For decades, Greyhound Lines has been the dominant player in the US intercity bus market. The company’s iconic blue buses serve an extensive network across the United States and has several subsidiaries. But it has struggled in recent decades as short flights, cheap fuel and cheap bus routes compete. So it came as no surprise to the global business community when in October, the company was acquired of its owner, FirstGroup, by the transport company FlixBus.
The details of the transaction are notable. The buyer is a German company that has operated discount bus and train services throughout Europe for years and entered the North American market in 2018. This purchase could mean an improvement for bus travel in the USA.
In Europe, Flixbus’s business model is based on outsourcing the provision of the bus service itself to other companies, while Flixbus coordinates ticket purchases, route decisions and branding. Flixbus is therefore similar to Uber, serving as an intermediary connecting consumers to services.
Michal Lehman, Center for Transport Strategies, Explain that this allowed the service to grow rapidly, creating “the largest intercity bus network in Europe …[performing] 350,000 daily connections in 29 countries around the world. In addition to continental Europe, Flixbus plans rapid expansion UK. The company strives to base route and market entry decisions on the most recent information, using sophisticated technology. Greyhound, on the other hand, has its own set of dated buses and is not ahead of the tech curve.
Applying the Flixbus model to Greyhound’s vast network could produce radically different results. The company extended quickly in the United States, launching services in the West first, then moving to Texas and New York the following year. A brief search on their website shows many trips available for under $ 20 between frequent short trips like New-York-to-DC and LA-to-Vegas. This is common for other low cost bus carriers, which tend to focus on point-to-point routes in dense, high-demand markets such as the Northeast Corridor. Greyhound, on the other hand, has long covered the entire country and is not particularly well placed for short trips. New-York-to-DC and LA-to-Vegas start at $ 40 on Greyhound, according to my recent research.
Flixbus bought the brand for 46 million dollars–a remarkable discount considering that UK-based FirstGroup originally purchased Greyhound in 2007 for $ 3.6 billion. FirstGroup can now reduce its debt by around $ 20 million, according to Reuters.
Greyhound saw stagnant traffic for a while, and the pandemic made matters worse. In May, the company met with union acrimony when it asked drivers to cut their wages amid declining revenues. And the company got out of the intra-Canadian market entirely.
The emergence of a Greyhound-Flixbus conglomerate will likely spark criticism from those who think the market is already too concentrated. Given Greyhound’s vast reach, some have even called for it to be nationalized, à la Amtrak. There is some truth in the accusation of over-consolidation, but much of it is due to regulation.
Some of the cheaper competitors were shut down in the early 2010s based on flawed research by regulators. As Jim Epstein writing for Raison, The “Chinatown bus” companies became mainstream in the late 1990s, offering heavily discounted fares. But 27 were closed because the curbside buses were falsely checked for causing accidents.
Looking at the federal data used to justify the closures, Epstein discovered “In 30 of these 37 accidents, sidewalk buses were not involved. In fact, 24 of those 30 misclassified cases involved Greyhound’s conventional bus fleet. In addition, “sidewalk” carriers have been over-categorized, including Greyhound, which mainly uses terminals.
In some cities, the use of terminals is in itself a barrier. New entrants, including Flixbus, tend to use edge space for pickup, rather than renting slots at bus terminals. However, some cities have banned this practice and forced carriers to pick up themselves at terminals. Boston, for example, has imposed prohibitive fines on businesses doing curbside collections, while Washington, DC has attempted to force all curbside services to concentrate in one location. It will be interesting to see whether Flixbus maintains its orientation towards edge space or redirects its services to Greyhound’s portfolio of relatively well-located terminals.
There are, indeed, many potential improvements that could result from this acquisition. Ultimately, Greyhound has an iconic but outdated brand that FlixBus could perhaps reverse through better marketing. It will be an interesting development to follow.
This article presented additional reports from Market town planning report content staff member Ethan Finlan.