Bus Industry Costs. Make-up and Trends

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Cecilia Lee
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1 Bus Industry Costs Make-up and Trends

2 Just how expensive can it be to run a bus?

3 The Costs Around 120,000 each year

4 Cost Elements Each week a typical urban bus - Operates for hours Uses about 525 litres (115 gallons) of fuel Needs 2½ drivers to keep it in service And needs to earn at least 25 per hour

5 Cost Elements What are the major operating costs?

6 Cost Elements Labour The biggest cost by far 50 70% of all costs

7 Cost Elements Fuel (Price varies) Tyres

8 Cost Elements Maintenance Fixed and variable

9 Cost Elements One-off, incidental costs Insurance

10 Cost Elements Overheads Supervision Marketing Accounts Payroll Management Building Costs

11 New shiny buses - at up to 200K each : Pressure to invest in more as DDA compliance date grows ever closer

12 Red Tape Increasing bureaucracy Health and Safety Working Tax Credits Child Support Agency Training Requirements EU drivers records And so on and so on

13 Bus Costs Make Up Wage Related Costs total 61%

14 Cost Allocation: Based on bus, hours or miles Fuel, tyres by mileage Drivers by hour Maintenance by hour or by bus Overheads by as many ways as you can think!

15 A Service Makes a Contribution If it takes enough revenue to cover the cost of: And some of

16 The operator can only tolerate so many services which only make a contribution

17 In Perspective : Bus v Rail Big difference in scale of cost 15 of labour will take you 10 miles on an urban bus 1,300 yards on a local train and almost the whole length of platform 4 on inter-city

18 Cost Trends - Bus Industry Costs keep increasing faster than RPI Buses get slower due to congestion and rescheduling to improve reliability Labour rates increase ahead of inflation Labour costs increase even if there is no wage increase

19 Roadworks Increased tendency for complete road closures Extra buses, diversions Untold longterm impacts on revenue

20 TAS Work for CfIT (2007/8) Labour Costs RPI + 1.7% Some evidence this is higher as RPI falls Fuel RPI + 3% Varies but long term trend must be +ve Depreciation RPI + 1% Materials RPI Overheads RPI + 1.5%

21 Suddenly

22 Late 1990s Discovery Pay L Get Staff Turnover Rates Increase

23 Hence Labour Cost in Real Terms 29,000 27,000 25,000 Cost ( per employee) 23,000 21,000 19,000 17,000 15, / / / / / / / / /08 All outside London All Great Britain

24 Efficiency Trends 31,528 32,849 35,231 35,770 36,351 36,692 37,442 37,478 38,343 38,838 38,690 38,956 38,510 37,254 35,197 35,613 34,780 33,522 32,693 31,143 31,492 31,163 32, / / / / / / / / / / / / / / / / / / /05 KM Run per Crew Member 1988/ / / /88

25 Efficiency Gains Productivity gains by squeezing drivers conditions unlikely to happen Main likely source of productivity gain is by increasing bus speeds => each driver hour provides more service 1% speed improvement => 0.8% cost saving

26 What Happens in The Real World?

27 Change in Profitability A half hourly service uses 4 buses and takes 56 minutes end to end Makes a profit of 10% Peak Congestion beginning to bite

28 Peak Adjustments Typically peak journeys get extra running time => more hours cost to provide the same service longer journey times and longer gap in service less attractive => patronage falls => profits fall

29 Or worse.. A Step Change A new traffic scheme and all-day congestion slows the service by 7 minutes now 63 minutes end to end => needs an extra bus + 100K on costs Extended journeys less attractive so extra resource plus lower patronage => makes a loss

30 And so s Original Cost Original Revenue First Stage Cost First Stage Revenue Second Stage Cost Second Stage Revenue

31 Put Another Way If we start with the loss-making service taking 63 minutes Then put in bus priorities which save 7 minutes running time Operator saves one bus in service, gains passengers as buses are faster and more reliable, makes a profit => can invest in improving the service!

32 A Clear Choice

33 Vicious Circle Buses get slower Costs increase Patronage & Revenue fall Fares increase Services are cut Patronage & Revenue fall The old, old story

34 Or Virtuous Circle Bus speeds improve Patronage and Revenue increase More investment in services Fare increases smaller Services are more attractive Patronage and revenue increase

X. Cost Analysis and

X. Cost Analysis and Financial i Planning Public Transport Planning and Regulation: An Introduction X-1 Planning and Analysis Building Blocks Schedule Building Focus of Discussion Cost Analysis and Financial