Benchmarking: Transportation Industry

Aug 26, 2019Business Consulting, Transportation

Is your transportation company performing as well as its industry peers? You reviewed your financial statements from your accountant and you are making money. That is great, but what else are the numbers on the paper telling you?

Utilizing benchmarks is an easy way to determine how well your transportation company compares to others in your industry. Below are benchmarks regarding five major subgroups in the transportation industry:

  • Public School Bus Services
  • Chartered Bus Services
  • Local Freight Trucking
  • Long-Distance Freight Trucking
  • Airport Operations

Every transportation company is unique and the below standards will not apply to all. These metrics should be used as a guideline. Statistics and information was provided from the IBISWorld Industry Reports, June 2018.

Public School Bus Services

  • Profits are expected to average 7.2% of earnings before interest and taxes for school bus operators. This is dependent on company size. For example, larger school bus companies have profit margins closer to 10.0% due to economies of scale. In recent years, profit margins should be climbing slightly due to lower fuels costs.
  • Wages represent the most significant cost for industry operators. Due to the labor-intensive nature of the industry, operators can expect to see wages near 46.2% of total revenues.
  • Purchases and fuel are another large cost of the transportation industry. With acquisition of buses, leasing, and licensing, 27.8% of revenues can be accounted for through purchases. School buses can range from $65,000 to $85,000, with newer, more technologically advanced buses even reaching up to $185,000. Assuming an average of 7.0 miles per gallon for a school bus, we can estimate roughly 1,700 gallons of gasoline are used each year (average 12,000 miles driven). Fuel can be anywhere between 20% and 30% (5.56% to 8.34% of total revenues) of your total purchase expenses.
  • Depreciation costs average 9.7% of total revenues. This number has decreased over the past five years due to increased investments into software that helps to track vehicles, verify inspections, and track and manage fuel consumption rates. This information can help to extend the life of capital investments, such as buses.

Chartered Bus Services

  • Profits (earnings before interest and taxes) average 6.4% of revenues. Flexibility in the economy’s disposable spending and increasingly popular and inexpensive curbside lines have caused growth over the past five years for chartered bus services.
  • Purchases are the industry’s second largest expense behind wages. Averaging 15.7% of revenues, a majority of this expense category lies in gasoline purchases. Smaller companies tend to feel the impact of changing fuel prices versus their larger counter-parts.  Typically, this difference is due to larger companies having the resources to purchase fuel in bulk, or enter in forward purchase contracts.
  • Wages, the largest cost for companies, average 33.7%. This cost segment varies largely between company sizes. For instance, workers in traditional scheduled bus service positions usually belong to a union, which can help to increase their wage negotiating power.

Local Freight Trucking

  • Profits are typically low in this industry due to the competitive nature. Most trucking companies in this industry are non-employers that operate with extremely thin margins.  Profit as a percentage of revenues averages 6.7% for the industry.
  • Wages represent the largest individual expense at 30.9% of revenues. With labor being an essential component of this industry, companies can expect to see wages follow trends in overall demand for services.
  • Purchases average 32.2% of revenues with fuel-related expenses making up the majority of this category. Fluctuations in fuel costs impact this category most often. As prices increase, profit margins thin, with only slight relief to larger employers whom have fuel surcharges in place.
  • Rent and utilities in this industry can account for 5.0% revenue. It is typical of companies in this industry to rent and operate warehouses and distribution centers.
  • Depreciation is a given in this industry. Roughly 4.6% of revenues can be allocated to depreciation to account for every truck and trailer a company owns.
  • Marketing is minimal at 0.2% of revenues. In many cases, operators conduct business through freight brokers or through existing long-standing relationships. Marketing campaigns direct-to-consumer are rarely used.

Long-Distance Freight Trucking

  • Profit in this industry is relatively low at 5.9% of revenues. This is up from 4.9% in 2014.  Companies are constantly competing on prices to win business, which ultimately hurts profits. The prices of diesel over the past 5 years explains the jump in profit margins.
  • Fuel and purchases are expected to rise as the price of diesel is anticipated to increase again over the next 5 years. However, with a strengthening economy and an increase in demand for services, negative impact on profit margins from fuel costs could be offset slightly. Fuel and purchases on average account for 29.1% of revenues.
  • Maintenance and other costs average 9.9% of revenues. These costs typically include upkeep on trucks, trailers, and containers. 
  • Depreciation costs have grown to 6.9% over the past five years as demand for more technologically advanced and fuel-efficient vehicles has increased.
  • Rent and utilities make up 17.6% of revenues. This category not only would include warehouses and distribution centers, but cost of electricity as well as truck or trailer rentals.  Lease-to-own financing on truck purchases are included in this segment of expenses.

Airport Operations

  • Wages and other labor expenses represent the largest expense in an airport operators cost structure. Worker role ranges from air traffic controllers, security guards, engineers, and maintenance workers to managers and even a police force in some cases. Wages average 36.5% of revenues.
  • Purchases represent roughly 10.4% of revenues. Operators in this industry often need specialized equipment for things such as aircraft refueling, maintenance, cargo and baggage, ferrying, and other services. 
  • Profits average roughly 6.0% of revenues, up from 4.7% in 2014.
  • Depreciation costs are a substantial cost for airport operators, averaging around 33.7%. The construction and operation of an airport requires substantial capital investment into things such as a runway, terminal, hangar, and communications equipment.


To bring you innovative solutions, our Transportation Group stays on top of industry benchmarking, trends, tools and technologies to ensure we give you the best possible advice. Smith Schafer professionals have serviced the transportation industry since 1971 and is committed to serving over 110 Minnesota transportation entities. We take great pride in consulting on various industry specific issues, as well as the broader needs of these companies and their owners.


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