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Spokane, Washington  Est. May 19, 1883
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News >  Business

Megabus and rivals enjoy profitable ride

People wait to board a Megabus, an intercity bus service, on Chicago’s South Canal Street in August.
People wait to board a Megabus, an intercity bus service, on Chicago’s South Canal Street in August.
Phil Rosenthal McClatchy-Tribune

ABOARD MEGABUS, NEAR ELGIN, Ill. – We’re running late this weekday afternoon and the road is a bit bumpy en route to Madison, Wis.

For Megabus, the still-growing discount intercity bus line, however, the ride has been faster and smoother than anyone would have guessed when it made its U.S. debut 61/2 years ago, linking eight Midwestern cities to a Chicago hub for as little as $1 a ticket.

Within two years, Megabus was carrying 2 million passengers annually. That number is approaching 6 million riders in about 100 cities in the U.S. and Canada. Its North American fleet of 194 double-decker buses last year has grown to 260, and its network of hubs has expanded to eight cities.

The intercity bus industry’s indelible image of Dustin Hoffman’s destitute Ratso Rizzo in “Midnight Cowboy” expiring on the way to Florida is giving way to a new reality from the curbside operators, so named because they spare the expense of maintaining traditional bus stations.

There is free onboard Wi-Fi, power outlets and tables on which riders can eat, play or set up a laptop and phone and get to work on, say, a newspaper column.

Along the way, these carriers have breathed life into a mode of transportation that was practically in hospice care for close to a half-century. Not even a spate of incidents this summer that raised safety concerns across the curbside bus business seems to have slowed the revival.

“The bus sector was flat on its back,” Joseph Schwieterman, a DePaul University transportation professor and the director of DePaul’s Chaddick Institute for Metropolitan Development, said by phone. “Megabus started its Chicago hub in spring of ’06, and that began the whole curbside boom.”

A part of Coach USA, which itself is a subsidiary of United Kingdom-based Stagecoach Group PLC, Megabus is racking up about $125 million in revenue and turning an overall profit, according to a spokesman. FirstGroup PLC’s BoltBus, a 2008 venture between Greyhound and Peter Pan Bus Lines, also has said it’s in the black, but it hasn’t broken out figures.

Schwieterman said it usually takes about four years for a hub to become profitable, which would suggest Chicago and New York are carrying Megabus, while Philadelphia, Pittsburgh, Atlanta, Dallas, Houston and San Antonio are still establishing themselves.

An attempt to expand into California, Nevada and Arizona a few years back was aborted after just a few months, an example (both bad and good) of just how nimble the company can be, unsubsidized and unbeholden to anything but its own needs.

Half of the intercity curbside bus passengers are 25 or younger, and three-quarters are no older than 35. Amtrak has taken a hit, as more than a quarter of the bus passengers have been diverted from rail travel, leading some to wonder what impact sustained growth of the curbside buses might have on future rail subsidies.

Megabus and the others benefited from rising fuel prices, a bum economy, digital technology that facilitates cost-cutting by moving most ticket sales online, and, well, that oft-touted $1 fare ($1.50, when a booking fee is added).

“It was price first,” explained Michael Alvich, Megabus’ vice president of marketing and public relations. “That’s what got everybody’s attention. They couldn’t understand how we could do it for a dollar. They thought it was going to be a promotional gimmick only out there for a short time.”

Instead, it was a promotional gimmick for which the company would be best known, available on at least a few seats on every bus on every route, with prices going up as available seats dwindle and departure nears.

Because of the low cost, growth of the curbside sector and the way the bus industry is monitored, there have been concerns raised about safety despite the government giving Megabus a satisfactory rating on that front.

The Federal Motor Coach Safety Administration, which oversees 4,000 companies, announced in May it was shutting down 26 bus operations after a yearlong investigation. And the agency and the National Highway Traffic Safety Administration this summer warned of the blowout danger posed by double-decker buses exceeding their tires’ weight limits.

Indeed, a tire blowout was said to have figured in the Megabus crash in August that killed one person and injured almost 50 in Litchfield, Ill.

But it’s in the interest of Megabus, BoltBus and others that safety concerns not deter travelers.

“There’s been nothing like this since airline deregulation in terms of the excitement it creates,” Schwieterman said. “And there’s been nothing like this to re-energize downtowns and downtown travel since World War II. Plus there’s the whole environmental side in what kind of mileage bus companies get.”

It’s traveled a long way already.

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