WALL, N.J. — School bus contractor Student Transportation of America Inc. has locked in lower fuel costs for the next fiscal year, officials for parent company Student Transportation Inc. (STI) announced on Wednesday.
Fuel prices have decreased significantly in recent months. Diesel, for example, dropped below $3 per gallon last month for the first time in more than four years. At the end of January, the price of oil was about $50 per barrel.
For STI, the lower fuel prices improve the company’s “at risk” portion of fuel exposure, according to CEO Denis Gallagher.
“Despite the fact that we lock in a portion of our fuel cost prior to the start of each school year on a normal basis, we have decided to take advantage of the recent price declines and to lock in a similar portion for next fiscal year," Gallagher said.
Officials said that STI expects its fuel expense for the current fiscal year, 2015, to be in the range of 7.5% to 7.7% of revenue — down from 8.8% in fiscal year 2014.
STI currently has fuel mitigation features in about 60% of its revenue contracts, providing some protection against market price increases.
"Some of our customers are enjoying the market price decline, since a portion of our fuel mitigation consists of the outright purchase of fuel by those school districts,” Gallagher said. “Our remaining fuel mitigation is tied to reimbursements associated with fuel price caps and collars, which act as insulators against swings either way.”
Gallagher added that while STI is still somewhat exposed to fuel price increases, “we also benefit to some extent with a decline in market fuel prices. For that reason, we have been locking in with fuel vendors for fiscal year 2016 and expect an additional reduction in fuel expense levels next year."
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