Headwinds & Wipeouts?

Posted on December 17, 2008 by LCT Magazine

TOUGH N' ROUGH IN 2009: If the informal operator cocktail chatter at GCLA is accurate, then chauffeured transportation faces a rough spell heading into 2009. Some operators report selling off unprofitable vehicles and seeing longtime clients wait until the last minute to book reservations. Some even report the worst business climate of all: Silent phones. Many clients appear to be on the brink of deciding whether they can do without a ride to the airport, and instead drive themselves. November will likely be the month considered to be the breaking point, when operators nationwide noticed their first jarring declines in revenue.

Richard Kane was the guest speaker at the GCLA's official Christmas event and meeting held just outside of LAX. Kane offered some sobering facts and stats that underscore the importance of the roles of the NLA, state and regional associations, and LCT Magazine in keeping the industry informed, connected, affiliated, and most importantly, positioned for future prosperity. From Kane:

Operators report year over year revenue declines of anywhere from 5% to 40%. "New York and Boston are getting wiped out," said Kane, referring to the financial industry implosions that have pink-slipped at least 120,000 workers in New York alone.

54% of the approximate 2,100 NLA members own 1-5 vehicles and are the most vulnerable during the recession. If this industry segment don't renew its memberships, "the NLA could get wiped out," Kane said. (California has 350 NLA members).

The universal credit squeeze is working its way throughout the industry, with available credit for equipment and daily operations likely to become increasingly tenuous in 1Q and 2Q of 2009. Kane urged operators to continuously communicate with their banks about credit status and company finances.

Operators need to closely track receivables: "People are not paying as fast, because they are not getting cash and credit as fast," Kane said.

Several operator-members will simply run out of cash during 1Q 2009. Those operators who had a bad financial year in 2008 with flat profits, or none at all, may have problems qualifying for further credit.

Others who say they are up in revenue, or gamely say things are just fine, actually may not be, or are just playing Pollyanna.

To counteract such downward trends, Kane said operators need to tap two key resources: 1) Membership in the network of industry associations that have seen success in staving off costly taxes, fees, and regulations, thereby saving operators money and simplifying their regulatory compliance; 2) Operator-driven educational seminars that present the latest ideas, tactics, and approaches to running a transportation company during a recession. There will be plenty of networking and innovative resources available at the 2009 International LCT Show in Las Vegas on Jan. 26-28, 2009.

If we at LCT had to post a BOTTOM LINE: There is no way to sugarcoat 2009; it will be a dreadful year economically and it will test, reshape, and transform chauffeured transportation like never before. But just like the Internet and dot.coms never disappeared, and indeed thrived, after the 2000 tech crash, chauffeured transportation will follow the same path after a corrective shakeout.

-- Martin Romjue, LCT Editor

 

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