Rise in profits for Stagecoach underlines public's move away from cars

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Petrol prices are rocketing. Congestion is worsening. Parking is aheadache. Sooner or later, the UK's driving public was going to getfed up, or priced out, of the ordeal that driving has become.
And yesterday, just as the price of diesel broke through the£6 per gallon mark – as if to underline the point– Stagecoach revealed the extent of the resulting shifttaking place in UK travelling habits, publishing an 8 per centincrease in annual operating profit thanks mostly to a significantincrease in bus passengers. The company, which operates local andinter-city bus services as well as regional rail franchises, earned£174.4m on sales of £1.76bn, a 17 per cent increase onthe same time last year.
Robert Speirs, the chairman of Stagecoach, said the sharp rise inbus and rail users was primarily due to environmental consciousnessand a new-found concern for personal health. Mr Speirs' conclusionswere based on the results of a survey of 4,000 people that thecompany conducted. It found that nearly half the respondents, 47per cent, were now using their cars less than they did three yearsago. Pollution and an interest in getting healthier were the toptwo reasons cited for the change.
The findings fit conveniently with Stagecoach's strategy. Thecompany has gone out of its way to burnish is green credentials– it made headlines last year after it launched a pilotproject to fuel buses with discarded chip-fat. It has signed a dealwith a small technology group for an additive that increases fuelefficiency, and has also placed a large order for new,cleaner-burning buses.
Today, however, environmental concerns are surely much less afactor than they were when the study was conducted in February.Going forward, people will more likely choose to leave their carsin the garage to avoid the soaring price of fuel. Over the pastyear, the price of diesel has shot up by more than a third to97.27p per litre. Petrol has risen by more than a fifth. Theincreases have been most acute in the past few months thanks to thesoaring oil price.
According to the AA, the spike in prices means that UK motoristsare paying £14.4m more per day on petrol than they were 12months ago. "The £6-gallon would have been an unrealisticnightmare to motorists only one year ago, yet today it is areality," said Edmund King, president of the AA. "Two thirds ofmotorists have already cut back on their journeys and many areslowing down to conserve fuel."
Consider, for example, that at these levels it would cost aneye-watering £264 to fill the 44-gallon tank of the FordExcursion, one of the largest sports-utility vehicles on the road.
Not surprisingly, car use has begun to drop markedly, according torecent Office of National Statistics figures. "Car traffic in theUK has fallen year-on-year in each of the past four quarters ... Atno time in the past 14 years has there been this sort of sustainedfall," said Gerald Khoo, an analyst at Credit Suisse.
There are other motivations at play too. "Factors such as worseningroad congestion and more expensive parking costs are resulting inpeople switching from cars to trains and buses," Mr Khoo said."Improved public transport services [new trains and buses, morereliable and punctual operations] and heightened environmentalconcerns may also be adding to the trend."
Stagecoach, along with rival Go-Ahead Group, are Credit Suisse'favourites to benefit from great numbers of people choosing toleave their cars home. Indeed, Stagecoach is particularlywell-placed because nearly all of its petrol contracts are hedged,or fixed on long-term contrast well-below the market price, for therest of this year.
Brian Souter, chief executive, said the oil price will continue to"focus people's attention" on alternatives. He said: "We arestarting to see a fundamental shift towards public transport. Webelieve there is significant opportunity to attract more people togreener, smarter travel to help them reduce their carbon footprintand tackle climate change."
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