Fuel prices are certainly front of mind for student transportation professionals, so when prices drop, they take notice. Now, contractor Student Transportation of America has taken action by locking in lower fuel costs for fiscal year 2016.
Parent company Student Transportation Inc. (STI) is North America’s third largest provider of school bus service with 12,000 buses operating in the U.S. and Canada. The company will discuss the current fuel environment in the management discussion and analysis for the second quarter of fiscal year 2015 at the quarterly conference call on Feb. 12 at 11 a.m. Eastern. The live audio webcast will be available at www.rideSTBus.com
“We have been asked lately about the decrease in market fuel prices, which we believe will be very attractive news for the company both in this fiscal year and the next. Despite the fact that we lock in a portion of our fuel cost prior to the start of each school year on a normal basis, we have decided to take advantage of the recent price declines and to lock in a similar portion for next fiscal year,” stated Denis Gallagher, STI’s chairman and CEO.
Global markets have seen a significant decrease in fuel prices during the past several months. Prices have been steadily declining since last September, with the price of oil at approximately $50 per barrel at the end of January.
“We have seen some positive impacts on our fuel expense for the three and six months ended December 2014, and expect to see that trend continue in the second half of the fiscal year, which runs through June 2015, based on the current level of market prices,” Gallagher said. “The company anticipates fuel expenses for the current fiscal year will be in the range of 7.5 to 7.7 percent of revenue compared to the 8.8 percent reflected in the fiscal year 2014 results.”
While STI has previously said it is exposed to changes in the market price of fuel, it presently has fuel mitigation features in about 60 percent of its revenue contracts that provide some measure of protection against any price increases.
“Some of our customers are enjoying the market price decline, since a portion of our fuel mitigation consists of the outright purchase of fuel by those school districts. Our remaining fuel mitigation is tied to reimbursements associated with fuel price caps and collars, which act as insulators against swings either way,” said Gallagher.
“So while the company is still somewhat exposed to price increases, we also benefit to some extent with a decline in market fuel prices. For that reason, we have been locking in with fuel vendors for fiscal year 2016 and expect an additional reduction in fuel expense levels next year,” he continued.
