Low-Cost Bus Lines: Shaking Up Inter-City Travel

Published by Reason Foundation – Surface Transportation Innovations, Issue Number 50, Dec. 2007.

One of the justifications offered for U.S. taxpayers to subsidize Amtrak is the idea that lower-income people (students, immigrants, the retired, etc.) need an affordable alternative to using the airlines for inter-city travel. That’s always rung hollow with me, since we’ve had nationwide Greyhound bus service since long before Amtrak. But Greyhound has been losing money for a number of years, and its annual passenger count has been declining since 2000—in part due to the growth of low-cost airlines.

But this decade has also witnessed a proliferation of new inter-city bus companies. So far, none is of national scope, but their niche markets are growing. And they seem to be following in the footsteps of low-cost air carriers, by thinking outside the box to cut costs dramatically.

The largest such company is Megabus, a subsidiary of the U.K.’s Stagecoach Group plc, which cut its teeth in Britain’s deregulated bus market. Megabus offers a few seats on every bus for a $1 fare, and uses pricing similar to that of the airlines, with low fares if purchased well in advance, and higher fares near the departure date (www.megabus.com). All booking is done online, minimizing staff costs, and the company has no stations, picking up customers at known curbside locations. Thus far, the company is offering inter-city service in 10 states, three in the west and seven in the Midwest. There are 23 cities in the network, but so far you can only travel within—not between—the regions.

In the northeast, several companies offer bus service between Chinatowns in various cities. The largest of these seems to be Chinatown Bus (Chinatown-bus.com), connecting Boston, New York, Philadelphia, Baltimore, and Washington. Fares vary, with “typical” one-way fares ranging from $12 New York-Philadelphia to $20 New York-DC. Another bus company, Vamoose, offers express service between Manhattan and two DC suburbs—Bethesda, MD and Arlington, VA for $25.

Private companies are even moving into urban markets. Spanish Transportation Corporation of Paterson, NJ now runs 130 commuter buses into Manhattan each day, on three different routes. The company has grown from a van service with 14 vans in 1993 to a sizeable enterprise today. The buses are branded Express Service.

And Las Vegas now boasts a new door-to-door service among hotels and casinos on the Strip—at just $2.50 per ride. Called Arrow, it is offered by Vegas.com, a travel and booking company. Also offered is a $10 daily pass offering unlimited use of Arrow and the private Las Vegas monorail. Arrow competes with the regional transportation authority’s double-decker Deuce buses.

I’m encouraged to see these entrepreneurial ventures, starting up and growing despite taxpayer-subsidized competition. As with low-cost airlines that sprang up after deregulation, their very existence debunks the idea that airlines or intercity surface transportation or local transit is some kind of natural monopoly that must be controlled by the government. Consumers generally win when competition can flourish, and these examples show that competition still exists in these areas.

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©2007 Coalition On Sustainable Transportation