FlixBus Buys Greyhound

In a move that is sure to shake up America’s fluid, intercity-bus market, one of the newest entries into that market, FlixBus, is buying one of the oldest, Greyhound. Greyhound was previously owned by FirstGroup, one of the two main British companies that emerged from Britain’s bus privatization in the 1990s.

The other British company was Stagecoach, which started Megabus, which revolutionized American intercity bus operations in 2006 by offering curbside bus service (saving the cost of bus stations) and internet ticket sales (saving the cost of ticket agents). FirstGroup responded by buying Greyhound in 2007.

FlixBus began operating in Germany in 2013 and within five years had captured 90 percent of that country’s intercity bus market. Unlike Greyhound and Megabus, FlixBus did not operate its own buses but instead contracted them out to other bus owners who displayed FlixBus’s logos while FlixBus provided the marketing and ticket sales services.

In 2016, FlixBus bought Megabus’ European operations from Stagecoach while contracting with Stagecoach to operate the buses. FlixBus’ entry into many American markets in 2018 competed directly with some Megabus routes, ironically contracting with Stagecoach to operate some of those routes. This may have persuaded Stagecoach to sell its North American Megabus operations in 2019 to a Los Angeles equity firm.

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In buying Greyhound, FlixBus appears to have departed from its policy of not owning buses as Greyhound consists mainly of a fleet of 1,700 coaches. This isn’t entirely unprecedented, however, as in 2019 FlixBus bought Turkish bus company Kamil Köç, including its buses, and continues to own and operate those buses.

FlixBus is paying FirstGroup $172 million for Greyhound. That’s a real bargain considering that FirstGroup paid sixteen times that much for it in 2007. FirstGroup also assumed $800 million of Greyhound’s debt when it bought the company in 2007, but is accepting responsibility for $320 million in liabilities (such as pensions) as a part of its deal with FlixBus. FirstGroup therefore appears to have lost more than $3.7 billion on Greyhound.

Greyhound also owned at least some of the 230 bus stations and various maintenance facilities that it uses, but Stagecoach is hanging on to many of those stations and other properties with plans to lease them to FlixBus and eventually to sell them. These have an estimated value of less than $200 million, so won’t do much to cover FirstGroup’s losses on Greyhound. With Stagecoach getting out of the North American intercity bus market, both British companies seem to be conceding ground to FlixBus.

Still, purchase of Greyhound could be risky for FlixBus. While no data are available, bus ridership is no doubt low due to the pandemic and what happens to ridership in the future is anyone’s guess. While FlixBus says it will continue to operate Greyhound and FlixBus as separate brands, at least the old dog will be run by someone capable of learning new tricks.