Fuel price woe is a boon for bus firms
YOU might not know it from clapped-out trains that break down in the wrong type of snow or, more recently, heat – but we are living in a golden age for public transport. Higher prices at the petrol pump and the recession have combined to force more and more people to ditch the car and travel by rail or bus. Last year, we made 1.32bn train journeys, 6.9 per cent higher than in 2009 and almost 40 per cent more than in 2000. That was the highest number of rail passenger journeys in a peacetime year since the mid-1920s, when the railway was twice the size, most trains were powered by steam and car ownership was a fraction of what it is now.
Buses are also booming. Transport for London yesterday said that passengers made 2.3bn journeys over the last year, 60 per cent more than in 2000 and the highest number for fifty years.
That is good news for shareholders in public transport groups like First, Go-Ahead and Stagecoach. Fares might have increased by around six per cent in January, with even larger hikes to come from 2012, but that is no match for soaring petrol prices. On 5 June, a litre of unleaded cost 136.1p – six per cent more than in January 2011 and 22 per cent higher than January 2010.
Yesterday’s results from Stagecoach show it is benefiting from the cultural shift. Annual bus operating profit was up 21 per cent to £151.3m while rail operating profit was up 16 per cent to £48.4m. Nor is the boom limited to the UK. Ebitda at its US bus operations grew by 112 per cent to £19.3m, albeit from a relatively small base. Passengers might grumble that higher profits have more to do with higher fares than a surge in numbers, but as fares go up so does the cost of franchises. Stagecoach paid the government £284.8m in franchise premiums in 2010-11 compared to £148.7m a year earlier.
For now, high oil prices and a squeeze on take-home pay mean public transport operators are a good bet.
david.crow@cityam.com