Student Transportation Increases Currency and Fuel Protection

    Increased Canadian Revenues Coupled with Energy Portfolio Creates
    Effective Hedge

    TORONTO, July 7 /CNW/ - Student Transportation of America Ltd. (STA)
(STB:TSX) Chairman and CEO Denis Gallagher today announced that the company's
"natural hedges" for currency and fuel, combined with its continued growth,
are expected to create sustainable dividends and increased value for
shareholders while attracting new investors now and in the future.
    "With the expected close of the Elgie acquisition in London, Ontario, in
just two years, we have increased our Canadian revenue and cash flow to over
23 percent of our total company revenue," Gallagher said. "Student
Transportation of Canada's net cash flows have helped create a natural
currency hedge and, coupled with the company's existing financial 'rolling'
currency hedge in place for the next 60 months, mitigate currency
fluctuations. We plan to continue our growth in Canada and are actively
pursuing new opportunities throughout several provinces.
    "On the fuel side, good efforts by our management team have increased the
proportion of school contracts with some form of fuel protection to 60 percent
for the new school year. Those include contracts with fuel caps, pass-through
rate increases and some with 100 percent customer-paid fuel. We also have
addressed fuel costs on some contracts with no protection by negotiating
higher than normal contract rate increases," he said.
    "In addition to these actions, the energy portfolio, purchased as part of
the Canadex Resources acquisition in January, just prior to the spike in oil
and gas prices, has performed very well due to higher commodities prices,"
Gallagher said. "As a result, we have offset the rise in our own fuel costs in
the transportation division in a manner similar to a financial fuel hedge.
This portfolio, while representing less than five percent of the total
revenues of our core transportation division, was the best fuel hedge we could
have put in place this year to support our core business. It offers us more
protection than a 'store-bought' heating oil hedge with a correlation to
diesel fuel prices, which have been unpredictable over the short term.
    Gallagher said the company will look to the financial market to find an
attractive alternative to hedge unprotected fuel again this year.
    "Investors and shareholders should be pleased to know that STA will again
achieve significant growth in revenue for this past fiscal year, increase cash
flows, and deliver consistent, if not improved, cash flow margins to the prior
year," he said. "I believe investors like our business model because of
several key factors: the stability of the contracted nature of our business,
the consistency of our results, the dividends we pay, and the experience and
knowledge of our management team. This was evident with the successful issue
of shares to new and existing investors in our most recent private placement
offering that raised $60 million. While most transportation businesses have
had challenges over the years, our ability to manage a wide range of issues is
what investors expect, what we have done and what sets us apart from the
others in the industry."

    About Student Transportation

    Founded in 1997, Student Transportation is the fourth-largest provider of
school bus transportation services in North America, conducting operations
through local operating subsidiaries. Student Transportation has become a
leading school bus transportation company by aggregating operations through
the consolidation of existing providers and conversion of in-house operations
and operates more than 5,400 school vehicles in North America. For more
information, please visit

    Forward-Looking Statements

    This news release contains "forward-looking statements" within the
meaning of applicable securities laws, which reflects the expectations of
management regarding STA's results of operations, expense levels, cost of
capital, financial leverage, seasonality, cash flows, performance, liquidity,
borrowing availability, financial ratios, ability to execute the STA's growth
strategy and cash distributions. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may", "will",
"expect", "intend", "track", "targeted", "estimate", "anticipate", "believe",
"should", "plans" or "continue" or similar expressions suggesting future
outcomes or events. These forward looking statements reflect STA's current
expectations regarding anticipated future events, results, circumstances,
performance or expectations, which are not historical facts. Forward looking
statements involve significant risks and uncertainties, and should not be read
as guarantees of future performance or results, and will not necessarily be
accurate indications of whether or not or the times at which or by the
performance or results will be achieved. A number of factors could cause our
actual results to differ materially from the results discussed, expressed or
implied in any forward-looking statement made by us or on our behalf,
including, but not limited to the factors discussed under "Risk Factors" in
our Annual Information Form. These forward looking statements are made as of
the date of this news release and, except as required by applicable law, we
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.

For further information:

For further information: MEDIA CONTACT: Lynette Viviani, (973) 968-7929
office, (973) 534-1004 mobile,; INVESTOR CONTACTS:
Student Transportation of America Ltd., Denis J. Gallagher, Chairman and Chief
Executive Officer, (732) 280-4200, (732) 280-4213 (FAX); Patrick J. Walker,
Executive Vice President and Chief Financial Officer, (732) 280-4200, (732)
280-4213 (FAX); Keith P. Engelbert, Director of Investor Relations, (732)
280-4200, (732) 280-4213 (FAX), Email:, Website:

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