Tuesday, October 7, 2014

The Bus Story

For years and years....the BundesBahn (the German Railway) tightly controlled mass travel around Germany.  The law basically said that bus travel could be done for short distances and within the city or community itself.  You could not run a bus from Stuttgart to Frankfurt, for example.

Over the years, consumers complained, and wanted a second-option for lengthy travel.    So late last year...the change came.  Numerous companies came out, and offered bus travel across Germany.  The public was excited, and it cut into the daily traffic of German railway numbers.

This week.....another company (the second) is reviewing options of quitting the bus game.  The first to leave was City2City.....who will end this month (Oct).  The new company reviewing options?  ADAC-Postbank.

The issue?  It's a commerce thing.  You need market share and stable income numbers.  To get market share.....you generally give up profits and stable income.

This strategy leads you to offer dirt rate tickets from Berlin to Hamburg (twelve Euro for one-way tickets).  Profit off this?  I'd take a guess that if the bus was fifty-percent full.....there's zero profit for the driver cost, bus cost, and fuel.  To attract more customers.....you do the logical thing....cheap tickets, which fill the bus up, but you really need three-quarters of the bus full to now meet minimum profit requirements.

All of this is creating several dilemmas.  First, way too many bus companies now operating.  Second, competition is fierce and briefly aiding the consumer.  Third, bus companies are looking for any angle to save on cost.....so maybe your driver is completely rested.....or maybe he's not rested.

It's brewing to be a mess that gets German safety officials involved and start yanking the bus license of various drivers....creating turmoil with schedules and frustration with passengers.  Generally, in a free-market atmosphere.....situations correct themselves.  You don't offer services for free, and there's some profit gained at the end of the day, or you get out of the business.  It'll go that way for the German bus companies.

Maybe it'll take a year or two more.....but what I see is one or two national companies competing mostly against themselves, and a dozen smaller companies that specialize in two or three routes only.
The odd thing here?  The Bahn guys are talking to the bus companies.  Yeah, the competition.  What I suspect is that the Bahn knows they are overspending on passenger service for dozens of railways across Germany.  Maybe their agenda is to take these one-trip-an hour along certain rail routes, and convert them to one-trip-every-two hours....filling in the missing hour with a bus route along the same path.  Cost would be half as much, and it makes perfect economic sense.

Where this all leads onto?  These twelve and twenty Euro bus trips?  Enjoy it now.  Within three years....it'll revert to just a couple of companies, and most bus trips will be a minimum of twenty-five Euro.  It'll still be cheaper than railway travel but it should not ever be more than half the railway ticket.

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