summer, 25 15s. for 120 miles plus es 2s. for fixed expenses for eight hours, making a total of £8 17s. There should be an addition to this of 7s. 9d per hour for every hour over the eight hours, so that, if, for example, the trip takes 12 hours, the ;ate will be 28 17s. plus 21 11s., a total of 210 8s.
In the winter, the hourly charge will fall to 6s, 6d., and corresponding rates will be 28 7s. for eight hours' running 120 miles, and 29 15s. for 12 hours with the same mileage.
The point about these figures and assessed charges which must strike the operator as being of considerable importance is the marked difference between the rates which must be charged for six months on a small mileage, as compared with those of an operator who keeps his vehicle in service all the year round and runs a bigger mileage.
Obviously, if two operators at the extreme ends of this scale be competing in the same area, the one who runs his vehicle all the year round will be able to undercut the other man and thus make the conditions worse. He will he able to increase his annual mileage, whilst that of his competitor will decrease, so that the costs which the first man must face will diminish, thus still further improving the situltion: the costs of the other one will increase, making his conditions worse than ever.
So far as I can see, there is-no answer to that. The only solution is that the operator who has hitherto run his vehicles for only six months must take steps to develop his business and find work for his vehicles to do during the winter, thus putting himself on level terms.
It is not without interest to note that the Northern Road Transport Owners Association is coming to agreements on rates. The area covered by the Association has been divided and groups allocated within each sub-area. Ea 4h group has a leader who calls meetings to discuss rates, which are subsequently debated amongst the group leaders in order to reach a common basis' Furthermore, I understand that, once agreement has been reached and signatures appended, the larger combines— those people who operate express and stage coaches as well as contract carriages—will agree not to cut.
In such circumstances, the yearly mileage, deprecia.ion and the fixed charges are considerably less than those whirlk have to be faced by operators who concern themselves with only private-hire work.
It is not without interest, either, to refer to Table 1, which is an abridged copy of a schedule of rates being dis cussed in that area. S.T.R.