Fuel savings offset by higher operating costs: Transport firms

Singapore Airlines said that it regularly reviews fuel surcharge levels.
Singapore Airlines said that it regularly reviews fuel surcharge levels.ST PHOTO: STEPHANIE YEOW

It may seem obvious that transport companies are the first to benefit from cheap oil but many firms say they are unable to pass on the cost savings.

This is because other costs, such as labour and rent, are also rising at the same time.

Despite a 1.9 per cent cut in public bus fares last month, private operators say that they cannot follow suit. They told The Straits Times that savings from lower diesel prices are offset by rising labour and overhead costs and cannot be passed on to consumers.

Konsortium Express and Tours executive director Joe Lim said that diesel savings for his company's coach services to Malaysia are "not that significant".

Mr Lim, who is also president of Singapore's Express and Excursion Bus Association, added that overhead costs are always increasing, and labour costs rise by about 10 per cent per year.

"With higher expenses, we don't benefit from the lower cost of diesel," he said.

LITTLE BENEFIT TO FIRMS

With higher expenses, we don't benefit from the lower cost of diesel.

MR JOE LIM, Konsortium Express and Tours executive director.

 
 
 

Grassland Express and Tours operations manager Steven Chew said that while cheaper diesel eases expenses, maintenance costs for the 40 buses in his fleet have gone up by close to 20 per cent over the past year.

"Most of our coaches are from Germany, so the parts are very expensive," he said, adding that salaries have also increased by 10 to 15 per cent, as the labour shortage makes it difficult to attract applicants.

Another reason fares cannot be lowered, he said, is that demand for coach services is seasonal, and "during the low period we have to cover losses in revenue".

Mr Wong Ann Lin, executive council chairman of the Singapore School Transport Association, said that some school bus operators already operate at a loss, as the fares they charge are too low for their operating costs.

"The oil price helps, but I don't think it will affect fares," he said.

It is a similar story for firms in the logistics sector, which relies on transport and includes delivery companies.

Mr Wilson Loh, director of PTC-Xin Hua Transportation, said that operating costs are high as his drivers deal with chemicals, and need special training. They attend courses which his company pays for. "There is a decrease in petrol and diesel prices, but we have to stay put on our pricing," said Mr Loh, who has 300 employees.

Fuel, however, is one of the main costs for airlines, which means that the low oil price would give their bottom lines a big lift.

Some Japanese and Hong Kong airlines are already dropping their fuel surcharges to pass savings on to their travellers.

But Singapore Airlines was non-committal when asked if it was planning to follow suit.

In a statement, SIA said that it regularly reviews fuel surcharge levels, and "whenever changes are decided upon we announce them to the market".

The last time SIA adjusted its fuel surcharge was in February last year, when it cut surcharges by between US$5 (S$7.15)and US$83.

A version of this article appeared in the print edition of The Straits Times on January 25, 2016, with the headline 'Fuel savings offset by higher operating costs: Transport firms'. Print Edition | Subscribe