Management & Operations

'PERFECT STORM' Hits Charter Operators, Says Krapf

Posted on March 1, 2005

Dale Krapf, co-owner and manager of a family transportation business called Krapf Bus Companies, has a wide-angle perspective on public transportation.

His Exton, Pa.-based company provides charter, shuttle, transit, paratransit and school bus services, operating a total of more than 1,100 buses.

Diversification is a relatively recent development, however. The company was founded in 1942 by Dale’s father, George, as George Krapf Jr. and Sons, and it focused on school bus transportation until the early 1980s.

At that point, the company was expanded and diversified, first with a charter bus division — Krapf Coaches Inc. — and then with transit and paratransit contracts.

Dale, who manages the family business with his brother Dallas, learned the business from his father, starting as a young boy washing buses after school. Dale has passed along his enthusiasm for the business to the third generation of Krapfs, who play a key role in the operation.

Krapf recently spoke with METRO Senior Editor Janna Starcic about the company and how it’s navigating the challenging business climate of the 21st century.
Your company is highly diversified. You have charter and shuttle operations as well as transit, paratransit and school bus contracting. Has that diversification been an outgrowth of opportunity or a conscious decision on your part to enter into these different markets?
Dale Krapf: It was a conscious decision. In the early 1980s, we were only a yellow school bus company and were not far beyond the third generation of the family business. My brother Dallas and I decided that we wanted to be a strong regional player rather than a national player. To grow our business regionally, we decided that we would go into two other markets. We did that systematically, beginning our charter operation in 1983 and then our paratransit operation in 1984. Once we made that decision, other opportunities presented themselves.

Like many private bus companies, yours is a family-based operation through multiple generations. Did you ever want to do something outside the family business?
No, I never thought of doing anything else. That’s the simple answer. I was always one of those sons who wanted to follow in the footsteps of his parents. When I went into the school bus business on a full-time basis in 1967, we had approximately 50 school buses. And, of course, now we run more than 1,100 buses, and that’s a mixture of charter, transit, paratransit and school buses. So we’ve grown considerably since then. That’s all I ever really wanted to do. I’m very happy with my decision.

How was your charter business in 2004 compared to 2003?
My personal opinion is that the charter market for the last three years in our area of the country — and I think I have to specify that because I think it’s different in some areas — has been flat. I saw maybe a little upturn in the fall of 2004, but for the most part, I did not see any significant increase in the charter business last year.

Has it returned to pre-2001 levels?
Absolutely not. To give you an example, our charter company was running 53 coaches prior to 2001. Today, we actually have two different divisions, but we’re running about 35 coaches, so we’ve downsized that much.

I think charter bus companies have gone through what I often call the “perfect storm,” to steal a Hollywood film title. In the late 1990s, we dealt with deregulation, and by the year 2000 we had a significant downturn in the economy.

At about the same time, we had a significant devaluation of our used equipment. As an example, when we started in the charter business in 1983, a new motorcoach cost us, give or take a few bucks, $150,000. We used it for 10 years, and we sold it for $105,000. Today, a new motorcoach costs you, give or take a few bucks, $410,000, you use it for 10 years and you’re lucky to get $30,000 or $40,000 out of it.

Since 9/11, we’ve also dealt with significant insurance increases, significant fuel increases and significant costs related to employees. It’s just been one thing after another.

How has the rising cost of fuel affected your bottom line, and have you made adjustments to rates?
Yes and yes. It’s had a major impact on the bottom line. Eighteen months ago, we were paying 80 cents for a raw gallon of fuel, without taxes. Today, we’re paying $1.30 for the same fuel, if we’re lucky. Even when you add a fuel surcharge, and you can’t do that very often because it turns off the customer, there’s a huge lag time in the use of the surcharge, so you have to absorb that. You either absorb that or chase your customers away.

On a related topic, you were talking about the rising insurance premiums. How have you been impacted by that?
Our insurance premiums have increased in excess of 60% over the last three and a half years. That’s with a reduction in our actual limits for excess insurance. Again, by the late 1990s, insurance had hit some all-time lows, so part of that is a readjustment. After 9/11, however, the very next year we got a 30% bump, and we’ve seen significant increases since that time. So, the insurance has gone up significantly. Again, you can’t pass all that on to the customers, but you can’t absorb it all either.

Going back to Sept. 11, what do you hear from your customers in terms of their willingness to travel now?
I believe that the customers have gotten over the issues of 9/11 as it pertains to coach travel, but the other piece of the perfect storm that I mentioned earlier is that we’re also transitioning demographically. Our customer base is different. My parents were very interested in traveling by motorcoach, and if they were still living, they would be in their late 90s. But the grandparents of today have become accustomed to, in many cases, traveling by air or by cruise ship. So, we have to reinvent our industry. We can't rely on the senior market like we once did.

How has your charter business accommodated this change in demographics?
We’re going to do a much more aggressive advertising campaign, and it’s going to be to a different clientele. At one time, we were 60% senior-oriented, but we’re redirecting our efforts to corporations, colleges and universities.

There was a day where our sales force would sit in the office and just handle the phone and our buses were booked 70% of the year, but that’s no more. We’ve just recently hired a very strong outside sales person.

These difficult times, which have not gone away, and if any operator tells you they have, he’s lying, require that you be aggressive and yet run as lean as you can. At the same time, we’re spending additional monies to reinvent our business.

Now, how do you see the near future for the charter industry?
Charter operators really need to change the way they’re doing things. We’re all hoping, and when I say we, I mean those of us in the charter companies, particularly here on the East Coast, we’re hoping to see low air fares go away. The airlines have been a major competitive force over the last couple of years. We used to have a lot of travel between the Philadelphia area and Florida in the winter, whether it was a senior group or a school group. Now when they can jump on a plane for $120, they would just rather do that. But I think there’s a balance in everything, and we’ll get back to that balance in the not-too-distant future.

What are your thoughts on the proposed consolidation of the United Motorcoach Association and American Bus Association?
Personally, I really do not think that that’s going to happen. I think there’s a huge philosophical difference between the ABA people, who are basically line-run folks, and the UMA people, who are basically tour and charter.

The memberships of the two different organizations have different needs. The ABA people work closely in alignment with the public sector, whereas the UMA people are most closely in alignment with the private sector. I think consolidation of a somewhat fragmented industry is a great idea, but I’m not sure that the merger of UMA and ABA is something that will happen.

Are you heartened by the Federal Transit Administration’s willingness to send out a Dear Colleague letter and brochure clarifying the rules of charter service, especially in regard to limits on transit agencies?
Absolutely. That was a terrific victory for the National School Transportation Association. As you know, I’m currently the president of that organization, and that culminated a two-year effort, which included conversations with FTA Administrator Jenna Dorn. I think it’s an area that has needed to be made clearer to all parties, and I think it was a terrific effort by our folks and a huge victory. I see a lot of positives going down the road.

How do you view the federal government’s efforts to improve the security of over-the-road coaches? Should more funding be provided for equipment and operational enhancements?
I think it’s a good thing that there’s more effort being put into security. Quite frankly, those people who run the over-the-road coaches, like the Greyhounds of the world or Peter Pan on the East Coast, do not know who their passengers are. They probably need a bigger security effort than those of us who are in the charter business. I think the folks who are represented by ABA probably need more dollars than those of us who are represented by UMA. There’s also tremendous need for more security training and more security dollars for the school bus operations. That’s an area that’s been totally overlooked, and those folks, which include my own company, need help in that regard.

Do you think the driver shields that they installed recently in some Greyhound buses are a good idea?
I read that Vince Lombardi once said, “When I go to bed at night, I always lock my bedroom door.” And the interviewer replied, “Well, what do you do that for, you’re inside your own home?” And Lombardi said, “Well, if it gives me that couple extra seconds to react, it may save my life.” I think that’s exactly what the shield does for the driver.

What would you say is your company’s greatest challenge these days?
Running at a profit. That’s the greatest challenge. I go back to my perfect storm comment. There’s no way in a low-margin business that you can absorb all these costs increases — new equipment, insurance, fuel, devaluation of old equipment and all the costs associated with putting a well-trained, certified driver behind the wheel and paying him on a daily basis. You just can’t do all these things and not have a huge effect on the bottom line.

We stay in this industry because we feel as though it has a strong future. In general, it has been a wonderful industry.

We certainly have gone through our share of difficult years, but I expect 2005 to be a better day, and I think there will be better days ahead. We just have to stay the course while, at the same, focus on reinventing ourselves and our industry.

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