Fuel costs creating dilemmas for agencies, operators

By Glenn Swain

Santa Monica, CA-based Big Blue Bus is implementing several new amenities over the next 24 months that should retain existing riders. Photo courtesy of Big Blue Bus/D. Finn dcfinn@filmeye.com

Instability in the Middle East this spring has had an obvious affect on fuel prices in North America — similar to what was experienced three years ago in the summer of 2008. With the cost of a barrel of oil nearing the $110 mark and a gallon of diesel now over four dollars, public transit agencies and private motorcoach owners are dealing with rising fuel costs and the influx of new riders.

As motorists throughout the country keep one eye on the gas gauge and one on skyrocketing gas prices, again the number grows of those parking their cars and opting for public transit to get them to where they are going.

A recent American Public Transportation Association study showed if a gallon of regular gas hits the $4 mark, it could trigger an additional 670 million passenger trips for U.S. public transit. Transit agencies began seeing readership numbers increase in February as turmoil in the Middle East sent uneasiness throughout oil markets and fuel prices shot up.

Triangle Transit, Durham, NC, saw ridership jump 23 percent, while the Nashville, TN Metropolitan Transit Authority (MTA) saw an increase of 6.5 percent compared to February a year ago. In the same area, the Regional Transportation Authority (RTA) saw a 19 percent increase on the Music City Star in January.

“With the recent rise in gas prices, more people are seeking other alternatives to driving their cars,” said MTA and RTA CEO Paul Ballard. “They are quickly realizing how affordable and convenient public transit can be.”

While experiencing an uptick in ridership, MTA and RTA are actually saving money on fuel cost as a result of a fuel-hedging program that locked in fuel prices at contract rates beginning in May 2009. The company estimates it has saved $1.7 million since that time.

Santa Monica, CA-based Big Blue Bus inked fuel-hedging deals after the spike in prices in 2008. The agency says the contracts are now paying off.

“We are beginning to see some isolated days in which ridership is significantly up, but not a consistent trend yet,” said Cindy Baker, director of marketing for the Kansas City Area Transportation Authority.

“Typically, non-riders live with high fill-ups for a little while before they decide they need to make a change. Then they start investigating their transit options. It may start with a visit to our website or a call to the Info Center.”

Jacob Snow, general manager for the Regional Transportation Commission of Southern Nevada, said his agency is ready for the spike in riders.

“We have learned Southern Nevadans more inclined to leave their personal vehicles behind and ride transit when the price of gas goes over the $4 mark,” he said. “They resort to other alternate commute modes that even include walking, bicycling and carpooling.”

According to Snow, RTCSN can accommodate any spike in ridership on it 39 routes and 419 vehicles that carry about 54 million riders annually.

Big Blue Bus Customer Relations Manager Dan Dawson says summer tourism and beach goers always create a spike in ridership. The agency is implementing several new amenities over the next 24 months that Dawson said should retain existing riders and may attract new customers.

“We are installing new bus stops and providing access to real-time bus information on our new website, as well as a 24-hour automated phone line and on-street signage,” he said. “Additionally, we introduced new prepaid discounted multi-ride passes last summer to expedite the boarding process and eliminate the need for riders to use exact change.”

Most transit agencies agree once a commuter uses transit for the first time, they are more likely to use the service more often because they realize it is affordable, accessible and convenient.

Still, with the increase of ridership invariably comes a leveling out or decrease of the number of riders if prices begin to fall.

“Experience has shown that once customers use our service, they tend to stay with it, but a decrease in fuel costs will have some people move back to personal auto use,” Baker said.

In April 2008 Northfield Lines, Northfield, MN, began using a fuel calculation chart from the U.S. Department of Energy’s Energy Information Administration of the to make calculations based on the monthly retail averages. The chart seems to be a standard for most operators to fairly and accurately calculate surcharge percentages as fuel prices increase.

“We started the fuel surcharge at the base of $1.90 a gallon; anything above that we started adding a percentage,” said Northfield President John Benjamin. “In the Midwest right now the average is price of diesel fuel is $3.82. At that price our surcharge is 15-point-12 percent of the gross cost of the trip.”

“We’ve implemented an eight-percent surcharge,” said Luke Busskohl, director of marketing for Arrow Stage Lines, Omaha, NB. “We’re not making extra money here; we just have to cover those costs.”

Busskohl says the two-percent surcharge kicks in at $3.10 per gallon and decreases according to the fuel surcharge chart.

Rising fuel prices have motorcoach operators and transit agencies making tough decisions on surcharges and increased ridership.

As prices for diesel top $4.00 a gallon in most parts of the country, Scott Bush, general manager of Colorado Charter Lines and Tours, Commerce City, CO, says he is on the fence on whether to carry out a surcharge.

“We don’t have a set policy yet, but we have to keep watching the fuel prices and adjust accordingly,” says Bush. “We’re at the point of a surcharge now.”

Bush notes that operators really can’t compare 2008 with today’s current prices, saying that the markets are completely different.

“It is a matter of weighing the charter bus market, the customer base, the competition and the pricing all has to be weighed in,” he said. “These factors are not the same as they were three years ago.”

“From what we experienced in 2008, we know every change in fuel costs adds new challenges for us with our customers,” said Benjamin.

Mid-American Coaches and Tours, Washington, MO, is about to institute a surcharge as an option.

“We have to keep margins,” said Mid-American President Roger Jones. “I probably should have instituted it a little faster this time around. We held back hoping the prices would go back down.”

At Leprechaun Lines, New Windsor, NY, President Edward Gallagher, Jr. said his company has implemented a surcharge, but only on future bookings.

“I’ve found it’s not wise to do that with existing business,” said Gallagher.

Along with utilizing a GPS system to monitor idling times and other gas-burning habits  like speeding and hard braking, Leprechaun Lines is looking ahead by changing out bus differentials, an idea

Gallagher says he got from a BUSRide article [BUSRide, March 2011,  Kobussen Bus Rides on Family Pride]. That company changed out differentials to improve mileage on their buses by one or two miles per gallon.

“I did that in 1999, but Kobussen has taken it to a new level,” Gallagher said. “I’m looking at that as well.”

Meanwhile in Canada, where companies are paying for liters the equivalent of about $4.91 U.S. a gallon, many bus operators are simply raising prices. But that is not the case at Charter Bus Lines of British Columbia, Delta, BC. Charter President Sheldon Eggen believes some operators are excessive in tacking on surcharges, noting that in 34 years his company has never ever charged a fuel surcharge.

“We don’t give a quote to our customers based on fuel prices from two years ago,” he said, “and then tell them they have to pay more when fuel goes up.”
As many operators figure out their next move, Scott Bush just tries to keep a cool head.

“One way or another,” he said, “we’ll figure out how to get it done and keep the customers happy.” BR