For decades, Greyhound Lines has been the dominant player in the U.S. intercity bus market. The company’s iconic blue buses serve a wide network across the U.S., and it owns several subsidiaries. But it has struggled in recent decades, as short flights, cheap fuel, and discount bus lines provide competition. So it came as little surprise to the global business community when in October the company was acquired from its owner, FirstGroup, by transportation firm FlixBus. 

The details of the transaction are notable. The buyer is a German company that has run discount bus and train services across Europe for years, and entered the North American market in 2018. This purchase could spell improvement for U.S. bus travel.

In Europe, Flixbus’ business model is based on subcontracting provision of the bus service itself to other companies, while Flixbus coordinates ticket purchases, route decisions, and branding. Flixbus is thus similar to Uber, serving as a middleman connecting consumers with services.  

Michal Lehman, of the Centre for Transport Strategies, explains that this has allowed the service to expand rapidly, creating “the largest network of intercity buses in Europe…[performing] 350,000 daily connections in 29 countries of the world.” In addition to continental Europe, Flixbus is planning rapid expansion in the UK. The company strives to base route and market entry decisions on the most up-to-date information, using sophisticated technology. Greyhound, by contrast, owns its own set of dated buses and is not ahead of the technology curve.

Applying the Flixbus model to Greyhound’s vast network could produce some dramatically different results. The company expanded quickly in the U.S., launching services in the West initially, then moving to Texas and New York the following year. A brief search on their website shows ample rides available for under $20 between frequent short routes like New-York-to-D.C. and L.A.-to-Vegas. This is common for other low-cost bus carriers, which tend to focus on point-to-point routes in thick, high-demand markets such as the Northeast Corridor. Greyhound, by contrast, has long covered the entire country and is not particularly well-positioned for short trips. New-York-to-D.C. and L.A.-to-Vegas start at $40 on Greyhound, according to my recent search.

Flixbus acquired the brand for $46 million—a remarkable discount considering British-based FirstGroup originally bought Greyhound in 2007 for $3.6 billion. FirstGroup can now reduce debt by about $20 million, according to Reuters. 

Greyhound has seen stagnating ridership for some time, and the pandemic worsened matters. In May, the company ran into labor acrimony when it asked drivers to take a pay cut amid declining revenues. And the company pulled out of the intra-Canadian market entirely.

The emergence of a Greyhound-Flixbus conglomerate will likely provoke criticism from those who believe the market is already too concentrated. Given Greyhound’s extensive reach,  some have even called for it to be nationalized, a la Amtrak. There is some truth to the charge about excessive consolidation, but much of that is due to regulations.

Some of the cheapest competitors were shut down in the early 2010s based on faulty research by regulators. As Jim Epstein writes for Reason, “Chinatown bus” companies became common in the late 1990s, offering highly discounted fares. But 27 were shuttered because curbside buses were wrongly scrutinized for causing accidents.

Looking at the federal data used to justify the closures, Epstein found “in 30 of those 37 accidents, curbside buses were not involved. In fact, 24 of those 30 misclassified cases involved Greyhound’s conventional bus fleet.” Moreover, “curbside” carriers were overcategorized, including Greyhound, which mostly uses terminals.

In some cities, terminal use is itself a barrier. Newer entrants, including Flixbus, tend to use curb space for pickup, rather than leasing slots in bus terminals. However, some cities have forbidden this practice and forced carriers to pick up at the terminals themselves. Boston, for instance, prohibitively fined companies making curbside pickups, while Washington, DC attempted to force all curbside services to concentrate at one location. It will be interesting to see if Flixbus maintains its bias towards curb space or redirects its services to Greyhound’s portfolio of relatively well-located terminals.

There are, in fact, lots of potential improvements that could come from this acquisition. Ultimately, Greyhound has an iconic but stale brand that FlixBus might be able to reverse through better marketing. It will be an interesting development to track. 

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.