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June 01, 2007  |   Comments (0)   |   Post a comment

Q&A: Gallagher Sees Wealth of New Contractor Opportunities

Denis Gallagher, chairman and CEO of Student Transportation of America, says prospects for school district conversions are high. He also believes the proposed merger of First Student and Laidlaw provides his company with opportunities for growth.


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Denis Gallagher, chairman and CEO of Student Transportation of America (STA) of Wall, N.J., continues to grow his company through acquisitions and conversions.

Since 2000, the company has added more than 2,600 buses to its fleet.

Last year, STA had the fifth-largest contractor fleet in North America [see the Top 50 Contractor Fleets survey in the June/July 2006 issue] with 4,017 buses in its fleet.

But STA could move up a notch this year because of the pending merger of First Student and Laidlaw Education Services.

Gallagher is viewing the proposed merger positively, believing it will provide his company with opportunities to add to its corps of managers and to pick up new contracts with school districts.

Gallagher recently discussed this issue and others with SBF Editor Steve Hirano.

How is the 2007-08 school year stacking up for Student Transportation of America?
DENIS GALLAGHER: The 2007-08 year is shaping up to be another good year for both our U.S. and Canadian operations. This past year we saw big growth, and we will have several new locations opening this coming fall. Watch for the announcements.

STA has been growing its business through acquisition, bid and conversion. Are you focusing more strongly on any one of these three strategies right now?
Our makeup is about 60 percent acquired and 40 percent divided between bid wins and conversions. We believe we can continue that model as we look for quality growth opportunities. Our plan is to maintain that percentage and pick up the conversion pace.

How is the rising price of buses and fuel going to influence the discussion about whether it’s more efficient for a school district to run its own buses or contract out the service?
We continue to believe that contracting out student transportation services makes sense to school districts by allowing them to know their true costs and to maintain control over the contractor through the contract provisions, which force contractors to be efficient.

STA converted the Altoona Area (Pa.) School District last year. Do you see growing opportunity for conversions these days?
Yes, Altoona has been a great success for us. It was a case of working together with the district employees and the administration to retain employment and economics for the district employees, along with our expertise, which created the savings they needed. Those two items are key to a successful conversion.

We have seen a definite increase in conversion activity in our operating regions. We also monitor this on a national basis and have seen our competitors completing conversions as well.

At the National School Boards Association convention in San Francisco in April, we heard from many school board members who, quite frankly, are not even aware that contracting is a viable alternative.

I would say in my 30 years in this business, this is the most optimistic I’ve been in regard to conversion opportunities.

If the FirstGroup acquisition of Laidlaw goes through, what impact will this have on the school bus contracting business? On STA?
I’ve said before, when No. 1 and No. 2 merge, all you get is a bigger No. 1. There are several ways to view this merger: first, from an industry view and, second, from an investor point of view. I’m not positive about either of these at this point.

I do believe it will create many new opportunities for us at STA. We’ve been contacted by many new districts and even current management from the merging companies who clearly know there will be layoffs. Both are welcomed and have opportunities to be part of the STA family.

Driver recruitment and retention remains a challenge for school bus operators. What strategies has STA adopted to address this challenge?
Our philosophy has been consistent. We operate as a local business. We try very hard to make our operations and our culture a family business — not my family — the STA family of companies. We are so fortunate to have such caring employees who are dedicated to providing safe service each day. Our employees help set the standards they ask all other STA employees to live up to. Customers want consistency, the same driver on the same bus with the same route each day. This is one of the keys to a successful operation — consistency and safe, on-time service, every day.

Children being left on school buses continue to be an issue for this industry. How has STA responded to this chronic problem?
This is such a no-brainer. It has happened to us and many other contractors and school operated fleets as well. There is absolutely no excuse for this — none! Unfortunately, I’ve seen drivers with 20 years of experience get fired for just being lax in that moment. It’s painful to everyone. It’s about training, training, training. It’s about reinforcement every day. Bells, signs and whistles work, yes, but this is about drivers and attendants who have to take their jobs seriously and check the bus after every trip. Again, in my 30 years, I can’t remember such a time where this has been such an issue. Lastly, I believe in “kids watching out for kids.” Kids know if someone is on the bus sleeping and they should tell the driver as they get off the bus.

The deadly bus crash in Huntsville, Ala., has stoked the issue of seat belts on school buses. Are your school district customers expressing greater interest in seat belt-equipped buses?
Yes, for sure! Those are terrible accidents and will always re-start the discussion. I’m someone who has always questioned why we don’t have seat belts.

This is an issue that isn’t going away. As an industry executive for 30 years, I’m at a loss why the feds haven’t made the change. I do know that history shows our primary issues are outside of the bus — the danger zones — and I do know the configuration of new seats will decrease capacity and increase cost dramatically. There are many questions and many opinions. That’s just mine.

How has STA addressed the growing concern of security of school buses against terrorism?
We live in an open society. We know there are bad people out there. Our job is to get our students to school — safely and on time. We have had experts on the subject (for example, the California Highway Patrol) speak to our operating managers on a train-the-trainer basis over the last few years on this subject. We try to have open dialogue with our schools and our local police departments to be part of “the community” and we incorporate these awareness programs into our driver training programs. We are also improving our communication between drivers and the terminals.

How important is reputation to a school bus contractor?
We are proud that since our company’s inception in 1997, we have retained 96 percent of our contracts through renewals and bid extensions. If a district chooses to go low bid, not even the lowest responsible bidder, and doesn’t care about service references, you’ll get what you pay for.

What are the greatest challenges facing school bus operators these days?
School bus operators have faced challenges before — labor costs, fuel, increased vehicle cost, insurance, facilities being squeezed out of towns. On the other end, district’s budgets are tightening and there’s a demand for more and more service for less and less money. I guess that’s why I love this business, there’s always something to work on.

What’s the greatest challenge facing STA these days?
Our challenge at STA besides everything I’ve mentioned above, is just trying to stay who I’ve always wanted us to be — a local hometown, yet nationwide, company due to our experience, with a great team, doing a great job and such that we are just part of the regular daily landscape.

In addition, attracting new management to our growing company is something we are concentrating on right now. We believe it’s a great place to work, and we’re excited about our business and the industry.


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