How Will the FUEL CUT Affect COACH CHARGES?
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THE coach operator who is mainly concerned with private-hire work seems to be most likely to experience the full effect of the 10 per cent. cut in petrol supplies. Obviously, those who run scheduled services will need sufficient fuel to maintain them. Major F. S. Eastwood. Yorkshire Licensing Authority, has ventured the opinion that as extended tours, involving bookings at hotels and the making of contracts with passengers, should have first call on the operator's fuel supplies, any cut would have to take effect on short trips, whiclii might mean that mileage devoted to that class of work would be cut by as much as 1242 per cent.
In any event, whether the cut be 10 per cent. or 124. per cent., the operator must face his difficulties and. so far as possible, make plans to meet them. Whilst giving the maximum service to his customers, he must take precautions to ensure that his reasonable profits shall not be reduced.
Theoretically a cut in petrol supplies would involve only a diminution in the mileage travelled, and not in the hours of use of the coach. In practice it is equivalent to a reduction in hours, because the number of trips which the operator can do is diminished. That will be the case unless it is possible to concentrate on contracts of a kind which involve minimum mileage and the maximum of hours.
Perhaps the best way to begin to consider this problem is to compare costs and rates before the fuel cut was made with those that may be expected under the 10 per cent. reduction. In the case of an operator who keeps his vehicle in commission throughout the year, the following is an approximate estimate of the number of hours' work he is likely to do:— For the 16 weeks of midsummer he will average 60 hours per week, a total of 960 hours; for eight weeks each side
of that period (another 16 weeks) an average of 30 hours per week, making 480 hours; for the rest of the year a total of about 360 hours, making 1,800 hours in all.
In assessing the fixed costs which must be recouped in that period, 1 am going to consider the operation of a luxury coach. such as is likely to attract maximum custom.
Such a vehicle will cost approximately 0,700. from which £100 can be deducted as the value of a set of tyres, leaving £3,600. In four years or less it will be necessary to replace the vehicle by a new one. I will assume that 1:1,000 is obtained on sale. That leaves 2,600 to be depreciated over four years, equivalent to depreciation of £650 per annum.
The other standing charges will comprise £60 for Road Fund tax, public service vehicle licence and certificate of fitness (the actual amount is £60 4s.). a further £60 for insurance, £40 for garage rent and 008 for interest on first cost. The total so far is £918, to which must be added not less than £300 a year for establishment costs, which in this class of work are much heavier than most operators who do not keep accurate records of expenditure seem to think. That gives a total of £1,218 per annum. Spread that sum over 1,800 hours and it is equivalent to 13s. 6d, per hour, to which must be added 3s. 6d. per hour for wages, making a total of 17s. per hour.
A fair ratio of profit to cost in this type of work is 33-1 per cent.. so that 5s. 8d. must he added to that 17s. for profit, bringing the charge for time alone to 22s. 8d.--say, 23s. per hour.
Running costs will he. approximately as follows:--Petrol. 7), m.p.g. at Is. 11d., 3.0 hi. per mile; lubricants, 0.20d.; tyres, 1.50d.; maintenance. 3.12d.; total, 7.83d. Adding 331 per cent. (2.61d.) gives 10.44d.. say 10!-.d. per mile.
On last year's petrol supplies, 23s. per hour and 100. per mile could have served as a basis for charges. The cut in petrol obviously does not affect running costs. Presumably, other things being equal, it will influence the number of trips that can be made in a year and one can assume that it will reduce the number of hours by about 10 per cent.that is, to 1,620, instead of 1,800.
The figure for fixed costs of £1,218 will remain unaffected by this cut in petrol supplies and by the reduction in hours, so that the net cost per hour will increase from 13s. 6d. to 15s. Assuming that the wage per hour will still be 3s. 6d., that brings the total cost per hour to 18s. 6d., and adding 33i per cent, (6s. 2d.) makes the charge per hour 24s. 8d., so that in the 'absence of such farther considerations as I am going to discuss, the basic time and mileage figures for this season would appear to be 24s. 8d. per hour plus.10id. per mile.
Costs of Part-year Operation
Before going further let me consider the case of the operator who licenses his vehicle for only the middle section of the year. His working period will be 16 weeks at 60 hours per week (960), plus 16 weeks (the eight weeks each side of the middle 16 weeks) at 30 hours per week, making 480. The total last year was 1,440 hours. Fixed charges unfortunately do not diminish in anything like the same proportion as hours. They are as follow:-Tax £40; insurance £40; rent (unaffected) £40; depreciation, as before, £650; also interest £108. Overheads will probably diminish to £200 and the grand total is thus £1,078, as compared with the full year's use of the vehicle at £1,218.
By operating the vehicle for 1,440 hours per season, fixed charges will amount to 15s. per hour. Adding wages at 3s. 6d. gives las. 6d. per hour, and 33i per cent for profit f6s. 2d.) brings the charge to £1 4s. 8d, per hour.
Last year, therefore, such an operator could make a profit by charging £1 4s. 8d. per hour and 100. per mile. This year his total of hours will presumably lie cui by 10 per cent. from 1,440 to 1,296, representing practically 16s. 6d. per hour. To that sum we must add, as before, 3s. 6d. per hour for wages, making £1. Then add 7s. for profit, which gives us £1 7s. per hour, and on that basis the charge must he El 7s. per hour plus IOid. per mile.
Now let us consider the matter from another aspect. The operator who uses his vehicle throughout the year and can operate even tinder the 10 per cent. cut at El 4s. 8d. per hour and 100, per mile, is competing with the man who runs his vehicle for only six months and must, if he would make the same proportion of profit, charge £1 7s. per hour and 10+d. per mile.
What is going to happen? Is the man who runs his vehicle for only six months per annum going to cut to the level of the operator who keeps his vehicle in service for a year or is the latter going to increase his rate and charge the same as the former?
As conditions are to-day, with coaches at a premium, I think the answer is obvious. The higher rate will become a minimum. Indeed, if we recollect the old maxim, "The price of a commodity is what it will fetch," we shall make no bones about it, but shall suggest a minimum of £1 10s. per hour and Is. per mile. My spies tell me that current quotations for the private hire of coaches seem to be based on those rates and in many cases are higher.
The problem facing the operator is to eke out his petrol supplies so as to make the maximum number of trips and please the maximum number of customers, which means that he must devise some means for suggesting indirectly to the intending passenger the advantages of short-distance runs.
One way of doing that has already been indicated in the suggestion that the charge per mile should be Is. Another is to graduate the charge per mile in proportion to the mileage covered. That is to say, we should take the course diametrically opposed to that usually adopted, wherein the charge per mile tapers, becoming less as the mileage increases. It might be, for example, that the operator would charge Is. per mile for a trip in which the mileage did not exceed 50. If it were more than 50, he might make the charge IS. 3d. for 51 to 60 miles; is. 6d., 61 to 80 miles; and 2s. per mile for any distance in excess of 80 miles.
What this system would mean in charges may best be illustrated by taking a few examples-first, a half-day trip involving six hours' use of the coach and only 40 miles' running. For six hours at 30s. the charge will be £9 and for 40 miles at is., £2; total £11. For a day's work, say, 10 hours, the time charge would be £15 and if the mileage did not exceed 50, a further £2 10s. would be required; total £17 10s. If the trip involved 10 hours of running, but the mileage" was 100, the time charge would be, as before, £15, but the mileage (100 at 2s.) would cost £10. The charge would be the intentionally prohibitive one of £25 for the day's trip.
Those who read these articles on coach hire may recall that about a year ago I referred to the case in which friends of mine had booked a coach for an eight-day cricket tour. The vehicle was a 32-seater and was hired to travel on the Sunday from North London to Margate, the initial journey being approximately 80 miles. On Monday the team played at Margate, so that there was no mileage run: On Tuesday the match was at Ramsgate (eight miles); on Wednesday at Folkestone (48 miles); on Thursday, Ashford (64 miles); on Friday, Canterbury (32 miles), and on Saturday, Sittingbourne (64 miles). On Sunday the team returned to North London, a further 80 miles. The total mileage was 376. , For time the operator would no doubt have charged for eight eight-hour days, that is, 64 hours. In addition there would have been some extra charge for garaging the vehicle -say, £2 for the week-subsistence allowance and Sunday payment to the driver, another £6.
In fact, quotations given this year for the trip ranged from £170 to £120, comparing with £70 which was paid last year. Eventually, after some little use of what is nowcommonly called the Old Pals Act," a price of £100 was quoted.
Now let us work it out in various ways and see what the charge ought to be according to the assessments already made.
Charge of £144 Justified
Using first the most expensive inethod: the distance is 400 miles and, presumably, could be charged at 2s. per mile, which is £40. Add for 64 hours at 30s, an hour, £96. Then £8 for garaging, subsistence allowances. etc., and the total is £144.
The coach proprietor may, on the other hand, have taken the view that as most of the daily mileages were comparatively short, Is. per mile could reasonably be charged, in which case the charge for the mileage would be £20 and the total £124.
According to a third method, he might adhere strictly to the rule already set out, namely Is. per mile for a journey under 56 miles; Is. 3d. for 51 to 60 miles; Is. 6d. for 61 to 80 miles; and 2s. over 80. On thathasis he should charge on the first day for 80 miles at Is. 6d., which it £6. On the second day no mileage is run. On the third day eight miles are covered at Is per mile (8s.). The distance for the fourth day is 48 miles and the charge at Is. per mile is £2 85. The fifth day sees 64 miles covered at Is. 6d. per mile, and the charge should be £4 16s. On the sixth day 32 miles are run at Is. (£1 12s.) and on the seventh day another 64 miles (4 16s.). The return trip of 80 miles is made on the last day and at ls. 6d. costs the team £6. The total is thus £26. To that sum must be added £96 for time (64 hours at 1 10s.), also £8 for garage and subsistence, giving a figure of £130.
Clearly, an operator assessing a figure for this tour could charge anything from £120 to £150 and still feel that he had made a profit but not overcharged the customer. The fact that my friends were able to get the job done for £100 shows that they, too, have other good friends. S. T R.