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Clinton Budget Aftermath : Transporters' Road Just Got Rougher


After Congress voted to raise fuel taxes last week, transportation companies--from railroads to airport shuttles--must now decide whether or not to raise their rates.

The 4.3-cent-a-gallon hike--designed to raise $24 billion over five years--on gasoline and diesel fuels will make a relatively small dent in corporate budgets. For most transportation companies, fuel costs are relatively small--5% or less of total operating expenses.

But even a minor increase is cause for concern these days in the transportation industry, which is both hard-pressed and highly competitive.

The California Trucking Assn. estimates that the average California trucking company will have to pay an extra $10,000 a year as a result of the higher federal fuel levy. In addition, California truckers are facing the prospect of a state-imposed levy on certain types of diesel fuel. "The trucking industry has a profit margin that is so incredibly low that it will just be passed on to customers," said association spokesman Dave Titus.

However, the Quickway trucking company in Los Angeles, for one, says it will probably be forced to eat the tax hike.

"It's very hard to get a rate increase because of economic times" and intense competition, said Vice President Joseph M. Nievez. If Quickway raises its prices, he said, customers will have no trouble finding a competitor whose rates are lower.

Many transportation firms are jealous of airlines, which managed to win a two-year reprieve from the higher taxes that go into effect Oct. 1. Intercity bus companies, which compete with airlines for price-conscious passengers and short-haul routes, lobbied members of Congress for two weeks for an exemption, without success.

"It improves their advantage over us," said George Hanthorn, senior vice president and general counsel at Greyhound Lines. Since Greyhound passengers are extremely sensitive to price, "We are going to just sit back and wait to see if we are going to be able to recover it at the fare box or not."

Los Angeles-based Gray Line Tours, which operates 75 sightseeing buses that gobble five gallons of diesel fuel an hour, cannot pass along the higher cost to passengers even if it wanted to, said co-owner Fred Sapir. Gray Line sells most of its tickets at a fixed price to tour companies under yearlong contracts.

"The extra cost will have to be eaten by the company," Sapir said. "The economy is so bad, and this tax is not going to help the company at all. We are all on the edge."

Many transportation firms will be able to ease the pain of the tax hike as they improve the fuel efficiency of their fleets. Greyhound, for example, is modernizing its fleet of more than 1,800 buses with new coaches that use 18% less fuel than older coaches.

Super Shuttle, which ferries passengers to and from airports in Southern California and the Bay Area, is supplementing its fleet of gasoline-powered vans with vehicles that use less costly propane and natural gas.

A recent drop in gasoline prices will also help mask the upcoming hike in fuel taxes. Super Shuttle now pays about $1.06 a gallon, compared to $1.18 a few weeks ago.

"That has been very good news," said John F. Goss, chief operating officer of Super Shuttle, which uses 51,000 gallons a week for its more than 200 vans. However, unlike rising and falling gas prices, "a fuel tax is a permanent thing," he said.

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