Cashflow

Royal Taxis collapses, as industry blames cheap fares

Yolanda Redrup /

A Victorian taxi business has been placed in administration, with industry officials blaming fare prices and high LPG costs.

Royal Taxis, based in the Melbourne suburb of Springvale, collapsed on Monday, putting more than 70 taxis out of service, according to industry officials.

Victorian Taxi Association chief executive David Samuel warned if industry conditions don’t change, more companies will be put out of business.

“If something isn’t done in the next six months or sooner than, yes, more businesses will be placed under financial pressures,” he told SmartCompany.

“The issue here is about the level of fares and the fact they haven’t been changed for a long time… since 2008. This puts you under pressure, as does the hike in LPG prices which occurs at the end of every year.”

In December last year, the commodity price for LPG rose 33% to more than 90 cents a litre, as the northern hemisphere pushed up demand in the lead up to winter.

Samuel says the biggest impact on the sector has been the government’s decision not to increase taxi fares since 2008.

“It’s not even a change to legislation which is required, it’s just a ministerial decision. We’ve been arguing this since 2008,” he says.

“You just can’t run a business in 2014 at 2008 prices.”

The price of Victorian taxi fares is once again under review by the Essential Services Commission, with a decision expected in June.

Samuel says fare prices in Victoria are now 10% lower than CPI and 30% behind comparable Australian states.

Royal Taxis is just one of numerous Australian taxi businesses to face financial pressures in the past 12 months.

In Victoria alone it is the second largest Victorian taxi operator to collapse in the past year and the third in the past two years.

In November last year Sydney Metro Taxis Fleet was issued with a winding up order, Paradise Coaches and Paradise Taxis was placed in liquidation and, in July, Arnhem Bush Taxi Services was ordered to wind up.

In a statement issued this morning, Samuel said the collapse of Royal Taxis was not surprising.

“While we are disappointed that Royal Taxis is entering administration, the sad reality is, this news can hardly be described as surprising,” he said.

“The industry has continually warned the Victorian government about the serious effect challenges such as low fares and high input costs are having on small taxi businesses. Unfortunately commentators, who know little about the practicalities of taxi businesses, repeatedly have their views put ahead of sensible outcomes.”

SmartCompany contacted Royal Taxis for comment, but no one was able to comment prior publication.

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