As the price of gasoline soars, many folks are finding more fuel-efficient ways to commute to work.
But for people who make their living putting miles on their cars, it’s hard to escape the pinch on profit-margins.
With the average cost of gasoline hovering above $3 a gallon in Spokane, according to American Automobile Association statistics, local taxicab and delivery companies are feeling the pinch from their ever-increasing bottom lines. Local prices are almost 60 cents more per gallon than a year ago.
Some are choosing to pass on those prices to customers, sometimes in the form of fuel surcharges, while others hope to weather the high costs or make them up by picking up more customers and delivering more packages. Some are looking at high-tech options for making their vehicles more fuel efficient, or simply replacing their fleets with fuel-efficient cars.
Some are simply choosing to bail out of an industry that is becoming less profitable.
“We haven’t changed our rates in three years, but we’re going to be going in that direction here (soon),” said Mich Lane, general manager of the Spokane-based TransX cab. “We’ve been gauging gas prices on a daily basis, hoping it’ll come down.”
“It’s a difficult business to begin with,” he added. “The profit margin on the dollar is not very high.”
Spokane is an anomaly because little government regulation means taxi drivers here can easily pass their costs to customers. In most cities, the municipality controls the rates they charge, said Harold Morgan, director of education for the Maryland-based Taxicab, Limousine & Paratransit Association. The business nationwide has become less profitable for drivers, most of whom are independent contractors who pay a fee to a dispatch company, resulting in a shortage of drivers, he said.
In contrast, delivery and limousine companies in the U.S. are able to more easily increase their rates, he said.
In Spokane, cab drivers need only give the city 15 days’ notice of their intention to raise rates, but they are free to raise them as much as they want, said Steve Parker, deputy sealer at the city’s Weights and Measures department, which calibrates meters for the city’s registered taxis. They can tack on fuel charges without giving the city any notice.
And some companies are doing just that.
Parker, who has seen cabs come through with 50-cent-surcharge notices posted on the dash, said several companies also raised their permanent rates last year, mostly because of high gas costs.
Passing on those costs is exactly what drivers should be doing to stay in business, said Axel Raven, who owns a taxi business with four independent drivers. His drivers, who pay him a $75 rate per shift and keep everything above that, haven’t passed gas costs to customers largely because of worries about elderly passengers on fixed incomes.
But in the delivery business, passing on costs is not always as easy as it sounds. Customers who sign contracts with delivery companies sometimes refuse to help pay for those costs, said Teri Griffin, an owner and operations manager of the Spokane-based City Parcel Delivery.
City Parcel Delivery pays its independent drivers extra to compensate them for gas costs, but when customers refuse to give the company extra, that eats into profit margins, she said. That amount they give to drivers keeps going up.
“We try to take care of our drivers because we need them. So we try to pass the fuel charge up to them,” she said. “Some companies are trying to make a profit with the fuel surcharge. We’re just trying to stay equal.
Another delivery company is doing everything it can to keep from passing on gas costs to customers, weathering what it hopes is just a rough spot in the long run.
“We’re taking it a little bit in the shorts, but it’s forcing us to work smarter,” said Bill Grilli, owner of Coeur d’Alene Delivery Service.
Despite gas costs for the service that have increased about 45 percent over the past three months, Grilli said he believes in looking at the long term, not only short-term profit margins.
Other companies, like Spokane Cab, say they can’t really raise rates because they are already the most expensive cab service in town.
Bob Beare, president of the Spokane Owner Driver Association, a nonprofit working under Spokane Cab, said Spokane Cab has resisted instituting a surcharge because he considers it an insult to passengers, who already enjoy high-quality service.
“A lot of our customers have also been a little more generous with their gratuities as a way of helping,” said Beare, who has driven a taxi for 16 years.
To avoid pricing his company out of the market, Beare said he would watch what the other cab companies do with their rates, but “if it gets up to $3.50 a gallon, we’re going to have to look at a rate increase. Everybody is going to have to.”
“If the oil companies are going to take an extra five bucks a day out of my pocket, well, who’s gonna pay for that?” he asked. “Eventually, the public is going to pay for that.”
In the meantime, his drivers have been working longer shifts trying to make up the lost profits, he said.
That’s something that drivers across the nation are also doing, Morgan said.
Technology has also proven a useful tool in reducing drivers’ time at the pump. And while no local companies reported seriously considering hybrid cars – mostly because they’re too expensive or aren’t large enough – they are doing other things to increase fuel efficiency.
Lane, from TransX, said he is considering a device that connects to the vehicle engine and tells the driver when the vehicle is losing gas mileage. It shows the driver that filling the tires with air or getting a tune-up, for example, will improve mileage.
Despite attempts to dull the pain at the pump, some drivers are bailing out of the business.
The number of registered cabs in the city has declined from 70 this time in 2004, to 50 last year and 42 this year, Parker said.
But, Beare said, the full-timers who see it as a true business are still driving. They’re looking at it as just a rough time.
They’re hoping, he said, that “the milk and honey is just around the corner.”