Academic journal article Journal of Transportation Management

Industry-Wide Response to Terror: A Political Economy Analysis of the Owner/operator Sector of the U.S. Motorcoach Industry Post 9-11

Academic journal article Journal of Transportation Management

Industry-Wide Response to Terror: A Political Economy Analysis of the Owner/operator Sector of the U.S. Motorcoach Industry Post 9-11

Article excerpt

INTRODUCTION

U.S. transportation sectors adapted promptly to the challenges engendered by the terror attacks on U.S. soil September 11, 2001. Though initially grounded at U.S. borders, motor carriers responded effectively to requests for expedited shipments. Rail faced some slowdowns, but recovered quickly enough for Norfolk Southern to contribute 1,000 rail cars to transport debris free of charge in the World Trade Center cleanup (Morton, Hyland, Aichlmayr, and Freeze 2001). The U.S. air cargo carriers suffered heavy losses when the Federal Aviation Association banned air travel for two days following the attacks on Washington D.C., and New York City (Freeze 2001), but was back to full speed by week's end. Though these short term coordinated efforts returned the nation's transportation and logistics networks to normal and this operational recovery provided some sense of security, much less is known about specific policy and strategic responses to terrorism-induced environmental change faced by specific sectors of the transportation network.

The purpose of this research is to identify the emerging patterns of policy changes to episodic events of terror and systemic strategic responses in emergency preparedness of the owner/operator sector of the motorcoach industry in light of the attacks and subsequent war. The vehicle to explain such reaction is the political economy framework (see Stern and Reve 1980, and Achrol, Reve, and Stern 1983).

This transportation sector's response patterns are analyzed by looking at the actions and intentions of the firms operating and competing in the U.S. motorcoach industry in the months following the terror attacks on New York City and Washington D.C. The focus on the owner/operator sector of the motorcoach industry as the backdrop is due to this sector's functioning at the boundary of transportation and travel/ tourism industries, as both of these industries have been hit hard by terror (Pizam and Fleicher 2002). Before discussing the results of the research, a review of the state of the U.S. motorcoach industry is presented.

THE U.S. MOTORCOACH INDUSTRY: FOCUS ON ITS OWNER/OPERATOR SECTOR

The charter and tour portion of the motorcoach business tend to be family-owned, requiring long hours with much of the charter work occurring on weekends. It involves enormous capital expenditures offset by historical 15-20% profit margins. During the late 1990's many changes occurred which had tremendously negative effects on the industry. Consolidation was a leading threat to many independents. Revenue was flat, new equipment costs were escalating and overcapacity in the market was becoming commonplace. Marketing was a virtually unknown concept with owners adopting an order taking approach rather than marketing their business. Low entry barriers encouraged small, inexperienced players to join. Lending companies encouraged new entrants and rapid growth with comparatively easy financing terms resulting in increased sales of new equipment. Motorcoach companies were viewed by many customers as undifferentiated, with price as the major distinguishing factor. Therefore, when the new entrants finally realized the total operating costs, these companies could not afford the payments and repossessions became commonplace.

The motorcoach industry is comprised of three major business segments: charter, linehaul, and tour. The largest segment, charter work, which represents hauling persons from point to point, comprises 72% of the business, yet represents the lowest margin. Line haul (e.g., designated routes from city to city or to airport terminals) represents 18% of all motorcoach business and tour groups comprise 10% of the motorcoach business. During the late 1990's tour groups represented 14% of the business in the industry and line hauls were 15% of the business. The demand for motorcoach tours has fallen while the demand for line hauls has risen, yet few owner/operators are involved in line haul business. …

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