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.