Flixbus is like the Uber of long-haul road travel. Could it reboot the American coach business?
The Flixbus I took from Berlin to Hamburg last month showed up about fifteen minutes late. My seat didn’t recline. The wifi was spotty. The bathroom, reasonably clean. In other words, at 18 euros, the three-hour ride was just fine—a step up from what intercity buses have historically offered, but nothing revolutionary.
And yet Flixbus is the hottest thing in Europe’s long-haul bus business: It boasts 200,000 cheap, daily connections to more than 1,200 destinations in 26 countries, carrying 30 million passengers in 2016. Flixbus created this network in just five years, a growth that has little to do with the quality of the rides themselves.
It’s the business model: As Uber does not own its on-demand cars, Flixbus does not own its buses. Instead, they are operated by other bus companies Flixbus has franchised or absorbed—a Borg-like strategy has allowed this Munich-based start-up to utterly dominate its home market, with nearly 90 percent of the German long-haul bus business. It’s approaching monopoly status on many of the major routes and corridors where it runs.
Now Flixbus has its gaze set on the United States. Last week, it announced plans to set up a base in Los Angeles in the coming year, its first move outside of Europe. Stateside, the company wants to change the perception of long-haul coaches for all.
“Five years ago in Europe, going [on the bus] was something for low-income groups—not a choice you made if you didn’t have to,” said André Schwämmlein, the company’s founder and CEO. “What we achieved was that buses became cool. I see similarities in the U.S.”
The American intercity bus sector is primed for a Flixbus-style disruption. From the 1980s up until fairly recently, the dominant players, Greyhound (which operated jointly with Peter Pan until this summer) and Stagecoach, were caught in a vicious cycle of fewer passengers, shrinking routes, and ever-worsening service quality. That trajectory began to turn around in 2006: with gas prices peaking, and more under-regulated “Chinatown” buses taking off from city curbs, the two operators rolled out their own discount express coaches along major commuter corridors. That year, Stagecoach introduced its first Megabus in Chicago, with fares famously as low as $1; in 2008, Greyhound introduced super-cheap BoltBuses between New York and Washington, D.C.
With Recession-era wages in the toilet, ridership surged along busy commuter corridors, as the buses beat Amtrak and the airlines for value travelers. Other, smaller players have emerged to catch demand, stepping up amenities like free wifi and bottled water. (Lame, yes, but better than many airlines.) Even more recently, new startups are testing out true luxuries on board in an effort to compete with plane travel on hotly competitive routes—take, for example, the coffin-like sleeping bunks on Cabin, the “hipster bus” shuttling night commuters between L.A. and San Francisco, and Vonlane, a first class operator in Texas with onboard conference rooms.
“What’s emerged is a highly stratified landscape, with lots of small companies making their way into big markets,” said Brian Antolin, the president of a Philadelphia-based bus operator and a bus market researcher and analyst. Consumers are winning. When they’re full, long-haul buses are about the most fuel-efficient transport mode out there—and despite the reputation, they’re a pretty safe way to travel. Between 2006 and 2014, U.S. intercity bus travel grew an average 6 percent each year—much faster than the airline industry or Amtrak ridership.
But in the past three years, a recovering economy and lower fuel prices have slowed the growth of the curbside bus operators, with more Americans hopping back into the driver’s seat. Express buses (as well as Amtrak service) have been cut along many well-traveled routes in the 120-to-400-mile range—the sweet spot for non-driving, non-plane travel—according to a new report on ground transportation options by the Chaddick Institute for Metropolitan Development at DePaul University. Some routes have never had a “middle mode” option at all, even though they link major metropolitan areas. The Chaddick Institute report identified 152 routes lacking express coach and rail connections, including Los Angeles to Phoenix (estimated to have 2.5 million trips per year), Cleveland to Detroit (1.9 million), Dallas to Oklahoma City (1.9 million), and Miami to Fort Myers (1.5 million).
Many of these cities are still served by conventional buses, such as Greyhound. But while express coaches have a slightly stepped-up reputation, riding the dog remains the choice of last resort—or the only choice at all for elderly and lower-income riders who don’t drive or own cars and can’t afford airfare. For folks with any cash to spare, along these corridors, “the absence of express coach lines and Amtrak leave many to regard themselves as having no choice but to fly or drive,” the report states.
The entry of a company like Flixbus might reboot the American bus boom, and reshuffle the class hierarchy of intercity travel in the process. Flixbus was founded in 2013, after Germany deregulated its bus market—previously, only state operators were allowed to run coaches between metros. It quickly built a national network of intercity connections departing around the clock by collecting and rebranding existing coach operators, large and small, under their umbrella. Mostly this has looked like franchising—or to use Flixbus’ parlance, forming “partnerships” with companies that would otherwise be competitors. “That’s still the core of our business model,” said Schwämmlein. “It drives about 80 percent of what we do.”
Flixbus also heavily invested in custom software to locate veins of unmet demand, and to reorient drivers to more optimal schedules and routes. That, too, sets the company apart: Antolin explained that coach companies have historically tended to base schedules on what they can afford operationally, rather than thinking about these demands. “They may or may not have consumers’ needs at heart,” he said.
Like dominos, a line-up of European countries have followed Germany to liberalize their transportation sectors over the past few years, allowing Flixbus to replicate its Uber-esque franchise model across the continent. There is little downside for either Flixbus or its franchisees, said Joseph Schwieterman, the director of the Chaddick Institute and lead author of the report. By tapping into Flixbus’ enormous network—and adhering to its quality standards, such as clean seats, snacks for sale, and two, uniformed drivers at all times—the partners get more visibility, more trips, more riders, and more money.
This is part of Flixbus’ inherent value, from both a franchising and marketing standpoint, Schwieterman said: “If you travel to another region, instead of stepping on a bus company you’ve never heard of, you recognize the brand.” Customers feel more comfortable, and smaller operators profit from a wider playing field. It’s a model that would seem to do well in the American bus market, with many tiers of competing players.
Flixbus has also grown via mergers and buy-outs—some of them enormous. Witness its 2016 acquisition of the massive UK-based Megabus Europe, which spread Flixbus into Germany, Italy, France, Spain, and Benelux, as well as cross-border services to London—and turned it into Europe’s largest provider. In a few cases, when bus operators have declined to work with them, Flixbus has run contracted buses along the same routes, and crushed them with bottom-barrel (some would say predatory) prices. While a bevy of other bus operators have surged onto Europe’s deregulated markets since, Flixbus’ growth-hungry, non-ownership model has made it the brand to beat—or rather, join.
As with many a juggernaut, growth precedes profitability. Flixbus is fueled by billions in venture capital—the latest round, an undisclosed amount, came from U.S. equity firm General Atlantic. It’s unlikely that the privately traded Flixbus is profitable at this point—another parallel to Uber and other metastatic tech-based mobility services. Which leads to a growing concern about Flixbus among some European regulators: It’s more or less assembling a monopoly. Fares may be super low for customers as long as they’re subsidized by investors, but Flixbus’ domination of the market could eventually change that equation, and diminish service quality onboard. That’s not unlike what happened in the U.S., for decades, with Greyhound, as it took over the market—the company became notoriously customer-disoriented.
But Flixbus leaders say that, while competition among other bus companies might be shrinking, it’s still vying with trains, planes, and automobiles for passengers; in that broader mobility landscape, low prices set it apart. And it claims that has actually grown demand for city-to-city travel in Europe, and that it’s reducing the number of private cars on the road in the meantime. According to company surveys, about 30 percent of Flixbus passengers (80 million in the past five years) said they would have taken a car. Another 30 percent would have taken a bus or a train, and 30 percent would not have taken the trip at all.
In the U.S., Flixbus may face an uphill battle: American cities are much more spread out, and travelers might be less willing to shift modes across considerably larger distances, or hop on the bus for the sake of a cheap trip they wouldn’t have otherwise made. Flixbus won’t say yet exactly which routes it will start running, once its base is established in L.A.
Yet Schwämmlein said that he is confident that by forming branding partnerships with existing bus lines—for example, perhaps Megabus, which operates coaches from L.A. and Riverside to Las Vegas, San Francisco, San Jose, and other West Coast cities—the company can get a foothold. Eventually, Pierre Gourdain, who leads the company’s international expansions, hopes to bring service to routes around the U.S. that have been historically underserved by buses and trains. He points to South Florida as one area with unmet demand for alternatives to the car; likewise smaller Midwestern cities, college towns, and military bases. In a world where transportation options make or break a city’s cosmic prospects, express buses for flyover towns that lack decent rail and airport connections might be pretty meaningful.
What about the big dog? Greyhound has been trying to turn around its reputation for seedy, slow-crawl travel. Its representatives say it welcomes competition: “When new companies enter a market currently served by Greyhound, it introduces more people to the concept of bus travel, which is a benefit for everyone,” Lanesha Gipson, a Greyhound communications specialist, wrote via email. “We’ll continue to focus on providing the best service we can for our customers, with an emphasis on safe, reliable, and affordable transportation.”
Flixbus will certainly give it a run for its money. In Europe, Flixbus has absorbed some of the largest players in the land. Imagine such a partnership with Greyhound: It might shine up the older company’s reputation by making the brand as buzzy as that of a European-style express coach. Maybe then traveling by bus—any bus—could be a decent option, rather than a grim obligation, for riders across the economic spectrum.
“When you can’t drive in the U.S., you feel like you can’t go anywhere,” Gourdain said. “Where less is offered, the more value we bring.”