Creating a Win-Win Relationship
Presented by:
John McCarthy
GO Airport Express
THE BEST SERVICE IS ACHIEVED WHEN
BOTH THE AIRPORT AND THE
OPERATOR ARE SUCCESSFUL IN
ACHIEVING THEIR GOALS
Common Goals
• Offer Quality Service to
the customer.
– Achieve Satisfied
Customers and Repeat
Business.
• Provide Quality
Employment for Local
Residents
Airport Goals
• Achieve efficient use of
the airport resources i.e
curb and terminal
space.
• Maximize Airport
Revenue
Operator Goals
• Maximize Return on Investment
What are we looking for in quality
service?
•
•
•
•
•
Professional Driver
Attractive, Clean, Late Model Vehicles
Frequent Service
Easy Access to Service
Economical Pricing
Professional Driver
• Screening of Applicants
– Choose the best.
• Training and Retraining
– Invest in the driver and
maximize driver
retention.
– Offer an attractive
compensation package.
Attractive, Clean, Late Model Vehicles
• Invest in new vehicles
to meet demand
• Invest in a preventative
maintenance program
• Invest in in-vehicle
technology
–
–
–
–
Drivecam
Mobile Data Terminals
Credit Card Swipes
GPS
In-Vehicle Technology
Frequent Service
• Minimize Waiting Time
• Manage Load Factor
Economics.
Easy access to Service
• Invest in state of the art
reservation system.
– Offer online reservations
through attractive
website.
– Offer portals and links to
travel sites.
Brand Service for National Recognition
Maintain Efficient and Responsive Call
Center
Have Professional Staff at Airport
Ticket Counters
Have Professional Staff at Airport
Curbs
Economical Fare
• Price Service to be 50% to 70% of Cab Fare
• Maintain Economical Load Factor
LOOKING AT THE ECONOMICS OF
THE OPERATION
Transportation Industry
• Large Capital Investment
• Low Profit Margin
• Steady Cash Flow
Airport Ground Transportation
• Business models vary based on specific market
conditions.
• Profit margins of a healthy company range
from 5% to 8%.
• When services were regulated, Utility
Commissions looked for margins of 5% to
10%.
The economics of operating one van.
MICRO ANALYSIS OF INDUSTRY
Revenue
• $120,000 per year; $2,400 per week; $400 per
scheduled day.
• Vehicle works 25 days per month (six days per
week)
• Carries 3.5 passengers per trip – 7 passengers
on a round trip – 21 passengers per day
• The average fare charged is $19.00 per person
(Assume competitive cab fare is $30 to $38)
Driver’s Wages (35%)
• $42,000 per year
– Including:
• Taxes
• Benefits
– Excluding
• Gratuities
• Equates to a straight time hourly rate of $9.25.
Vehicle and Equipment (6%)
•
•
•
•
Depreciated over 5 years.
$34,500 Cost of Van
$800 Radio
$600 Mobile Data Terminal – GPS – Credit
Card Swipe
• $600 Drive Cam
Fuel (11.5%)
• 10 Miles Per Gallon
• $4.00 cost per gallon
Maintenance (6%)
• 45,000 miles traveled per year
• 16 cents per mile including maintenance, body
repair, cleaning and tires.
Additional Expenses
• Insurance (4%)
– Annual premium including $10,000,000 umbrella
• Transaction Expense (4%)
– Cost of taking a reservation or selling a ticket is
approximately $0.75.
Administration (12.5%)
• Includes:
– Hiring
– Training
– Dispatching
– Accounting
– Technology
– Facilities
– Etc.
Airport Fees (6%)
• Equates to 10% on all business departing the
airport.
How Do We Share The Pie
Annual Per Van Numbers Based upon
$120,000 Revenue
Expenses / Profit
$7,200.00
$6,000.00
Driver
Fuel / Maintenance
$15,600.00
Vehicle
$42,000.00
License / Insurance
Transaction Expenses
$8,400.00
Marketing & Sales
Admin / Overhead
$7,200.00
Airport Fees
Profit
$5,400.00
$7,200.00
$21,000.00
Annual Per Van Numbers Based upon
$120,000 Revenue
Expenses and Profit
6%
Driver
5%
Fuel / Maintenance
35%
13%
Vehicle
License / Insurance
Transaction Expenses
7%
Marketing & Sales
Admin / Overhead
6%
Airport Fees
5%
6%
18%
Profit
Sharing the Revenue
• If one area needs a larger slice of the revenue,
then other aspects of the operation get a
smaller slice.
• Mandates often require a larger cut of the
revenue.
– Vehicles being required to use alternative fuel.
– Drivers having to be paid a prevailing union labor
rate.
– Increasing Airport Fees.
Growing the Revenue
• Increasing the size of the revenue pie allows
for bigger slices.
• Ways to increase revenue:
– Increase the Fare
– Increase the Passenger Volume
– Increase the Passengers per Trip
Roles Airports Can Play in Increasing
Revenue
• Promote the Shared Ride Service
– Press Releases about Holiday Travel
– Airport Website with link to operators website.
– Announcements in terminals promoting shared
ride service
– Directional Signage to Shared Ride Service
– Provide Airport Ticket Counters for the Sale of
Shared Ride Services
– Loading Zones and Counters in convenient
locations
Airport Directional Signage
Counters and Loading Zones
Making the Investment
• Short and Long Term Investments
– How much does one want to invest in a business
that will last only three to five years?
– How much does one want to invest in a house if
they are only going to live there three to five
years?
– How many will take a job with a career horizon of
only three to five years?
Making the Investment
• The longer the agreement
with the airport- the
greater commitment of
the operator.
– Long term agreements
generate larger capital
investments.
– Today’s environment calls
for greater investment in
vehicles, technology and
personnel.
Making the investment
• Long term airport and operator partnerships
have been successful!
Return on Investment (5 Year Contract)
Capital Investment
Vehicle
$ 33,000.00
Related Equipment
$ 3,500.00
Working Capital
$ 6,000.00
Other Technology
$ 1,500.00
Total $ 44,000.00
Annual After Tax Earnings
38% Tax Bracket
$ 3,700.00
Average Annual Return on Investment
Over 1 Year
8.5%
Return on Investment (3 Year Contract)
Annual After Tax Profit (38% Tax Bracket)
$682
Average Return on Investment
Annual Return on Investment
1.69%
Conclusion
• Airports and operators need to be partners in
making a shuttle service successful.
• The quality of a service is dependent on the
economics of the operation.
• Long term commitments generate greater
capital investment.
Conclusion
• Revenue must be sufficient to cover:
– The cost of providing quality service.
– Airport Fees
– Return on Investment