‘Keeping costs down is key for coach operators’

Wringing the most out of what little work is left and reducing costs as far as they can go were the central parts of a webinar aimed at coach operators and staged by Busworld on Thursday 23 April.

It was held in conjunction with the Global Passenger Network (GPN). Several of GPN’s members spoke, including Mark Anderson, MD of Anderson Travel. He outlined some steps that the London operator is taking to cut its outgoings, both during the coronavirus COVID-19 pandemic and for the longer term.

Before that, the webinar quickly confirmed that the pandemic is having the same disastrous impact on operators’ diaries across the globe. Business has all but halted in most countries, with passenger numbers at around zero.

The impact of that was articulated by the results of two viewer surveys. 54% have seen their turnover drop to between 0-20% of what it was at the same time in 2019. A further 19% say it is currently at 20-40% of that level.

At the same time, almost a third of those coach operators have only been able to cut their costs by 20% or less. A further third have reduced outgoings by between 20-40%. Although the scale of government help varies between country, those figures add further proof – if it were needed – of the scale of the challenge facing the coach sector globally.

Time for coach operators to regroup and consider costs?

How income can still be generated is generally down to conditions in an individual nation. Repatriation of cruise ship passengers, transport of military personnel and movements of food and other goods have all been explored by GPN members.

While that is one part of survival during the pandemic, cutting costs is another for coach operators. Mr Anderson says that doing so may be a lost art for some. The industry’s focus is often on securing work and doing it properly, and on the profit it generates, rather than keeping outgoings under control.

“What we have found – and we are guilty of this – is that operators are very focused on generating business. They are also focused on operating that business successfully. But they are not quite so clear on the costs associated with it.

“There is a feeling among many that an empty garage means you are making lots of money. Nine times out of ten that might be the case, but are you maximising that profit?”

What the pandemic has done is to have given time for an operator to examine its cost base and ensure that it is kept as low as possible, he continues.

Experience shows that while the difference between the price that wins the business on offer and those that do not is usually no more than 10%, there is much more variance in individual operators’ costs. That figure can be up to 40%. Such a scope illustrates the importance of controlling outgoings.

Cost saving potential sits all around you

Among the areas examined by Anderson Travel are telecoms, staff rotas and the workshop.

When carrying out its costs audit, the operator quickly discovered that drivers’ use of mobile phones provided by the company has decreased. Instead, they often use their own thanks to unlimited-minute contracts. That has allowed a reduction in the number of phones fitted to coaches.

Keeping costs under control was never more important, says Mark Anderson

Coupled with shopping around to find the best deal for its landlines, Mr Anderson says Anderson Travel is confident that it will save £35,000 on telecoms between now and the end of the year.

Searching for the best deal regardless of the type of supplier is important, he continues.

“Our customers will be shopping around for coaches when they are back to normality, so the opportunity is there now to get the best deal for your own business.”

Possible savings in engineering are another area to examine, he adds. For senior managers, the workshop is often “an Aladdin’s Cave of mystery.” Mr Anderson does not advocate questioning the judgment of fleet engineers when they say a vehicle is not fit for service or requires parts.

Instead, it is necessary to look at other things to see where savings can be made. He observes that Anderson Travel has found parts in stock for coaches that have not been built for 20 years. All the vehicles that it runs are under three years old. Those long-obsolete components are now on eBay.

Equipment may also be present in workshops that is underutilised or not used at all, but it still being paid for. If it serves no purpose, the advice is simple: Get rid of it.

Look at driver allocation and utilisation

Staff rotas represent a further opportunity for savings, but executing that successfully comes with some nuance. Anderson Travel uses the Coach Manager product, but not for work allocation. That is done instead by three team members with “experience and knowhow,” says Mr Anderson.

“They are fantastic people and they are extremely talented,” he continues. Most of the operator’s staff are currently subject to the Coronavirus Job Retention Scheme (CJRS), but undertaking training is permitted under the rules of CJRS. That key point should be used to an operator’s advantage.

“I set the three of them a task of doing some allocations as best they could. They all came back with a different way of working. That got me thinking. There has to be savings. Which of them was doing it best and which saved us the most money?”

Taking a fresh look at how work is handed out to drivers has removed the need for a standby. “That’s the guy who sits drinking tea and gets paid for it,” says Mr Anderson. “We estimate on that, we will save in the region of £60,000 per year.”

Uncertainty remains the only certainty

Regardless of their location in the world, the operators speaking at last week’s Busworld webinar agree that the future looks bumpy for coaches until work returns to a sustainable level. When that will be cannot be predicted, but those businesses in the tourism sector are particularly hard hit.

Excess supply while volumes ramp up during the recovery may impact rates. That will be unavoidable and is a factor of supply and demand. But Mark Anderson makes a valid, and valuable, point about costs for coach operators: Now more than ever, they need to be driven down as far as they can go.

A further free Busworld webinar will be held on Thursday 30 April at 1400hrs UK time. It will look at how to restart bus operations after movement restrictions are eased. Register here.