Are Bus companies making a killing?

[whole diary]

[old original]

Over the past few years every time bus fares have increased the main reason was "rising fuel prices"., but has anyone one seen any reductions now fuel is the best part 2/3rds the price it was 6 months ago? 

I'd like to think this might be the start of it..

http://www.firstgroup.com/ukbus/devon_cornwall/travel_news/news_initiatives/?item=24391&conf=0

..but as they only started running these 2 days previously, I don't think they count!!

[ChrisB]

Hmm, I think fuel hasn't dropped that much has it? 30p-ish from the top price? so nearer 4/5ths than 2/3rds....? (20ish% rather than 33%ish drop)

I suspect the companies will take the chance to increase their (almost non-existent) profit margins. All these Bus Passes (which councils do not pay the full seniors fare for) need to do more than cover the cost of carrying the holders!

[JayMac]

In Bristol, after a campaign and consultation process last year, First simplified their walk-up fare structure with flat single fares based on distance. ^1.50 up to 3 miles, ^2.50 up to 6 miles, ^3.50 over 6 miles in the Inner Zone and ^4.50 over nine miles within the Inner/Outer zone. They also reintroduced a ^1 three stop hop.

Zones: http://www.firstgroup.com/ukbus/bristol_bath/assets/pdfs/tickets/Bristol_Fare_Zones_Map.pdf

They trumpeted the fact, at the time these new fares were introduced, that multi use Day ticket prices in Bristol and Bath would not increase, and that some Season and young person/student fares would be cut.

However, in December, one of the most popular products sold by First in Bristol, the Inner Zone Day ticket, was increased in price by 10%, from ^4 to ^4.40.

Another large increase at the time of the fares consultation was the increase in the First West of England Day ticket from ^7 to ^10. Accompanied by that near 30% increase was a massive reduction in the area of validity. The ^7 First West of England ticket purchased in the Bristol/Bath area used to cover every First Bus operation from Hampshire to Cornwall (First Hampshire, First Dorset/South Somerset, First Somerset & Avon (inc Wiltshire), First Devon & Cornwall). The new ^10 Day ticket only covers Bristol, Bath, Wiltshire and Somerset. Also, if you buy a ^10 Day ticket in Somerset there's a different, non-reciprocal, area of validity. Buy it on a 'Buses of Somerset' service and it only covers those BoS services.

[LiskeardRich]

I saw something that answers this question recently on First Cornwall Facebook when a customer asked the same question.

The simple answer is that First buy all their fuel at a set price for a set period well in advance, so what we pay at the pumps isn't what they are paying, and they are paying at higher prices due to their contract.
It means whether the prices go up or down they keep paying the same rate during that contract period.

[ChrisB]

It's called 'Hedging' - all companies do this generally where a commodity forms a great deal of their costs - whether fuel, or other commodity eg coffee for coffee sellers, etc.

Forward contracts for supply at certain dates. Anything up to a year ahead. Re fuel, one expected OPEC to cut production once the fracking took off in the USA, but for reasons known only to them, production of oil has stayed up high, thus oversupply & down came the prices unexpectedly.

Now, you'd expect further forward contracts to be struck now at today's prices, wouldn't you? We'll have to wait & see....