urban bus

Auckland bus passengers are assured of 2 years of industrial peace after drivers agreed yesterday to end a long and bitter pay dispute.

About 600 NZ Bus drivers and cleaners voted by an 80 per cent majority to accept a company offer amounting to a 20c hourly pay rise in three instalments. That will lift the top hourly rate for drivers with at least nine months service to $17.45 now, $18.15 next year and $18.75 in February 2012.

The deal includes a minimum of $560 in backpay dated from July 5 and a $500 contribution from the Auckland Regional Transport Authority to wages lost when NZ Bus locked out 875 workers and suspended all its services for seven days last month.

Although the pay rises are the same as offered in a package rejected by 55 per cent of drivers at a rowdy and emotional meeting three weeks ago, union negotiators welcoming a softening of "clawbacks" sought by Infratil subsidiary, which provides 70 per cent of Auckland bus services.

Auckland Tramways Union president Gary Froggatt said the company dropped its demand to be able to review the jobs of drivers absent because of incapacity for more than two months, and had reverted to an existing three-month threshold. It also agreed to add just 24 hours to an existing 48-hour time limit for submitting complaints to drivers, which was half of what it sought earlier.

The deal retains a new weight limit of 115kg for driver recruits but the unions say that is outside their control as a pre-employment requirement, even though Auckland University of Technology nutrition and obesity expert Professor Elaine Rush believes it will discriminate against Polynesians, with higher average weights than other ethnic groups.

Drivers spoken to outside a Tramways Union meeting at Alexandra Park were generally pleased to have settled up before Christmas, given the added financial strain the festive season puts on families, but one said he believed they should have held out for more money. He believed the length of an agreement locking drivers into what he still considered to be low wages would make the company an attractive sale proposition.

Mr Froggatt acknowledged a general suspicion that Infratil may be grooming NZ Bus for sale, but said that gave the drivers no great concern as they had lost confidence in the company. He said that although hourly pay rates were now higher than that of other Auckland bus company, NZ Bus drivers received just time and a quarter for overtime hours and were determined to fight for time and a half after the new agreement expired.

Company operations general manager Zane Fulljames said NZ Bus was confident it had secured an agreement that would meet the needs "of our customers, our people and the business" and looked forward to rebuilding long-term relations with the four bus unions is it reshaped its operation. "This agreement allows us the stability and certainty to move forward with confidence into the Rugby World Cup 2011 and beyond," he said.

Regional transport authority chief executive Fergus Gammie also welcomed the return of stability for bus passengers.

Infratil's decision to register four key bus services as commercial - which require no regional council subsidy - is being described by the Green Party as the actions of a "virtual monopoly" trying to undermine a new tender process.

But Infratil says it will save the Greater Wellington Regional Council (GWRC) $2.5 million a year, making it a win-win for passengers, ratepayers-taxpayers and its own operation.

Two of the services (Queensgate to Stokes Valley and Petone to Upper Hutt) are contracted services which means they attract a GWRC subsidy.

A third proposed commercial service replaces contracted weekend and night-time services between Wellington and Eastbourne. The fourth is a new route from Johnsonville via Khandallah to Victoria and Massey Universities.

Until now, GWRC has set contracts on a route-by-route basis. But a change to legislation introduced last year means that it is possible to bundle sets of public transport routes into a contract.

That's likely to cause competition among bidders, thus driving down the overall level of subsidy required.

GWRC is about to release contracts for bus routes in the Hutt Valley on this new basis. The contracts will be for eight years, with an option for renewal for a further four years, the long guaranteed period being another incentive for an operator to sharpen its price.

According to a GWRC report, there had been steady bus patronage growth up until 2006 but since then, user numbers have been static of declining, despite higher costs of using private cars, petrol, etc. Bus customer satisfaction levels have also slipped 5 per cent since 2003.

''Information on the operational performance of Wellington's bus services is generally acknowledged by all parties to be unsatisfactory,'' the report says.

Services are dominated by the ''big two'' Infratril's NZ Bus Ltd (Go Wellington, Valley Flyer) and Mana Coach Services account for 98 per cent of the market with NZ Bus being by far the bigger of the two.

A High Court finding from 2006 was that while there was genuine interest from other operators to bid for services in this region, current contracts were too small in size and too short in duration.

A nationwide benchmarking exercise found that contracts involving more than one bidder are 15-20 per cent lower than with a single bidder (97 per cent of Wellington's contracted services attract a single bid).

''While it would be simplistic to conclude that competition for all contracts would reduce prices to this extent, the information does indicate that competition would generate significant downward pressures on prices in Wellington,'' the GWRC's report says.

A switch from net to gross contracts, as the GWRC is now proposing in the Hutt Valley, could enable the council to make savings of up to $4m-$5m each year.

Greens former co-leader Jeanette Fitzsimons says Infratil's registration of the two Hutt Valley commercial services on the eve of introduction of the new system here is ''cherry picking'' of the plum routes.

''They've busted open the contract and made it much less likely there will be a competitive tender for the rest of it.''

While it might initially appear to be a saving for GWRC, with two services no longer needing any subsidy, she says the subsidy required for remaining services with those two prime, well-patronised routes out of the equation, ''are likely to be higher''.

NZ Bus CEO Bruce Emson says the company is making these registrations now ''because of a very narrow window of opportunity''.

''Uncertainly around the [Public Transport Management Act] and regulatory framework has made it difficult to contemplate registration of these services until now,'' he said.

It's regrettable the Hutt Valley tender process is proceeding before the revised legislation is in place.

''We do not want to disrupt the GWRC's tender process, and have chosen to register the two services in their totality, seven days a week, even though this has meant incorporating the unprofitable 'tail' of each service in the registration.

''This means the GWRC will be able to proceed without delay to call tenders for the remaining services ...

He says NZ Bus will ''vigorously compete'' for contract tenders when they are advertised. The commercial registrations are for three years, and Mr Emson says it will take that long to turn them into profit through investment, innovative marketing and excellent service delivery.

Despite the GWRC's 2008 report warning that registration of commercial services could be used as a tactic to disrupt the bundled route approach, Transport and Access Committee chairman Peter Glensor says the registrations are legal, and there are very limited grounds on which the council can decline them.

There is an ''over tender'' process that could override the commercial registration, ''but I don't think it's 'top of the pops' in terms of the way ahead'', Mr Glensor said.

There will be some subsidy for the two Hutt Valley routes, with GWRC picking up the cost of ticket concessions and the taxpayer picking up the cost of SuperGold travellers.

New tenders for Hutt Valley services are expected to be ready in about six weeks.

TARGET SET

Greater Wellington Regional Council is targeting 50 million public transport trips (trains, buses, harbour ferry) a year by 2016-17. The 2007-08 'actual' number of trips was 34.7 million.

Achieving the target will require patronage to increase at an average rate of 4.7 per cent a year, per annum, significantly higher than the 3.3 per cent it has tracked at in the recent past.

The target splits these trips into 25 million peak journeys and the same number of ''off peak'' journeys.

Mike Lee sounds weary. He, along with bus drivers and 80,000 Auckland commuters, is winding down from a long, tough week.

The Auckland Regional Council chairman has already made strong comments about home-grown infrastructure company Infratil, the successful group of investors behind the standstill of much of Auckland's bus system, and he's not finished.

Infratil invests in airports and energy offshore and public transport at home, running buses in Auckland and Wellington through subsidiary company NZ Bus.

On day five of the lockout of the bus drivers, Lee threatened to sack NZ Bus for not fulfilling route contracts, only to find this was not so easy.

The process is more drawn-out than he anticipated.

Lee sounds mystified about the tactics of the "reckless", "clumsy" and "ruthless" men in striped suits who are behind Infratil, the ones really calling the shots over required profit margins and future vision.

Though the buses are back on the street, for now, he says the seven-day lockout, which disrupted life for so many school students and workers, has taken other tolls.

He estimates the region will lose nearly a million passengers from the annual scoresheet, vital statistics which are needed to justify extra investment in public transport.

There's another big impact, too. When you have a dispute such as this, people go away from public transport.

"It's enormously disruptive but they do find alternatives and if they're going back to their cars then, you know, you've got to try to get them back out of their cars.

"There will be a lasting impact."

Lee hesitates at the next question. He's somewhat at a loss, he admits tiredly. He's not quite sure how to fix this problem of ensuring buses stay operating despite employment disputes.

Though this dispute between NZ Bus and its drivers is patched for now, it is only a plaster and could erupt again.

To be honest, Lee says, he has other important things to be doing, such as getting ready for the looming Super City instead of figuring out disputes involving buses.

So when he is asked how he plans to stop such massive disruption again in the future, he is thrown for a minute. "I would much prefer we didn't have this going on but, however, you ask a valid question. What is going to be done about it? "We need to sit down with Arta (the ARC's transport co-ordinating agency) and discuss that very point and resolve on a plan of action, a contingency plan. We can't hand over a mess to the Super City," he says.

Lee says he has been quite shocked at the hardline tactics of Infratil/NZ Bus. The drivers wanted to work to rule while their pay claim was on the table but the bosses locked them out - and, in doing so, locked out Aucklanders. Infratil/NZ Bus have taken such a militant approach, he says, he thinks they have done serious damage to their reputation.

Lee describes the Infratil directors as "guys with Beatle haircuts and striped suits" and "cheery chappies". "You know, if you meet them you're thinking you're dealing with Herman's Hermits, but actually these guys are ruthless operators."

Ratepayers and taxpayers spend around $94 million in subsidies for buses every year - and $58 million of this goes to NZ Bus.

Given the large public subsidies, we asked Infratil CEO Marko Bogoievski whether his organisation cares about bus drivers and Aucklanders.

Bogoievski explains Infratil is a huge investor in both New Zealand and overseas and has been for 20 years. The company's intention is to grow businesses and for them to flourish. He doesn't see how improving and upgrading bus fleets, rebranding buses and schedules, training bus drivers and introducing technology is anything other than a positive for Aucklanders.

He says he understands the havoc the dispute has caused Aucklanders and says this was not an outcome anyone wanted to see, "so obviously you're in the middle of a dispute and it's a live conversation, we're trying to get it resolved".

What about the perception that Infratil directors are ruthless, cold and hard-nosed?

He replies: "We've been around for a long time and we've earned every bit of our positive reputation as a high-quality investor, so the proof's in that really." Infratil is trying to get the best situation in Auckland too, he says. Employees, shareholders and customers of all their services are important parts of the overall equation but they're looking long-term, not just at whether buses run next week.

They have to manage the overall cost of delivering public transport services in the long run, he says.

Every time there is a tender from a local transport authority to run a major bus or public transport service, tenders are given to the lowest-priced operator.

In the process, service levels and the amount of compensation are determined - there is no free lunch for anyone.

He says if you end up increasing cost structures in the medium term, you end up increasing public subsidies for public transport, but that is a policy issue for planning agencies like Arta. Bogoievski also says he believes the bus drivers are quite well compensated relative to their peers.

"The average wage of a driver, if they were to accept our proposal, would be higher than the average wage of a New Zealander."

One of the accusations against Infratil is that they have been lobbying the Government to repeal parts of the new Public Transport Management Act, which would require them, as a commercial operation, to open their books regarding the public subsidies.

Bogoievski says the problem with the Act is that local authorities want to control every aspect of public transport, including confiscating commercial routes that NZ Bus and other operators have been investing in for a long time.

Infratil's preferred model is to let private provision of these services reduce the need for subsidies, "so in effect, Infratil's leading the charge, through NZ Bus, to try to manage the overall cost of public transport to Auckland ratepayers".

Bogoievski says the Infratil directors are not mean people, "no, I think we're pretty average blokes who are just trying to continue investing in New Zealand and we hope we can".

The company stands by its achievements, he says.

"I know it's provocative to refer to merchant bankers sitting in Wellington, but come down and have a look, have a cup of tea with us, we don't look anything like that."

Part of the problem with buses is division over the extent to which public transport should be publicly controlled and run, or whether private operations are best.

For Infratil, obviously private operators must have a big say in how they run.

Others, such as New Zealand urban researcher Dr Jago Dodson, say local authorities have far too little control.

The Brisbane-based Griffith University research fellow warns strongly against any watering-down of the Public Transport Management Act, saying we are already seeing Infratil starting to test its strength in the current dispute with the bus drivers.

Transport Minister Steven Joyce says he is certainly taking a look at the Act because of concerns from NZ Bus and other operators about the ability of councils to contract over the top of commercial services where they are operating successfully and don't require a subsidy.

He doesn't cosy up to anyone, he adds, pointing out that though he has talked to NZ Bus, he's probably talked "way more times" to Lee, "but no one accuses me of cosying up to Mike".

For Lee, the end is not in sight. Joyce has announced a new Auckland Transport Agency which will operate under the Super City, replacing existing Auckland transport entities.

Lee says though the river of public money will flow - "$160,000 a day into Infratil once normal services are resumed" - public control and accountability over it will be weakened by the Minister's new transport authority.

"So when there's another lockout in the Super City, people will ask the Super Mayor what's going on and the Super Mayor will probably have even less power than I do now to get it sorted."

SERVICE CHARGE

The contracting of services for bus routes is a complicated business and though many routes qualify for subsidies, others don't. Ratepayers and taxpayers pay around $94 million in subsidies for buses each year.

Around 26 per cent are commercially run, so don't get a subsidy, but even these will often get a concessionary fare top-up. The bulk of the services - 74 per cent of which are contracted services - are paid for through subsidies.

Even many of the main routes, including the Link bus, and main arterial corridors such as Dominion, Eden and Sandringham Roads, have parts of the service provided through subsidies.

Arta says without the subsidy the number of weekday peak period services offered along Dominion Rd, for example, would be significantly reduced and services after 9pm may not be provided.

More than a thousand Auckland bus workers facing being locked out in a row over 10 cents an hour say they will report for work as usual on Wednesday morning.

Infratil-owned NZ Bus has told the workers, including 875 drivers, that they will be barred from 4am on Wednesday – a move likely to plunge Auckland’s public transport system into chaos.

The lock-out will affect staff at the Metrolink, Go West, Waka Pacific, North Star, Link and City Circuit bus services.

Snapper will not rule out installing its smartcard system on parent Infratil's 705 Auckland buses, despite probably missing out on a deal to provide an integrated ticketing system to the Auckland Regional Transport Authority.

The authority announced last week that it had selected a consortium led by French technology firm Thales as its preferred supplier of a system that would let passengers pay for bus, train and ferry travel using a single smartcard. The system is due to be ready in two to three years.

The New Zealand Transport Agency, which would pay for 60 per cent of the project, hopes the Auckland system will become the rump of a "national integrated ticketing programme".

Transport Agency chief executive Geoff Dangerfield says it "is not starting from a blank sheet of paper", acknowledging existing investment in smart ticketing systems in Wellington and Christchurch.

The agency said that its approach would "provide the potential for individual public transport operators to decide which electronic ticketing or smartcard system best meets their business needs".

Snapper Services chief executive Miki Szikszai would not say whether he believed that gave Snapper the green light to install its system on Auckland buses, regardless of the outcome of the Auckland tender. "We are obviously considering the wide range of options," he said.

After apparently conciliatory comments in the wake of Arta's announcement that it had selected Thales for Auckland, Mr Szikszai questioned the rationale for the investment of tens of millions of dollars by the Transport Agency.

Snapper is believed to have offered to extend Snapper to Auckland at no cost to taxpayers.

"There is a really important question which is not being asked, which is, `Why is an investment being made into a system when one already exists?' There was a statement made by NZTA saying they didn't want to invest into a system twice, and I think we should ask why they are investing once?"

The agency says there are several smartcard-based bus ticketing systems in New Zealand.

"Arta have sought a proven system that will also support rail ticketing." It would report on the appropriate process for operators to fund and provide their own equipment.

SNAPPER IN TAXIS

Snapper will be installed in all 1000 taxis in the Wellington region early next year, says Snapper Services chief executive Miki Szikszai.

The agreement follows a decision by Greater Wellington regional council to issue Snapper cards to 7500 disabled people, who cannot use public transport, for use in taxis.

The council pays for their taxi travel under its Total Mobility programme, costing $2.2 million a year, which is paper-based.

Transport and access committee chairman Peter Glensor says the new system will be far more user-friendly for clients.
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Mr Szikszai says Snapper terminals will need to be adapted for use in taxis. Once they are installed, the public, as well as those enrolled in the Total Mobility scheme, will be able to pay for journeys using Snapper.

It has not been an easy first year for Go Wellington's controversial Snapper card system.

It was intended to be a simple way to catch the bus, but has been plagued by teething problems and technical glitches. Snapper chief executive Miki Szikszai said issues with the card had been resolved and the system was running well.

However, the card has been dogged by complaints since its inception last July. There were problems when the card was introduced because many customers did not realise its $10 price tag did not actually enable them to travel on the bus.

Last September Consumer New Zealand complained that customers were being overcharged, or charged for routes they had not taken, and were being denied bus access when cards failed. In April, more than 100 people were overcharged for journeys owing to a computer glitch, one passenger being charged $97 for a $2.25 trip.

Last month the discount for Snapper users was decreased from 25 per cent to 20 per cent, rousing complaints of a "stealth" fare increase from some bus users.

Wellington solicitor and regular Snapper user Dana Maniapoto said she was concerned by the lack of information available to bus users. "I'm not clear whether it's charging correctly," she said. "With Snapper I am never sure." Maniapoto said while she accepted the decrease in discount, if the discount went down again she would not continue using Snapper cards.

Victoria University student Stephen Hedges said it was "silly" that the system showed him his Snapper balance only when it was down to $10. He was never sure how much money he had left on his card. "If I was overcharged I didn't really notice because they don't tell you," he said.

The cards can be used at various retail outlets and cafes as an alternative to eftpos or cash. However, lack of security has caused concern. The cards don't have a Pin, a name or unique information other than the serial number.

Regular Snapper user Terina Thompson said the lack of security was her major issue with Snapper. ''If it did get misplaced or taken I'm unable to get it cancelled, especially if I'm putting on $60 or more,'' she said.

Snapper's Szikszai said there had been a programme of development since Snapper's introduction, and the glitches in the system had been worked out.

He said complaints from customers that it was hard to work out the balance on their cards were ''confusing''. Szikszai said the cards had no Pin because they were intended for fast, easy transactions. He advised that they should be used only for purchases of less than $35. He said the cards could also be easily registered, which would allow for cancellation and replacement if lost or stolen.

Contrary to information currently on Snapper's website which forecasts a price increase to $15 Szikszai said the $10 price to buy a Snapper card would not be increasing ''at any point in the future''.

He said the Snapper system also enabled a complete reconciliation of earnings for the company. This resulted in nine bus drivers being sacked recently after accusations they had been stealing bus fares.

Soon transfer tickets, child fares and other types of ticket, such as daytripper passes, would be payable by Snapper.

NZ Bus general operations manager Zane Fulljames would not comment, but a company spokesperson said that even with the decrease in the Snapper discount, it was still the same cost as the previous 10-trip ticket

When the rest of the sharemarket rallied from early March, one stock, which had previously traded in lockstep with the market, was left behind: Infratil going backwards instead.

That's because some investors now think the company has a debt problem, the big bogey of the moment. Those investors may well think their fears are confirmed when Infratil reports a hefty bottom-line annual loss tomorrow, probably around the $200 million mark.

But Infratil is no Nuplex with recession-battered earnings. The losses will mostly be paper losses from writing down the value of its listed investments, particularly its 3.3% of Auckland International Airport, and 33% of Australia-based Energy Developments.

Most likely, Infratil will also write down the value of its British airports, which have been reporting mounting losses as the global recession bites particularly savagely in that country.

In a sense, that's all noise. A key number will be operating earnings, which should come in at about $350m, up 11% on the previous year. The underlying earnings of its key assets, such as its 51% stake in TrustPower and 66% of Wellington International Airport, continue to grow at a healthy pace. But the value of Infratil's assets does matter in the context of its bank debt.

Rob Bode, an analyst at First NZ Capital, says one of Infratil's three banking covenants is that shareholders' funds must be above 40% of total tangible assets.

In early April, Bode calculated this ratio could have fallen as low as 43.3% from 49% in September last year. Infratil had kilometres to spare within the other two operating earnings-based covenants, he reckoned. Later in April Matt Henry at Goldman Sachs JBWere conducted a similar exercise and estimated shareholders' funds were sitting at about 48%.

Of the company's main $520m banking facility, a third is rolled over each year and $174m was duly extended in February. A presentation the company gave to analysts this month showed $327.4m net bank debt at March 31.

Given how gloomy the mood in global financial markets was in February, I would have thought if Infratil really was in trouble with its banks, it would have shown up then. Assuming the banks keep rolling over debt, the first major refinancing event Infratil faces is in May 2011, when $112m of its listed bonds mature.

Infratil has a total of about $750m in listed bonds, including nearly $240m in perpetual bonds, all of which rank below its bank debt, which no doubt gives its bankers considerable comfort, but which also led analysts to the conclusion Infratil is over-geared in the current environment.

All of Infratil's bonds are trading at significant discounts to face value so issuing replacement bonds now doesn't look like a viable option, but who knows how sentiment will have changed by 2011.

Acting chief executive Marko Bogoievski says the bank rollover was uneventful. "There wasn't really even a conversation," he says, although the margin Infratil has to pay has gone up, in line with margins everywhere. Nevertheless, Bogoievski says investor perception is a reality which the company must address. Rather than raising equity at huge discounts, as other companies have been doing, Infratil has been selling assets.

In April it sold Fullers Ferries for $40m, yielding an estimated $12m profit over book value, and later that month it sold properties for $23.1m, a $4.1m profit over book value.

Bogoievski says Infratil will probably exercise its put option to sell its 90% stake in Luebeck Airport in Germany back to the city. That will yield about $60m.

Another possible source of funds is Infratil's warrants which lapse in July. If exercised at $1.62 they could raise $136.7m. The shares mostly traded above that level last week, increasing the likelihood the warrants will be exercised.

While Infratil clearly has plenty of time to sort out its balance sheet, Bode's argument that the company needs to position itself to take advantage of current conditions is compelling. "Arguably, Infratil's model and the market are probably much more prospective than they have been for a long time," he says. With a deregulation-minded government, likely opportunities for private participation in infrastructure projects, and the exit of private equity buyers prepared to pay over the odds for the sorts of assets Infratil favours, "the market is ripe with opportunity".

Rob Mercer at Forsyth Barr suggests Infratil also consider selling its stakes in Energy Developments, Auckland Airport and Austral Pacific.

* Jenny Ruth is a freelance journalist and a columnist for The Independent.

Auckland ferry company Fullers is assuring its thousands of passengers and 174 staff that service levels and fare concessions will not be cut under new ownership.

That includes free travel on NZ Bus services throughout mainland Auckland for holders of monthly passes for the Waiheke ferries, Fullers chief executive Douglas Hudson said.

His assurance followed an announcement yesterday by Infratil - which also owns NZ Bus - that it had sold the 11-ferry Fullers operation for $40 million to Souter Holdings, the private investment arm of Scotsman Brian Souter. Mr Souter was also chief executive of multinational public transport operator Stagecoach, which sold its New Zealand bus and ferry operations in 2005 to Infratil for $250 million.

Since that sale, he had returned to New Zealand to buy Howick and Eastern bus company in Auckland and a 74 per cent stake in Mana Coachlines in Wellington.

His New Zealand-based executive chairman Bill Rae said there would be no retrenchments or restructuring of the Fullers operation and his firm had full confidence in the management.

Campaign for Fairer Ferry Fares spokeswoman Cathy Urquhart, whose group was continuing to push for a reversal of fare rises imposed last year on the Waiheke Island runs, said she feared having to deal with yet another tier of decision-makers and wondered about the future of the free bus travel for monthly ferry ticket holders.

Infratil's sale of Fullers ferries is part of a retreat from underperforming businesses to repay debt.

The infrastructure investor yesterday announced that subsidiary NZ Bus is selling its interest in Fullers for $40 million to Souter Holdings, majority owned by Stagecoach co-founder Brian Souter. Infratil will retain its NZ Bus operations in Wellington, Hutt Valley, Auckland and Whangarei.

Infratil says the deal was part of a programme of divestments which would realise more than $100 million in this financial year. The money would be used to repay debt of about $1.2 billion including infrastructure bonds, perpetual bonds and bank debt. Infratil executive Tim Brown said the $100 million also included exercising the right to sell Lubeck Airport in Germany, worth about $60 million, and the sale of some bus depot properties in Auckland.

"In this environment we do have to look at recycling some capital and cut back on where you can't see them generating strong returns. The short term for us is going to be debt repayment but in the medium term there are various opportunities."

He would not comment directly on one analyst's suggestion that Infratil's other underperforming European airports could be next but said it was hard to run with a loss on a low-return asset in the current environment. Around 75 per cent of Infratil's investments, including Wellington Airport and TrustPower, were performing well, Brown said. "You have to say to yourself, can you have 25 per cent of the business not generating a return? In this type of environment you can't."

Souter's purchase of Fullers sees Brian Souter back on deck there after four years. In 2005 Stagecoach NZ sold its bus services and ferry business to Infratil for $253 million. Souter Holdings, which operates Howick & Eastern buses in Auckland, also has a 74 per cent ownership of Mana Coachlines in Wellington.

Brown said the Fullers sale signalled the intention of NZ Bus to focus on developing its core bus business. "The bus business is definitely one we like and we're enthusiastic about it."

Fullers' sale price reflected the market. "It wasn't a great price but I think it was a fair price," he said.

Forsyth Barr's head of research, Rob Mercer, said the sale was a signal that in tough conditions assets that were not strategic would be sold. "Their European airports are underperforming and I suspect they'll be looking to liquidate those unless they want to hold on to them long term. "It sets the scene for how they're going to shore up their balance sheet and get themselves in a position to go forward when they can see the light of day."

Infratil shares closed unchanged at $1.47.

While one company prospers from tenders, another has to sell buses, business editor Chris Gardner writes.
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Hamilton-based Go Bus will double its North Island depots in January when it puts 130 new buses into operation.

Managing director Calum Haslop, who joined Go Bus three months ago, told a business audience at PricewaterhouseCoopers' Clever Companies function in Hamilton this week that the secret to winning a sizeable Education Ministry contract was nearly five years of planning to match the ministry's tendering cycle, which comes in rounds of six to 12 years. The contract, being formalised this month, means the operator, formed from several small family-run businesses about four years ago, will double its depots from 12 to 24, with significant expansion in charter, school and urban operations in Hawke's Bay.

Construction is under way on 130 new buses, which will increase the fleet by between 30 and 40 per cent in January. The number of drivers will increase from about 200 to 300.

"There's a lot of work to do, but we are quite confident in our ability to deliver this," Mr Haslop said.

Go Bus, and Ritchies Transport Holdings in Christchurch, are two of the clear winners in the tendering process. Go Bus drivers are on the road for 60,000 man hours a year. They drive 10 million kilometres a year and burn 2.5 million litres of diesel. Mr Haslop said the company handled 3000 customer complaints a year, mostly related to buses not running on time.

Nationwide, more than 100 operators have lost their contracts for 2400 school bus routes servicing 65,000 pupils, which is reducing the number of operators from 205 to 92.

Waipawa Buses, which has operated in Central Hawke's Bay since 1970, is among the biggest losers, with all but four of its 70 routes going to Go Bus. It will sell 120 buses and lay off 100 staff.

Neil Dobson, who runs Dobson Motors in Te Kuiti, said his bus company was losing eight school routes but retained five. "I have already told eight of my 22 drivers that I will not be able to keep them on. While they don't like it, they understand it is not my doing," Mr Dobson said.

The company was told by the ministry that to have a chance of renewing its contract it would have to upgrade its fleet, so it ordered two new buses. The first, which cost $245,000, arrived two weeks ago.

"It is going to be hard to absorb the cost when we have effectively lost more than half of our business," Mr Dobson said.

"One guy, Clarrie Hanson, who does the Otewa School bus run, has been with us for 28 years. He was part of the community, he knew the kids, their parents and the community. It is the personal touch they are going to lose with these big companies."

Mr Dobson said his company gave donations to school galas and prize-givings every year, because it was rooted in the company, but couldn't imagine Go Bus doing the same.

Dobson Motors had not heard why it missed out from the ministry. "We were in the top two per cent back in April. We have done everything the ministry asked, and we still missed out."

Allan Turley, who runs Turley Motors in Te Aroha, said his business would lose two out of seven routes and two drivers. One would retire at the end of the school year, and the other had found work with a Morrinsville bus company. Karyn Coxhead, who operated Bus With Us, in Thames, with her husband Chris, said the business would not be affected by Go Bus's expansion.

Mr Haslop said during his presentation: "We knew this (process) was going to happen and we have been planning for that for four or five years." His favourite saying, quoted by Harrison Ford in the latest Indiana Jones movie earlier this year, was "you don't take a knife to a gunfight". "We don't do that," he said.

"We have taken a systematic approach. We don't pick our growth targets by throwing a dart at them." Another secret, Mr Haslop said, was hiring "high octane" staff with "fire in the belly".

He could have been talking about himself, captivating the audience with joke after joke at the presentation, explaining that he had left his pin-striped suit at home because the last time he had worn it was at a funeral. "I'm hoping for a better outcome tonight," he joked.

"There's a lot of irony in having a bus operator talk at a seminar on clever companies. I am not sure that people relate to bus companies as being clever, and I am not sure that we would see ourselves as being clever. The main driver is on the need to lift the game in passenger transport. "Passengers are needing more in quality and service and the Ministry of Education has demanded a higher quality of vehicle."

Mr Haslop said Go Bus would not have been able to attract equity partners, as it did last year, had it not had a guaranteed cash flow from contracts or a strong, clear, definitive business plan.

"We do put a lot of stock in the detail of our planning. Without that plan there would not be Go Bus."

Mr Haslop would not be drawn on the split between ministry and regional council contracts across the North Island, nor would he say how many services Go Bus would operate from January. He said the company had won the contracts because it was competitive and capable.

But Garry Hetherington, regional transport organiser for the National Distribution Union, said the company was paying drivers between the $12 an hour minimum wage and $13.51, and the union was about to start negotiations seeking more than $17. "We are talking about drivers who have been with the company a long time and who are expert drivers," Mr Hetherington said. "You are not going to keep them if you are paying them a minimum wage."

Mr Hetherington, who represents about 70 per cent of about 200 Go Bus drivers, said the coverage clause in the collective agreement would need to be updated to include depots outside of Hamilton.

"What it means for our drivers is more opportunity," he said.
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CAPTION: GOING PLACES: Go Bus drivers are on the road for 60,000 man hours a year. They drive 10 million kilometres a year.
Picture: Iain McGregor