Covid slams brakes on school transport business in UAE
Industry calls for government stimulus to support companies; restructuring suggested by analysts.
School transport companies are passing through a critical phase and facing an uncertain future if the government doesn't come to their rescue through a bailout package, industry officials say.
Analysts and industry stakeholders said the coronavirus outbreak wreaked havoc on the sector as they lost their business after schools were closed for normal operations in the last quarter of academic year 2019-20. However, they fear that the industry may fall into a deeper crisis if immediate remedial measures are not taken to ensure the smooth flow of operations in the new academic year.
They said distance learning is going to be a new normal for some time and it will continue to adversely impact the school transport business in months to come. So, only a government stimulus plan can avert a disaster by bailing out the industry.
"Some of the companies have already left the industry as there was no business since April. However, most of the school transport service providers are still struggling to bear the cost of fleet maintenance or passing, as well as arrange funds to pay visa costs, staff salaries and clear government dues to retain their trade licences and permits," an industry official told Khaleej Times on Saturday.
Most of school transport service providers such as School Transport Services (STS), Pace Education Group and Gulf Pinnacle Transport (GPT), among others, announced a big relief for parents by scrapping third-term transport fees to ease their financial woes in the wake of the coronavirus outbreak after the Knowledge and Human Development Authority's directives.
Crisis in the offing
As schools are gearing up for the new academic year in September, transport service providers have shared their concern that schools are unlikely to resume normal operations, which will continue to dent their business in coming months.
"We are not sure about the prospects of the school transport business in the new academic year as authorities concerned are still considering different proposals for resuming classes in September," said Sachin Gupta, general manager of Gulf Pinnacle Investments (GPI), the UAE subsidiary of Gulf Pinnacle Logistics, which is the owner of GPT.
Elaborating, he said e-learning lessons, education in different shifts and on alternative days are some of the options under consideration.
"The school transport business will take an adverse hit under all these options and needs government support to sustain their operations," Gupta said.
GPT has a fleet of more than 300 buses transporting over 7,600 students from 13 schools. The company bagged first place in the Roads and Transport Authority's prestigious Dubai Award for Sustainable Transport in the "Transport Safety" category during the 2018 awards ceremony.
Ganesh Sivaraman, head of GPT, said school transport service providers will have to bear additional cost of operations, spend more to ensure social distancing and safety measures in line with government advisories.
"The safety of students is our top priority and we are ready to accept the challenge. However, it is a great challenge to meet all expenses with no revenue generation at all," he said, adding that the company has retained its bus drivers and other support staff in these difficult times to ensure the smooth flow of operations in the new academic year.
Bankruptcy on cards
Mukhtar Ahmad, owner of Wadi Swat Passenger Buses Transport, said the school transport business is no longer a feasible option under the present scenario as more than 50 per cent of existing companies are going to close down their operations.
"Some of the companies providing school transport have already been bankrupt due to a sudden dent in revenues in the past four months due to distance learning. We sent staff on leave to cut down expense but still we have to pay for their visa, medical and tickets," Ahmad told Khaleej Times on Saturday.
"We have a fleet of around 100 school buses to facilitate thousands of students from their school and colleges to their homes, but now it seems difficult that the company will sustain its operations if the present situation persists in new academic year," he said.
To a question, he said transport service providers that have their own fleet are in serious trouble compared to those who run their operations on rental buses.
"Some companies returned the school buses hired on rent when the crisis began in March. Some of them find alternatives such as converting their fleet into less regulated segments such as staff or labour transport services. But school transport service providers that have a permanent fleet are unable to exercise these options," Ahmad said.
Bailout to rescue industry
Gupta said the government should consider a stimulus plan to ease the financial woes of school transport service providers.
"A stimulus plan should include a discount in staff visa renewals, permits and registration or renewal of buses as usually we do this exercise annually during the summer season. Unfortunately, our revenue and cash flow were badly impacted in the last school term and it would be of great help if the government offers a relief package to this vital sector," Gupta said.
Ahmad echoed similar views and said the government should relax certain conditions.
"We need direct and indirect government support to sustain our operations. The school transport business is tightly regulated to ensure the safety of students; however, the government should give some fee concessions in Dubai-Sharjah permits, relax the latest models condition and ease the school bus colour rule for the time being," he said.
"Every school bus costs up to Dh12,000 extra to comply government guidelines. Now, we may have to spend more to ensure social distancing in new academic year. The government should give discounts in its fees and charges and relax some of the regulations so we can sustain our operations in coming months," he said.
Restructure business model, advise experts
Analysts and experts said school transport companies are facing serious challenges and they need a helping hand to survive this difficult times. However, they must look into the ways to restructure their business model to generate more revenues through their transport fleet.
Dr Kiran Nair, assistant professor at Abu Dhabi School of Management, said considering the current economic situation, it will be tough ask for any government to bailout all sectors. Hence, the onus lies on every industry to find an alternative revenue model to sustain itself in present challenging environment.
"School transportation companies can explore other income-generating opportunities like advertising. They can rent out spaces on school buses to advertise different brands for a set period. The revenue generated here should be enough to cover up for lost/unpaid students' transportation fees," Nair told Khaleej Times.
"On the side of the government, they can help these school transportation companies recover the lost revenue during the lockdown period by giving conditional permission to run advertisement campaigns on school buses for a limited period," he said.
Saad Maniar, senior partner at Crowe UAE, said the sector needs to be restructured under the present scenario.
"For school transport business to survive they need to restructure their business model to reduce the operating cost and release liquidity in the business," Maniar told Khaleej Times.
"It shall be the fittest of things for them to be supported by the financial institutions or emergency funds to be able to survive a long-crisis period till school recommences," he said.
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