- First's latest trading statement shows that revenue growth fell from 4% in April to 0.5% in September, while Arriva, Stagecoach and Go Ahead's revenue continues to grow by around 5%. He cites that generally these companies have not undergone significant service cuts to reduce overall daily mileage by 4-5%, though concedes Arriva slashed its mileage by around 3%.
- 'Severe pruning of routes and staff' is thought to not be as prevalent in Arriva, Stagecoach and Go Ahead as it has with First, who've made around 1,000 employees in their bus division redundant.
- Questioning why First has faired less well in revenue growth, he puts forward the idea that First's dominance in urban environments (c80%), such as Manchester, Bristol, Leeds etc could be to blame. Their peers operate in urban areas too, but have significant proportions of their operations in the shire counties as well as rural communities, which in some cases have been less-hit by the recession.
- But then National Express' West Midlands operation, centred in the second-largest urban area in the UK, has posted better results than that of First. He's right to say that it would be too easy to overplay the urban factor. If so, then what is the problem?
- He looks at an alternative explanation which is that Arriva, Stagecoach and Go Ahead have chose to generally not withdraw large numbers of services as the recession started, choosing to stand still for the short-term, with cuts only benefiting the short-term. Respectable cuts could harm long-term developments of their businesses. They're permitted to 'thin-out' their routes rather than undertake wholesale withdrawals.
- First's response to the recession has been the reduction of cost. As previously mentioned, 1,000 staff have gone, 4-5% reduction in daily bus route mileage has been saved, with further cuts scheduled. He understands that this has been ordered from their HQ in Aberdeen, with little room for individual managing directors' ability to react as they deem fit. "...at the precise time when skillful local management is needed, managerial and supervisory staff are being axed". He concludes by saying that the sheer size of many of First's subsidiaries means a very local solution is difficult to implement.
It does seem true that where the other large groups have given autonomy to each of their individual bus operations, First has opted for the more centralised approach. Not affording local operators the leeway to react uniquely to their own circumstances, could ultimately be the difference between revenue growth being 0.5% or 5%. Perhaps First's pay offers are too large? At 3% plus a host of add-ons, the latest payrise in South Yorkshire it recently offered has raised eyebrows in the industry as being too generous. Employees there would point to their reduced hourly pay rate compared to other subsidiaries. First would react to the relatively low bus fares they're thusly able to continue offering in the area.
The longer term will show whether the points raised by James Dark are indeed true. If nothing else, the way in which the UK's largest transport operator has reacted to the recession, compared to others of a similar size, will be a good study case for economics students when the green shoots of recovery are in full-flower. (GWB)
