Featured in The Wall Street Transcript’s Best CEO Interviews of 2015
Denis J. Gallagher, Founder, Chairman and CEO of Student Transportation Inc. (STB), told TWST this year one of the company’s largest expenses, the price of fuel, has been declining, increasing margin for this transportation company.
“From my 40 years of experience, we’ve seen fuel as low as 5% of revenues and as high as 10%. Last year, fiscal 2014, fuel was about 8.8%, fiscal 2015 was just around 7%, and we are projecting it to be probably closer to 6.5% for fiscal 2016. As fuel prices come down, it does create a nice increase in margin for us, and we are expecting it to put an additional one point or 1.5 points on our margin for next year,” he said.
He said STB doesn’t hedge the price of fuel, but at-risk fuel has resulted in one of the lowest prices the company has ever paid for fuel.
“We don’t do any hedging, but we work with our largest vendor, Mansfield Oil, to actually lock in a contract prior to school for a portion of our fuel. And then a portion of it is at-risk, where we are in some very rural markets around North America, and they have to go to the pump. But for last year and the year that we are looking forward to, the at-risk has been the lowest price that we’ve gotten,” he said.
Gallagher also said STB is moving toward cleaner hydrocarbons, which he says improves the company’s image.
“I want to also mention that I made a conscious decision to make a shift toward propane, which is liquid petroleum gas, and it has been a tremendous marketing advantage for us. It is 60% less carbon monoxide in and around schools. The bus is quieter. Blue Bird was the first manufacturer that came up with this new product, and I studied a lot about the engine and the fuel injection system in it. We are running some CNG — compressed natural gas — vehicles in California, but the infrastructure cost for those is very expensive, whereas with propane we can literally set up tanks in our own facilities and our own yards, and fuel our own vehicles there. Propane is a great alternative fuel; it’s considered green technology and green fuel. The young Millennials like the fact that it’s less carbon monoxide in and around school. And it is really starting to lower our fuel costs as well,” he said.
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