karmacarrier 13 November 2010 7

I stumbled onto this site by accident. I’m impressed by the quality of both the informed and uninformed comment. I’m game to test the waters. Here’s my opening gambit. I’d like to revisit the taxi issue. I’ll do my best to respond seriously and intelligently to comments:


Another Government-sponsored review of the taxi industry has just been completed; making it the third or fourth major review of the industry in about the last 10 years. This latest review has been a monumental effort, taking more than 12 months from start to finish. It commenced in August 2009 and Price Waterhouse Coopers handed the final report to the Minister in September 2010.

So what did Canberra get for all this effort?

Firstly, PWC should be commended for constructing a report that successfully provides Government with a solution to the problem that it needs to solve. Unfortunately, the solution is a political one, rather than one that will actually achieve any improvement to Canberra’s taxi services. But this isn’t PWC’s fault – it was tasked with solving a political problem rather than a perceived service delivery one.

Based on the report, Canberra can expect Government to release about 50 more taxi licences over the next eight months; and about 10 each year after that. Obviously, this is fewer than proposed by some review participants; and it is clearly more than taxi industry participants think the market can support. From a Government perspective though, if nobody is entirely happy then they’ve probably struck the right balance.

On the face of it, this solves the problem. But what are the real implications?

The PWC report acknowledges that taxi industry incomes are already below community norms. But it suggests that more taxis will produce a level of service that will implicitly lead to higher taxi usage. The belief appears to be that each new taxi will not only generate new work sufficient to make it financially viable on its own, but also that the overall growth in usage will raise the income levels of all the other taxis as well.

The reality is likely to be somewhat different.

Unlike the taxi networks, which have a guaranteed income stream from the taxis that pay (regardless of the prevailing economic conditions) for access to their booking and despatch services, each taxi driver’s income is totally dependent on how many customers he can pick up in a shift. Commonsense suggests that more taxis will reduce the number of customers that each driver will be able to pick up. So, individual taxi driver incomes will drop. Noting that PWC has assessed a representative taxi driver’s present income at about $25,000, it’s not unrealistic to expect that a lower income next year will see some drivers leave the industry. It is less realistic to expect that a prospective income of less than $25,000 will attract many replacement drivers.

The first real implication is that the number of taxi drivers is more likely to decrease rather than increase. Future failure to address this basic attraction and retention issue will see further service problems arise.

The other group of taxi industry participants who actually rely on income from taxi users are the people who operate the taxis. Some of these people also drive their taxis.

Those taxi operators who don’t drive are likely to be the first affected by a reduction in fares incomes and a loss of drivers. If lowered incomes reach a tipping point where business viability becomes critical, these operators will explore all possibilities to minimise expenses. This could involve avoiding workers compensation or other insurance costs; or minimizing preventative vehicle maintenance. Some may make unsound commercial decisions that keep them in business a little longer, while others will leave the industry before that happens. A number have already taken this step – and their taxi licences have not been taken up by new entrants. In either event, the number and/or quality of taxis actually in operation will be compromised. Government is presently holding a number of taxi licences that could be picking up customers now; instead, all that they’re picking up is dust.

The group of taxi operators who also drive their taxis are likely to be last group affected. PWC estimates that they account for about 70% of taxis currently in operation. They will be the last affected because they have the inherent flexibility to personally do more driving and, theoretically, to gain a larger income. In addition, as a final option, they have the capacity to shed drivers and further increase their own driving opportunities. While shedding drivers might seem an odd response to a contracting business, the reality is that an operator/driver can focus on high demand times of the day and achieve, in a single extended shift, an income equal to the aggregated income of two shifts otherwise split between himself and a driver. This also enables him to legitimately reduce a range of variable expenses including fuel, maintenance and workers compensation insurance. The immediate result is that the operator/driver stays in business by working longer hours and by having his taxi off the road in lower demand times. The overall outcome is that a driver loses his job, the operator forfeits any work/family balance that he previously had and the taxi service is only available for 12-13 hours each day instead of the 20-21 hours that it presently operates. And this outcome has the potential to affect up to 70% of the taxis. This has obvious societal and taxi availability implications.

What can Government do to avoid this happening if, in fact, it has any real interest in having a reliable and sustainable taxi service?

Obviously, it could test all the negative perceptions that sections of the community have of the taxi service. This hasn’t been done. It could do this through an arms length customer satisfaction survey of a large cross-section of local residents and visitors. This could present a clearer picture of the overall performance of the taxi industry.

Secondly, it could conduct its own, or an arms length, study of the specific problems raised by interest groups relating to the airport, restaurants, hotels and late night transport services; as well as how these are impacted by traffic and public transport issues throughout Canberra. This hasn’t been done.

And, if these studies were to confirm that Canberra doesn’t actually have enough taxis to meet the demand for taxi (as opposed to public transport) services, then it would need to honestly address the income reduction issues that would inevitably arise within the taxi industry. Otherwise, any improvements could be short-lived.

The challenge for the Minister, before making a decision on the PWC report, is to step outside the narrow political focus that has been a feature of the review to date. Alternatively, we can all look forward to the imminent major review into why Canberra doesn’t have any taxis operating at night or on the weekend.

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7 Responses to Karmacarrier?
karmacarrier karmacarrier 6:04 pm 14 Nov 10

Snarky again. I’m sure that you’re right about increasing fares and getting more customers. That’s the philosophy behind the Silver Service fleet. But there was a time when you could leave fares untouched and also increase the customer base. This was achieved by the Elite fleet a few years ago. Elite drivers offered all the things you mention, minus the upgraded car. Price remained the same (because overheads weren’t increased) but Elite drivers delivered better service in better presented cars. Problem is that Aerial closed it down. Maybe it was too competitive for the Silver Service fleet, which was almost entirely owned by Aerial officials at the time. Anyway, there is now apparently a $20,000 franchise payment imposed by Aerial for new entrants to the Silver Service fleet. Kind of distorts the arithmetic. Maybe too much water being taken out of the river by middle men.

Snarky Snarky 10:40 am 14 Nov 10

karmacarrier said :

Moving to a conventional employer/employee arrangement has its attractions. But current fares are structured to exclude normal employee entitlements like holidays, sick pay and super. These would add over 30% to the fares revenue needed to cover labour costs. Only way to get it is to increase customers or raise fares.

I’m going to go out on a limb here and suggest that you can raise fares, and maybe increase the customer base too.

Right now taxis are seen as an alternative to the bus for ad hoc travel arrangements. Only a faily small proportion of taxi journeys are preplanned to accommodate drinking, late nights etc and other reasons that you’d otherwise use your own car for. So the comparison people make is to a bus. Then, when the taxi they’ve ordered is late, doesn’t know where it’s going, stinks, has a driver with bizarre or offensive opinions, driving skills or body odour you can bet they’ll feel ripped off. They have been.

But if a taxi can be shown to be an alternative *to a car* the whole game changes.

Your own car is clean (well, as clean as you want anyway), instantly available, and navigation can be on-demand if you don’t know where you’re going. It’s probably got a decent sound system too.

A taxi can be all these things – as far as physical presentation goes, Silver Service vehicles hit all these marks. And they’re generally prompt and reliable. And you pay more for them. When I was driving Silver Service I *never* had anyone complain about the extra cost. Most passengers commented on the smooth ride, plush leather interior and the fact I turned up on time.

I don’t think it’s necessary to turn all taxis into Statesmen or Ghias, but a better class of car with a salaried, knowledgeable driver who shows up when required and provides a pleasant journey could command a higher fare. And the reliability and comfort of these journeys, once teh word gets round, will translate to more passengers.

Parking in the city is a constant bugbear on Riotact. If it was possible to take a trip as nice as your car without worrying about parking, and knowing the vehicle will be there when you want it to come home again, you’d have a significant number of takers for a taxi alternative.

karmacarrier karmacarrier 8:00 am 14 Nov 10

enrique hits the nail on the head. Long shifts are already not unusual. Imagine what can happen with 50 or so more cabs competing for the same slice of pie.

fgzk is also right – it’s all too long, including the time taken to complete the review.

dvaey gets a tick about hours of driving and about incomes. Problem is that the driver needs to pay for the rent of the taxi as well as his own income. The current split is 50/50. So he needs to take $1000 a week to be able to keep $500. Oh, and there’s also the GST portion which he has to pay to the Tax Office. So he really needs to take $1100 before he can keep $500. And this is representative of a driver working 4 shifts a week. And if fares were lower would there be more use of taxis? Don’t know – but how do you make fares lower when presently fares only deliver non-viable incomes? PriceWaterhouseCoopers estimate fixed and variable taxi operating costs at $115,000 per year – excluding driver incomes. That’s 57,500 kms @ $2 per km to break even before making $1 income. All in the PWC report – but I can’t find it anywhere in Govt sites. Only using my borrowed draft copy.

Snarky has some good ideas, though not original. Moving to a conventional employer/employee arrangement has its attractions. But current fares are structured to exclude normal employee entitlements like holidays, sick pay and super. These would add over 30% to the fares revenue needed to cover labour costs. Only way to get it is to increase customers or raise fares. Lowering fares on speculation that more taxi use will happen is a bit optimistic. And how much would you lower them by? Cabcharge and other electronic payments are customer-dictated, not driver-dictated. Customers can take 10% off their cost by paying cash. But about 70% seem to find the convenience of non-cash payment worth the 10% added charge. Makes sense for business travellers – but go figure on the non-business user. Drivers always prefer cash – that way they get income immediately rather than waiting for the taxi operator to pay their non-cash portion. Niche market travel is a possibility. It is happening at the Canberra Hospital – but Aerial is using one of its MO-plated vans rather than a taxi or group of taxis. So little hope there for taxi operators or drivers. Murrumbateman and Bungendore have there own taxi services – one taxi in each. They can’t make a living income either and have made approaches over many years to be allowed to operate in Canberra. Low patronage bus routes are a standout possibility. Talk to the TWU. Others have done for more than 20 years. One bright point though – access to the airport has improved out of sight. The Russell project has already reduced the City to airport elapsed time from 20 mins to 10 mins. I hope this doesn’t deteriorate after the project is completed.

Thanks to all. A good start. Maybe Govt can make the PWC report available to the public. That would really open up a thing called public consultation.

Snarky Snarky 12:25 pm 13 Nov 10

What an interesting post, Karmacarrier. I agree with everything you’ve said.

I’ve been on both sides of the cab, as it were, as a driver and a passenger. I don’t drive any more because, while I often found the job pretty interesting and often entertaining, the money’s crap.

As you’ve noted there are already more taxis than drivers, and some drivers are rubbish.

Personally, I reckon a large part of the problem is the way the driver’s set up is structured (not owner-drivers, just regular drivers). Every driver is self-employed. They lease a vehicle per shift for 50% of the takings each shift. Each driver is then responsible for finding the fares they need to earn a shift’s wage. They have one important resource – the radio booking system – to find a large proportion of these fares, and the rest are off the various ranks and street hails. If you’re in the wrong place you won’t get a fare. That’s it. There’s a degree of freedom this way of course – since you’re not answerable to anyone during the shift you don’t necessarily need to be on time, or know where you’re going or even have a clean cab (although if anyone ever calls you on it you’ll have some serious explaining to do, and might lose your radio access and hence a big chunk of income).

But if drivers were waged employees a couple of possibilities open up. First, a guaranteed reasonable wage (and by “reasonable” I mean say $30K, which is far superior to $25K as quoted) would a. increase the pool of interested drivers and b. provide a much degree of leverage over their performance and presentation. Aerial and CabExpress know exactly where the cars are, all the time. They know whether the meter’s going and whether a job’s been accepted and a driver is late. A salaried employee with the real threat of dismissal for either not following rules or for incompetence would smarten up quick-smart if they want to keep their job.

But how do you pay the increased salaries? By finding more fares. Some ways to do this could be for either Aerial/CabExpress (ACE from now on) or the taxi owners as part of a cooperative to form a business to do just that, and let the drivers get on with driving, not hunting for jobs. And this new hypothetical company could find more fares by: lowering fares by not using the Cabcharge system and thus cutting 10% of the cost straightaway to passengers; providing contracted services to niche groups (eg regular scheduled daily or weekly pickups etc for disabled/wheelchair passengers to/from home and selected locations eg hospital/shoppping centres/clubs and the like – a micro-bus service really); bus-like runs late at night or peak hour in the mornings (passengers buy a ticket or joing a club with a card, salaried driver drives a regular bus-route type run to collect and deliver); intracity freight deliveries; regular long-distance rides to Murrumbateman, Bungendore, Qbyn etc; Contracted passenger ferrying for special events, functions etc.

All these contracted arrangements can be arranged and negotiated beforehand and ahead of time by company sales reps and the existing radio booking system. And because we’re talking taxis here there’s a degree of flexibility that can be gained (“need two extra vehicles this morning sir? I’ll get two extra drivers over in 30 minutes”) that you can’t get with a diesel bus.

The bus-like routes could be well handled by the maxitaxis. If they were company-run they’d have one or two central depots where they could be cleaned and stocked with (say) newspapers and bottled water for sale to passengers.

Some of these functions might impinge on ACTION although I personally doubt taxis carry as many passengers as ACTION now. But there must surely be ACTION routes that are fiercely unprofitable to run a bus on that a few taxis could take up instead for less cost than a 40-seater diesel bus with 2 passengers.

Finally, Canberra’s big weaknesse: The crap traffic to and from the airport. Sorry, can’t think of a simple fix for this, but it’s a major MAJOR pain – I always avoided the airport at peak times (ie when I was needed the most) because it simply took too long to get to and from the airport to get a fare. That particular ball is in the government/airport’s court I’m afraid; and
The huge change in traffic volume between peak and non-peak hours. Salaried drivers get right round this again – you don’t put drivers on when they’re not needed, simple as that.

Anyhow, these are a couple of my ideas rough and unpolished. Comments?

dvaey dvaey 11:43 am 13 Nov 10

enrique said :

I ask him to turn around and go the right way and he apologises, tells me he has been working non stop *since 3:00pm the previous day* and is very tired! Woah – that’s a 15 hour shift already!

At this point I’m starting to worry a bit for my safety and his. After chatting to him for a while (more to keep him awake then anything else) and getting groggy slurred quiet and confused responses it turns out that he leases his cab and can’t find anyone reliable to work for him – thus he works like this to get a basic income.

It was situations like this in the ol days, that led to stricter laws for heavy vehicles. Maybe taxi drivers need similar rules introduced, log-books, mandatory maximum driving shifts, etc. If its good enough for a bus/truck driver, it should be good enough for a cabbie.

I find the $25,000 figure interesting. That works out to an average of $500/week. From memory cab fares are about $2/km, so the cabbie has to have a fare for about 3hrs (at 80km/hr) per week to cover wages.

I have to wonder, if the fares were lower, surely thered be a lot more use of taxis. $2/km is about what a truck driver gets paid, to haul a semi-trailer across the state, it seems a bit strange that a cabbie cant make a profit charging that amount to drive a little sedan, on LPG.

fgzk fgzk 10:46 am 13 Nov 10

The taxi gambit. I think your gambit is too long. Cheap short shots, sacrificing pawns preferred. You wont win the mully with this opening.

enrique enrique 8:42 am 13 Nov 10

I’ve observed that one of the things you speculate on is already happening. I’ve gotten into a few cabs of late and most drivers speak of working long shifts. The worst case I saw was a few weeks ago…

Pickup time was 6:00am for me… 6:10 rolls past, no cab… 6:15 cabby calls me, sounding blurry and confused, is “on the way”, 6:20 cabby turns up. I jump in and tell him the destination – he then starts driving in the opposite direction. I ask him to turn around and go the right way and he apologises, tells me he has been working non stop *since 3:00pm the previous day* and is very tired! Woah – that’s a 15 hour shift already!

At this point I’m starting to worry a bit for my safety and his. After chatting to him for a while (more to keep him awake then anything else) and getting groggy slurred quiet and confused responses it turns out that he leases his cab and can’t find anyone reliable to work for him – thus he works like this to get a basic income. The clincher for me was when we were near the destination and he asks a quick question to clarify exactly where I wanted to be dropped. Not a minute later mid conversation he asks the exact same question! =) We’re laughing at this point and he says “see, I’m so tired I can’t even remember what I’m saying” – I’m laughing nervously thinking “phew, I made it without getting killed”.

Sign of things to come people – remember to bring your helmets with you when you order a cab in Canberra in the next few years.

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