BostonCoach Raises Fuel Surcharges In Katrina's Wake

Chelsea, Mass.-based BostonCoach—like other chauffeured transportation companies plagued by gas prices near or above $3 per gallon across the United States—has adjusted its pricing structure to reflect recent increases in gasoline prices, said president and CEO Jonathan Danforth.

He would not disclose specific surcharge levels, but said it was based on "a fuel surcharge matrix implemented earlier this year that outlines trigger points for both upward and downward modifications to the fuel surcharge, based on retail gasoline prices."

"Given the rising costs of fuel, we felt that implementing the current fuel surcharge was absolutely necessary for BostonCoach to continue to provide superior levels of service to our customers," Danforth said. "We implemented this matrix so that our clients have definitive parameters of the potential impact, both positive and negative, that changes in gasoline prices will have on the fuel surcharge."

Clients are assessed the surcharge as a percentage of their fare. Stops while en route and waiting time charges are factored into the equation, he said. "When gasoline prices fall within a certain range the fuel surcharge is set at a particular rate. The amount of the surcharge fluctuates both upward and downward, according to changes in the gasoline price per gallon over 30 consecutive days, to reflect sustained trends in gasoline prices. This is similar to the fuel surcharge matrix used by many other leading companies, such as FedEx," Danforth said.

BostonCoach uses rates published weekly by the U.S. Department of Energy to determine the national average gasoline price.

Washington, D.C.-based Carey International has not recently increased its per-trip fuel surcharge, said president and CEO Devin Murphy last month.

"Following the Hurricane Katrina disaster, we are monitoring fuel costs and analyzing their impact on our business. It is important to do this in conjunction with our present pricing," he said. "We have no immediate plans to increase pricing." Carey charges a flat $5 fuel surcharge per trip that is not adjusted on a per-trip basis, Murphy said.

When dealing with its corporate customers, "Carey will always honor its contractual commitments with its clients," Murphy stated, "and present any changes in pricing to them through individual meetings and a CEO announcement. Communication is the key. Customers do not like surprises. Obviously, we routinely review pricing upon renewal of any service agreement, but it's important to note that higher fuel prices are affecting everyone."

BostonCoach has notified all corporate clients of amendments to its fuel policies, Danforth said. "We believe it's important for our customers to understand our pricing structure, and we are sensitive to the impact rising costs may have on them and their organizations. BostonCoach directly contacted corporate clients to notify them of the change, detailing the potential upward and downward movement of our matrix-based fuel surcharge, making necessary contract amendments and explaining the rationale behind the decision. The fuel surcharge also is described to each customer at the time a reservation is made," he said.

Since instituting the surcharge, Danforth said, fuel is treated as a separate discussion in all rate negotiations. "Doing so removes the volatility of the fuel market from the equation and allows our customers to see the true cost of our service," he said.

Murphy doesn't expect higher fuel costs to impact Carey's earnings and other areas of performance in a major way. "Higher fuel costs will have a minimal impact on Carey's financial performance and none on its service quality. They will impact more heavily the company's service providers and their financial picture, and we are sensitive to this issue, as we are to the impact raised costs are having on our clients as well. We will work with them to offset as much of the higher costs as we can without losing business," he said.

Neither does Danforth expect BostonCoach's performance to be affected. "BostonCoach is fully committed to providing our clients with superior ground transportation experiences that exceed their expectations, so in no way will rising fuel costs impact BostonCoach's performance. Quality service, safety, reliability and timeliness are the hallmarks of our business, and we work very hard to ensure that these core values are never compromised," he said.

Dav El Chauffeured Transportation and Empire International officials did not return calls seeking comment.

The federal Energy Information Administration's "Short-Term Energy Outlook," released on Sept. 7, indicated that the most likely scenario for oil supply is a return to normal operations by sometime in December. By this month, experts expected all but about 900,000 barrels per day of crude oil refining capacity is expected to be back, with some incremental crude oil price pressure to remain for up to three months from the time of Katrina's landfall—a forecast issued before Hurricane Rita's Gulf Coast landfall late last month.

"Barring any other man-made or natural disaster, such as Hurricane Katrina, oil prices are expected to come down some 40 cents per gallon at the pump over the next several months," said Rockville, Md.-based Oil Price Information retail pricing director Fred Rozelle.

"Reasons are that wholesale prices are falling, demand has dropped off nationally and damage from Katrina wasn't as bad as at first thought, including to pipelines which are operating again," Rozelle said. Also, some environmental restrictions have been relaxed to allow oil to flow again, he said, but added it "was hard to say" how long restrictions would remain modified.