Dive Brief:

• Iconic North American intercity bus operator Greyhound has been acquired by Munich-based bus and rail operator FlixMobility, the companies announced last week. The deal, valued at $172 million, represents a bid to reinvigorate the struggling bus industry in the U.S., where the company already operates some FlixBus routes.
• Industry experts expressed surprise at the acquisition, given a years-long decline in bus travel exacerbated by the pandemic, which has cut ridership to about half of 2019 levels. But they also see demand largely returning by the summer of 2023.
• FlixMobility CEO André Schwämmlein agreed and believes they can further expand the market for long distance bus travel. He told Smart Cities Dive, "We believe in the industry and we believe in long distance bus travel as a mean of transport."

Dive Insight:

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

A 2021 study issued by the Chaddick Institute found that demand for bus travel was already weakening prior to the pandemic. Low gasoline prices made driving more affordable, while public perception of bus travel as unsafe or undesirable combined with other factors led to diminished service on some routes. Asked about his reaction to the Greyhound acquisition, Schwieterman said, “This move was a surprise to just about everyone.” 

Peter Pantuso, president of the American Bus Association, said that the industry, which is mostly composed of small, family-owned businesses, operated at just 15% to 20% of available capacity in 2020. “We've lost about a quarter of the companies that were in the industry in 2019,” he said. He estimates that scheduled intercity bus lines are currently operating at about 45% or 50% of 2019 capacity. They serve nearly 3,000 communities, and Greyhound says it reaches 2,400 of those.

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

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

Schwämmlein acknowledged that "the upcoming one to two years will be very challenging." From its start in 2013, the company has expanded to 36 countries, including the United States in 2018, where it currently operates routes in the South, West and Northeast under the FlixBus brand.

“We believe in long distance bus travel as a means of transport,” said Schwämmlein. He added that they see potential in the U.S. market. “We think from the customer side first and then build the network around that.” He said they are a young company, with a fresh brand that relies on technology and data.

But they’ll have to integrate century-old Greyhound into FlixBus operations and business. “The two companies have vastly different business models,” said DePaul’s Schwieterman. The FlixMobility CEO countered that the two companies are “very, very complementary.”

Greyhound’s real estate holdings, including some bus stations, were not part of the acquisition. The FlixBus model is to operate from facilities such as train stations and curbside stops, with additional pickups at universities and suburban locations. 

But will travelers in small or rural communities benefit from Greyhound’s sale to Flix? According to Schwieterman, intercity bus riders primarily travel for personal reasons: to visit friends and family, travel to healthcare or job interviews. He said that “much of Greyhound could use a facelift,” noting that “traffic has waned and the image of bus travel has taken a step backwards.”

“U.S. consumers are not served the way they should be served by the bus industry,” said FlixMobility’s Schwämmlein. He pointed to the fact that 40% of FlixBus customers had never traveled via bus before as a sign of their ability to expand the market, indicating that newer buses equipped with free WiFi and power outlets will draw new customers. “The more volume you generate, the more opportunity you get to spread the network.”

But an industry-wide driver shortage could impede growth. “As the industry has started to come back, the driver shortage issues are playing absolute havoc on the industry,” Pantuso said. He explained that many laid-off drivers decided to retire while others took jobs in trucking. Asked how FlixBus would address that, Schwämmlein said they would offer good working conditions and a strong brand.

With the industry suffering from weakened bus travel prior to and through the pandemic, Pantuso sees the Greyhound acquisition as an “attractive opportunity” for Flix. He’s optimistic that the future will bring travelers back to intercity buses.

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

Scheduled intercity buses reach far more communities than Amtrak’s 500, and even with the railroad’s planned expansion, it will add just 160 more. Greyhound already partners with Amtrak, serving as operator of Amtrak Thruway, providing bus connections to offline destinations.

Schwämmlein understands that FlixBus and other bus operators will have to fight to bring riders back. He said that growing intercity bus service is vital in addressing climate change and for connecting communities not served by rail. “Therefore, I truly believe that this should be and has to be a growth industry,” he said.