Intercity bus travel in the US
has long been dominated by one iconic brand. With its fleet of
1,200 buses, Greyhound shuttles nearly 16 million passengers
annually to roughly 2,400 North American destinations. While the
company caters to budget conscious long distance
travelers. It also offers charter services for businesses,
conventions and schools. In addition, its Greyhound Package
Express business provides same and next day delivery service to
thousands of destinations. But competition from low cost
airlines and a combination of increased automobile access and
low fuel prices have led to mounting headwinds for the bus
operator. The pandemic has also caused passenger demand to
plummet. In its fiscal year 2021 Greyhound saw on average have
just 10,000 passenger journeys per day compared with 40,000
during the previous period. The company reported an operating
loss of $12 million in fiscal year 2021 and an operating loss
of $15 million the year earlier. And it's not just intercity bus
lines like Greyhound that are hurting. The motorcoach
industry, which includes charter, sightseeing and
commuter services has suffered "unprecedented economic losses"
as a result of the pandemic. A motorcoach is generally defined
as a long distance passenger vehicle at least 30 feet in
length with a capacity of more than 30 passengers. The pandemic has hit the bus and
motorcoach industry really harder, I think, than almost any
other segment. Right now, everybody's asking
what's post-pandemic travel going to be like. We're
encouraged by what we're seeing in the last few weeks but we do
know that with Greyhound, there's sort of an image issue
that a lot of people just won't contemplate jumping on a
Greyhound because they see it as the mode only to be taken when
you've exhausted all your other options. Since the start of Covid more
than a quarter of the motorcoach industry has gone out of
business, including about 800 small, mostly family-owned
operations. According to the American Bus Association, as of
July 2021, the bus industry was operating at only about 50%
capacity. Greyhound provides an affordable travel option for
many people, including those living in rural areas, and
others with limited economic resources. So what does the
future look like for the bus operator and what happens to
intercity bus service in America once the pandemic ends? Greyhound got its start in the
mining town of Hibbing Minnesota in 1914. Swedish immigrant and
struggling car salesman Carl Eric Whickman came up with the
idea of transporting minors to work in a seven-passenger
Hupmobile for 15 cents a ride. Expanding rapidly by 1917 the
operation had a fleet of 14 buses and by 1929 renamed itself
Greyhound Corporation use the image of a running dog as its
symbol. Intercity bus travel was in its infancy following World
War I as the number of fully paved roads across the country
grew. Intercity bus service
fascinating industry because in the 1920s it grew so rapidly and
brought inexpensive travel, you know, less expensive than train
travel by considerable margin to huge share the United States and
every small town had a couple bus lines taking people to the
nearest city or long distance routes, taking them across the
region. A 1930s film starring Clark
Gable and featuring a Greyhound bus drew nationwide attention to
cross country bus travel and by the beginning of the 1940's
Greyhound had a fleet of 4,000 buses. We often think of the 50's and
60's as kind of the glory years of intercity bus travel where
Greyhound was buying modern scenic cruiser buses. We had new
Express services going across the country and remarkable
network. By 1969 Greyhound carried almost
92 million passengers but the bus industry hit a major speed
bump in the 70's. The opening of the interstate highway system a
decade and a half earlier meant private cars could now easily
travel longer distances faster, avoiding dangerous back highways
and endless stoplights. Secondly, the inner cities of large
metropolitan areas really started to decline and bus
stations started to be seen as unsafe, people started seeing it
as a mode of last resort. In 1987 Greyhound bought
financially troubled rival Trailways and in 1990 faced a
walkout as the majority of the company's 6,300 bus drivers went
on strike over wages and job security. A few months later,
the company filed for bankruptcy protection. Airline deregulation
also led to some passenger defection to budget carriers.
But by the mid 2000's intercity bus travel was seeing something
of a resurgence. Starting in 2006., we saw a
really nice recovery in this industry and innercity bus came
back in many ways and it still had tremendous reliance on
households without cars, lower income groups that couldn't
afford a car or families that just had one car and a lot of
drivers that bus would be like a second car. In 2007 Firstgroup, a bus and
rail operator out of the UK, bought Greyhound for $3.6
billion and went about modernizing the fleet as well as
terminals. The company launched Boltbus in 2008 with fares as
low as $1 and Greyhound Express in 2010, featuring new buses
with extra leg room. The U.S. motorcoach industry is a $15
billion business and includes segments like charter services,
commuter services, and scheduled services like Coach USA, the
operator of Megabus and of course, Greyhound. Prior to the
pandemic there were almost 3,000 motorcoach companies in the US
and Canada and while a few large national companies provided the
vast majority of passenger trips about 94% of motorcoach
companies were small and operated fewer than 25
motorcoaches. As of a few years ago, we were
moving 600 million passenger trips every single year. That's
almost as many as the airlines were at the time we're moving
about 700 million passenger trips. In 2017 the industry provided
574 million trips for passengers. Small companies
accounted for 47.4% of motorcoach mileage. Mid-sized
companies that operate between 25 to 99 vehicles accounted for
26.8% of that mileage and large companies that operate over 100
motor coaches accounted for the remainder. With the pandemic
causing Americans to be fearful of traveling in groups, the
industry has been decimated. So when I look at the commuter
segment, those companies are still operating even today,
somewhere around 20% capacity, if that, because people are not
moving out of some of the in and out of the big cities. In its financial year ending in March
2021, revenue at Greyhound was $422 million, down almost 45%
from that same period in 2020, and down more than 50% from 2019
levels. In fiscal year 2021 Greyhound saw 55.5% of its
revenue from passenger services, less than half a percent from
charter services and private hires and 44% from other sources
of revenue, like Greyhound Package Express. In an effort to
cut costs the bus operator sold 15 locations including a garage
and terminal in the downtown Arts District of Los Angeles and
made reductions to staff, 67% of which were corporate employees.
It also substantially reduced capacity on the majority of its
routes. That led to a few key improvements in the Greyhound
network. On-time performance surged from 76% in 2018 to 90%
in fiscal year 2021. With the company removing about 600
mostly older buses from service, the average fleet age jumped
from almost 10 years in 2017 to 5.3 years in 2021. Despite those
modest improvements, the past two years have been a
challenging time for intercity bus travelers Starting in about 2015 real
difficulties began, fuel prices plummeted and with that air
fares came down. You've noticed when you book air travel, a lot
of bargains out there on Southwest and Spirit and so
those longer trips were lost. So we had downward momentum and
then the pandemic hit, people felt even more wary of bus
stations than they would have say of airports because it was a
very public setting. It also prompted Greyhounds
parent company Firstgroup to look for ways to exit the US bus
market. In April 2021 Firstgroup entered into an agreement to
sell its US bus divisions, including First Student that
operates 43,000 year old school buses and charter services
across 40 states. The group has also put Greyhound up for sale,
calling the intercity bus line, a non-core part of its business.
In an email to CNBC Greyhound said COVID-19 has presented a
unique challenge and has given the company the opportunity to
focus on what it does best, provide safe, reliable value
driven transportation for the communities it serves. In many
rural areas, intercity buses, including Greyhound, are the
only alternative travel option to a private car, Hundreds and hundreds of cities
around the country, the only way to get to that town without a
car is to take the bus. Now you know little little places of 500
to 5000 people that bus comes once or twice a day and it
akes you to a bigger city where ou can connect to other places.
nd you look at the segments hat rely on that service and
here often is no plan B. It has also been a lifeline for
many during recent public emergencies. During the Oregon
wildfires in the fall of 2020 Greyhound spent three days
evacuating more than 1,500 residents to safe locations.
Early in the pandemic the company also provided more than
660 free tickets to nurses, firefighters and pharmacists. In
an email to CNBC Greyhound said it provides transportation to
over 1,000 communities not served by other bus or rail
providers. Passengers rely on its network for activities
ranging from seeking employment to accessing medical care. But
in recent years, the company has made a push to cut back on some
of its more unprofitable routes. In 2018 Greyhound withdrew from
Western Canada, three years later Greyhound service was
suspended across all Canada and discontinued entirely in 2021. Schedule operators have got to
at the end of the day be able to serve their customers and serve
the bulk of their customers. And so where it hasn't made sense
over the years not just recently but to make changes in schedules
to potentially drop lines or drop routes because they're not
only are they not profitable they're, you know, they're
significant losers to the system and are a drag on the system.
That's where we see changes. It also announced that same year
it was in definitely shutting down BoltBus known for its $1
fares and free Wi-Fi. So what does the future look like for
Greyhound and the intercity bus industry in the US? According to
analysts, one trend we are likely to see on more popular
route is buses that offer upscale experience. Over the last
number of years we saw companies step up and say well you know
the customer wants more room, more space and so they began to
change the look of their bus in the interior and took the same
vehicle basically and said well instead of having two and two
seats across, we're going to have one in two seats, make them
bigger seats, more luxury seats, more leg space. To compete with new entrants
into the space like Flixbus, the European based company that
launched in the US in 2018, Greyhound made investments in
its website, mobile app and customer call center. It is also
rolled out a new onboard entertainment platform across
its US fleet. According to Greyhound, its intercity bus
model could also face some tailwinds going forward,
including private car usage becoming less attractive due to
increased urbanization, it's underutilized routes may see
some funding by transportation authorities and environmentally
it is a better option than other forms of transportation.
Compared to air travel, trains and vanpools motorcoaches
produce the lowest amount of CO2 emissions per passenger mile and
use the least amount of energy according to the industry.
Greyhound said its emission rate per passenger kilometer is 33.6
grams CO2 equivalent 81% lower than the average US passenger
car and 87% lower than a domestic passenger plane. But
despite those issues, Industry analysts think it could be years
before the bus industry recovers and even then Greyhound will
have some work to do to repair its image. I think Greyhound's done a
pretty good job keeping the service standard pretty high.
They're rolling out different amenities and bus tracker
software and upping their stations. But long way to go to
get the mainstream traveler to think about taking that
Greyhound when that flights too expensive. Travel is coming back. Airlines
are obviously busy, airports are jammed as as I noticed the other
day when I flew to the meeting I'm at today. Restaurants are
busy, hotels are busy in different destinations but it
really hasn't gotten to the motorcoach industry and I don't
think we're gonna see full recovery or whatever the new
normal is being full recovery until probably sometime in 2023.
