Greyhound acquired by fast-growing FlixMobility, which aims to expand bus travel in the US

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Diving brief:

Iconic American intercity bus operator Greyhound has been acquired by Munich-based bus and rail operator FlixMobility announced the companies last week. The deal, valued at $ 172 million, represents a commitment to revitalize the troubled bus industry in the U.S., where the company already operates some FlixBus routes.
Industry experts expressed surprise at the acquisition, given a drop in pandemic-aggravated bus travel for years, which has reduced the number of users to about half of 2019 levels. But they also see that the demand will return largely in the summer of 2023.
CEO of FlixMobility André Sponge agreed and believes they can further expand the long-distance bus travel market. He he told Smart Cities Dive, “We believe in industry and we believe in long-distance bus travel as a means of transportation.”

Immersion knowledge:

Founded in 1914, the Greyhound brand became synonymous with bus travel in the U.S., serving large cities and rural towns. But the company he saw how his business deteriorated in recent years. “It’s been a difficult road for traditional bus lines like Greyhound, and the pandemic has created a large-scale crisis,” said Joe Schwieterman, director of the Chaddick Institute for Metropolitan Development at DePaul University.

A 2021 study published by the Chaddick Institute found it the demand for bus travel was already weakening before the pandemic. Low petrol prices made driving more affordable, while public perception of bus travel as unsafe or undesirable combined with other factors. caused a decrease in service on some routes. Asked about his reaction to the acquisition of Greyhound, Schwieterman he said, “This move was a surprise to almost everyone.”

Peter Pantuso, president of the American Bus Association, said the industry, which is made up mainly of small family businesses, operated only between 15% and 20% of what was available. capacity by 2020. “We have lost about a quarter of the companies that were in the sector in 2019,” he said. It estimates that regular intercity bus lines currently operate at about 45% or 50% of capacity by 2019. They serve about 3,000 communities, and Greyhound says it reaches 2,400 of those.

“The traditional intercity bus network needs to stop traffic erosion and this will require investment and new ideas,” he said. Schwieterman. “FlixBus can bring that “.

Greyhound’s previous owner, FirstGroup plc, sold the bus line for an initial payment of $ 140 million, with an additional $ 32 million in deferred compensation to be paid over 18 months. The British transit company acquired Greyhound in 2007 from Laidlaw International for $ 3.6 billion and began buying the bus line in the spring of 2019.

Schwämmlein acknowledged that “the next one or two years will be very difficult.” Since its inception in 2013, the company has expanded to 36 countries, including the United States in 2018, where it currently operates routes to the south, west and northeast with the FlixBus brand.

Courtesy of FlixMobility

“We believe in long-distance bus travel as a means of transportation,” he said Sponge. Hey he added that they see potential in the US market. “We think first from the customer side and then build the network around that.” He said they are a young company, with a fresh brand that is based on technology and data.

But they will have to integrate Centennial Greyhound into FlixBus ’operations and business. “The two companies have very different business models,” Schwieterman of DePaul said. The CEO of FlixMobility responded that two companies are “very, very complementary.”

Greyhound real estate, including some bus stations, was not part of the acquisition. The FlixBus model is to operate from facilities such as train stations and sidewalk stops, with additional pick-up at universities and suburban locations.

But will travelers from small or rural communities benefit from the sale of Greyhound to Flix? According to Schwieterman, long-distance bus users travel primarily for personal reasons: to visit friends and family, to travel to health care, or for job interviews. He said “much of Greyhound could use a face wash,” noting that “traffic has slowed and the image of bus travel has taken a step back.”

“American consumers don’t get how the bus industry should serve them,” Schwämmlein of FlixMobility said. He noted that 40% of FlixBus customers had never done so traveled before by bus as a signal of its ability to expand the market, indicating that newer buses equipped with free WiFi and power outlets will attract new customers. “The more volume you generate, the more opportunities you will have to spread the word.”

But an industry-wide shortage of engines could impede growth. “As the industry has begun to return, driver shortage problems are wreaking havoc on the industry,” Pantuso said. He explained that many fired drivers decided to retire while others took jobs in trucks. When asked how FlixBus would address this, Schwämmlein said they would offer good working conditions and a strong brand.

With the industry suffering a weakened bus ride before and during the pandemic, Pantuso sees the acquisition of Greyhound as an “attractive opportunity” for Flix. He is optimistic that the future will bring passengers back on intercity buses.

Chaddick’s study concluded that “intercity buses remain the least expensive travel option on the vast majority of the country’s major routes.” But he also notes that Amtrak is a “vigorous competitor to bus lines.”

Scheduled intercity buses reach many more communities than the Amtrak 500, and even with the planned expansion of the railroad, only 160 more will be added. Greyhound is already partnering with Amtrak, acting as an operator of Amtrak Thruway, providing bus connections to offline destinations.

Schwämmlein understands that FlixBus and other bus operators will have to fight to get users back. He said the growth of intercity bus service is vital to tackling climate change and connecting communities not served by rail. “So I really think this should be and should be a growing industry,” he said.

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