Deregulating the Bus

Deregulation came too fast. It opened the door to too many new entrants all at once, rather than gradually.

It brought the public some low fares, but the fare wars generated by the competition depressed yields and lowered profits. That, in turn, led to a drop in service standards, poor on-time performance and some bankruptcies.

The public is complaining. Questions have been asked about equipment maintenance procedures. Some people are calling on Congress to reintroduce a form of regulation into the industry.

The airlines are in trouble again, right? What airlines? I’m talking about bus companies.

The parallel between the airline and motor-coach industries under deregulation is striking. Just as the air carriers still seem perplexed by the changed environment since the government relaxed its control in 1978, so, too, do bus lines.

Riders Affected

And--as in the case of the airlines--the effects are being felt by those who use buses for point-to-point transportation and those who use them for vacations.

Motor-coach operators were deregulated in 1982. Overnight, what had been a tightly controlled, licensed and overseen industry became wide open.

Suddenly, anybody who could beg, borrow or steal a bus, and meet certain relatively undemanding financial criteria, was entitled to start offering transportation services to the public.

And many did. It is reliably estimated that in the two years immediately after deregulation the number of companies in the inter-city or coach tour business doubled to nearly 4,000.

As with many of the new entrants in the airline industry, many of those neophyte coach operators were underfinanced and badly managed. Almost 1,000 have already fled the scene, having by design or accident fleeced the public and brought havoc to the marketplace.

Two companies most dramatically--and adversely--affected by that havoc were the two biggest, Greyhound Lines and Trailways. Both have struggled through periods of layoffs and financial uncertainty.

These two used to have the world by the tail. In many inter-city markets they operated virtual monopolies, their only real competition for highway traffic being private automobiles.

Their vast fleets, and their licenses, gave them a distinct advantage over many competitors in the lucrative field of tour coach chartering.

(Many tour packagers do not own buses. They create the itineraries, book the hotel and sightseeing components and “rent” the buses from somebody else.)

All that came to a screeching halt for Greyhound and Trailways in March, 1982, with deregulation. The floodgates were opened to the same kind of runaway competition encountered by the airlines 40 months earliers.

The two companies fell from grace. So much so that Greyhound Lines is no longer part of Greyhound Corp. that founded it in Hibbing, Minn., in 1913.

Earlier this year Greyhound Lines was sold for $350 million to a Dallas investment group headed by Fred Currey, a man with impeccableble bus operating credentials. In his 30-year career Currey has held top management jobs in major coach companies, including Trailways.

Now, with Greyhound under his belt, Currey hopes to take over Trailways as well. Recently he asked the Interstate Commerce Commission for permission to buy Trailways for $80 million, a takeover that would save the company from bankruptcy, he said.

Trailways had been on the sales block for several months, without a nibble, until Currey came along.

Nothing says more about the condition of the motor-coach transportation business than the Greyhound/Trailways situation.

Sad Commentary

That one giant (Greyhound) should become such a burden to its founder that it would be spun off to somebody else is a sad commentary on the state of the industry. That Greyhound proposes to rescue the other giant (Trailways) from financial collapse by buying it only serves to deepen that sadness.

It is possible that the Justice Department could raise antitrust objections to the merger of the two, but Currey doubts it.

According to him, the companies compete on the same roads in only a few inter-city markets. And in those, it’s not competition between them that dictates the fares to be charged, it’s the fares charged by the airlines and by the cost of operating the family car over the same route.

That, he argues, is the public’s guarantee that a merged Greyhound/Trailways would not be able to raise prices at will.

The time may be propitious for the two companies, combined or individually, to make a comeback.

A growing domestic motor-coach tour market, air traffic control concerns, crowded airports and frequently gridlocked highways are giving a new allure to the entreaty, “Leave the driving to us.”