Busworld Academy webinar: Generating Income, Reducing Costs During Covid-19

The second Busworld Academy webinar about the Covid-19 virus and what it does to the coach sector was attended by 900 people from all over the world. “How to create income during a lock-down period and to reduce costs”, was the topic of this second Busworld Academy webinar held in partnership with GPN (Global Passenger Network).

Six top-level managers of coach operating companies from around the world, brainstormed about possible internal measures companies can take to face the lock-down period and the Covid-19 crisis. The 6 top-level managers: Mr. Mohammed A. Afzal as Chairman and Managing Director of AB Business Enterprises (Parveen Group) in India and Secretary General of BOCI in India; Mr. Mark Anderson, CEO at Anderson Travel, UK; Mr. Trinh Gia Hien, Executive Assistant at Haivan Group in Vietnam; Mr. Luis A. Pedrero, CEO Car Tour and former president of GPN, Spain; Ms. Bronwyn Wilson, President of the International Motorcoach Group, USA; Mr. Thami Mourad, Vice President GM2 Tours in Morocco.

Nobody knows how long it will take for the normal activities can restart. Coach companies which cannot bridge the loss of income during the crisis are not sure to survive the crisis. Millions of jobs are threatened in the coach industry and related sectors such as tourist attractions, events, hotels, restaurants, etc.

Webinar Chairman en Director of Busworld Academy Jan de Man, opened the meeting with the statement that coach operations has dropped to zero. Not a pleasant welcome but simply the harsh truth. “Business might start up again at the earliest in September. Coach companies have to survive with hardly any income for almost six months. There are three possible measures to be taken which can be crucial to the surviving of coach and bus companies: External help from the governments, finding creative ways to generate income and reducing costs with the focus on fixed costs.”

Initiatives

As former President of GPN Luis Pedrero gathered from his GPN colleagues in Europe some interesting examples about how to generate income in this time of crisis. The Italian company Linea Azzurea for instance was able to place its coaches in service for a cruise ship operator which had to repatriate passengers from their cruise ships. It was the client of an other coach operator. But that coach company had stopped all the insurance polices on its coaches so they could not be used. Linea Azzurra still had coaches available. The first repatriating was a cruise ship in the Italian city Savonna were 40 coaches from different companies were waiting in order toe repatriate the passengers. There they learned that 80 passengers were infected with Covid-19, and all the other coaches left. The Linea Azzurra coaches waited in order to see what protective measures were taken and if transportation could be done safely. The cruise ship company chartered plains to transport its passengers to the country of origin and Linea Azzurra was granted the transport to the airports. After this Linea Azzurra offered the cruise ship company a one-stop-shop facility for all over Europe with the help of the other European members of the Global Passenger Network. This way four cruise ships could be helped.

In France GPN member Say Bus converted sleeper coaches into medical sleeper coaches including ventilator-equipment after having contacted the ministry of Health to offer this service to hospitals. In Norway coach company Unibuss developed a campaign how to organize safe travel. Organizations who are hiring a coach can choose a limited number of passengers to maintain the social distancing requirements in the coach. Also the coaches are equipped with hand sanitizers and are fully cleaned and purified after each service. Other companies offer transportation services to deliver for instance meals and medical supplies.

Less than 1%

Mohammed A. Afzal has in his company AB Business Enterprises 1,500 coaches and 5,000 employees. Transportation in India has almost stopped entirely, according to him. Less than 1% of the normal work is carried out. “A special contract in partnership with tour operators was made to repatriate consulate-workers, expats, from all over the country to airports on their way to their home countries. Also his company is transporting doctors and medical staff with tourist cabs to the hospitals and villages and places in rural areas. “Distancing between medical staff and patients is taken care off and the cabs are used for transport of pharmacy and medical products.” Also an offer is made to the government to provide sleeper coaches for patients that need to be hospitalized. “Already the government has come forward with the railways to provide these services.” For the little amount of transport which is going on the coaches are periodically sanitized every trip and passengers are obliged to use the hand sanitizer, face mask and they are scanned for body temperature. Only 50% of the seating capacity is to be used.

Parcels instead of passengers

The Haivan Group in Vietnam has 250 coaches with 1,000 employees. It was difficult to establish the webinar connection with Trinh Gia Hien but at last it worked and he joined the webinar. “Our government has stopped all transportation of people mid March. Since then we are transporting parcels and mail. We always did this already but it had never our focus, until now. For promoting ourselfs we use social media such as Facebook. Our customers are mostly small businesses but also farmers who want to transport their goods to cities like Hanoi. We play a very small role in this market and are not a danger to the logistic companies. We offer those services at a cost price not aiming for any profit. We are helping people and at the same time keeping our business a live. Like us other companies are opening up and are doing the same but we have the advantage of having permits to access different areas.”

Bronwyn Wilsen from the International Motorcoach group with 60 coach companies from the USA and Canada as members outlined the situation in the US. “Government funding for bringing back our staff is available recently. We have no revenue. Our valuable resources are drivers and mechanics in who we have invested much. We are focussing on bringing them back. It is a time to revisit our fundamentals and become more efficient for after we recover.”

Thami Mourad mentioned that in Morocco a limited part of transport is still active. “Like military transport and prisoners. But it only covers up to 15% of our normal revenues. This work is tendered by the government. All tourist transport is stopped. The government has done a fantastic work to save jobs. So our most important costs are loans and insurance. Our biggest problems lie with the banks and insurance companies. Since the beginning of the lock down we have taken measurements in cancelling the insurance for 30% of our fleet and converted touristic coaches in staff transportation coaches. In this way we saved 40% on insurance costs. But it is a complex matter.”

Capacity

After Covid-19 and starting up business do we need more coaches due to social distancing? It was one of the questions posted during the webinar. Luis Pedrero: Yes we believe so but for a short period of time. One of our services is to transport workers to a factory which started up recently. Because of social distancing we need now double the amount of coaches. In Spain we only can use one third of the capacity of a coach. From a business perspective we need to use at least half of the capacity of the coach otherwise the price of the ticket will be doubled or even trippled.” In India the government says one third of the capacity can be used. Factories are calculating with this for their workers transportation and are asking for prices for the transport for instance only 3,000 employees instead of 10,000 which it was. So they only need to utilize the same number of buses but at the same time they want to reduce on the price. We are concerned we can not both ends meet”, Mohammed Afzal said.

Cost reduction

Mark Anderson, CEO Anderson Travel in the UK, started his business in 1988 with one coach and has now 40 vehicles, all under 3 years old. It is a London based company with even one depot next to the Tower Bridge. “Coach operators are very focussed on generating business and on operating successfully that business they have generated. They are not so clear on the costs associated on generating that business. There is a feeling among many that an empty yard or depot means your making lots of money. But are you maximizing that profit? So now with the down time this pandemic is causing, this is the absolute time to start looking at your cost base to make your costs as low as possible? I found over the years that winning or losing a piece of business is always about the price with a difference of 10%. But on the cost side I have noticed that on the actual cost of an operation you can have a difference of 20%, 30% or even 40% with the competitors. This can be a real opportunity to drill down and look at your cost base to see what savings you can make. We looked at telecoms and found that drivers do not use the coach phones but use their own mobile phones. So we do not need to use as many mobile phones as we used to have and we shopped around for the best deals on contracts. All together we estimate to save this year 35,000 pounds.” He also looked at the workshop where he found that lots of things can be improved. During this down time he went over it and found parts for vehicles that were al ready sold a long time ago. “Even for vehicles that are no longer being produced. With a little help from E-bay we managed to sell those parts.” The biggest savings he found in staff rotas for the amount of 60,000 pounds. The planning software used for maintenance schedules, accounting etc is not used for the allocation of work. That is done by three transport managers of the Anderson-team. In a survey we found that there is a little overlap in schedules for which there was a standby driver to fill the gaps, but mainly was washing the vehicles and drinking tea. Just by using a delay process for the allocations we estimate to save this 60,000 pounds. We are experiencing difficult times but there is a grey lining out there and that is to delve down into the nuts and bolts of you organization and that you are able to see and understand the cost based you are operating with and the opportunity you have to reduce those costs.”

Taxes

In India Mohammed Afzal sees other factors outside the company eating away the business profits. “Past year the competition has risen and tourism has drastically come down. From the beginning of this pandemic we have been working with the government to see how we can reduce these costs in a contribution in the salaries for the next three months and this can be extended up to six months. Also we are talking with the government about these advances to be repaid in two years without interest. Also the road taxes are huge in India and have to be prepaid for each coach which now are not utilized. So we have asked the government to adjust this tax to the forthcoming operational days for at least six months. The same applies to toll, which is even higher than road tax, and the tax on fuel which is also very high in India. We pay insurance in advance for one year, but now we are not utilizing these vehicles so we are asking to stretch the insurance for a period from three to six months. We are looking to the government for support because 65% of our costs are fixed and are linked to these topics. Also there is the problem of interest on loans. There is a moratorium on paying back for three months, but the interest is still there for which we ask the government a waver. And we ask the banks to support us by a capital infusion of 20% in order to restart our businesses.”

Banks

In Vietnam the Haivan Group is working with the bank to reschedule its debt. “Basically we pay the same amount but over a longer period. Also for the next three months we do not need to pay any interest and after this period it will be decided per month what to do, pay the full amount or only interest. Also we can take out a zero per cent interest loan to cover 50% of the salaries for the next three months. This is a huge help for us, because we have problems in paying our employees.

In Spain the Government also helps out with the banks. Luis Pedrero: “The government has issued a guarantee on loans for 80% for one to five years. There is also the possibility for a one year moratorium on the capital. There is one problem because the maximum amount is set on 25% of revenues in 2019. For most companies it can be enough but for businesses with intensive capital investments it is not enough and then it can be difficult to survive. We are requesting the government a new line of investment for this.”

During the webinar Busworld Academy launches several questionnaires. The first one was about the expected turn-over this year of coach companies compare to last year. The outcome was not surprisingly that more than 50% expects the turnover will be less then 20%. Only 5% of the respondents foresee a turnover of 80 to 100% compared to 2019.

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Dandamudi Satish Kumar
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29-04-2020-
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