Making Inroads

Germany's FlixBus wants to take on Greyhound

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Out of the way, Greyhound. Source: Reuters

Greyhound buses have crisscrossed American roads for over a century, and in that time, the transportation company has attained the status of an iconic US brand, one that has captured an enduring place in a nation long drawn to the allure of the open road.

Now, an upstart German bus company named FlixBus, founded only five years ago, plans to challenge Greyhound’s position as the leading intercity coach service on American highways. The planned expansion into the US makes FlixBus one of the latest in a series of German companies—from the grocery powerhouse Lidl to the food startup HelloFresh—that have recently moved to challenge American companies on their home turf.

FlixBus was founded in Germany in 2013, when German regulations were changed to do away with the legally enshrined monopoly on long distance domestic travel long held by the state-owned rail operator, Deutsche Bahn. That change quickly led to the birth of several bus companies offering a low cost alternative to German train travel. FlixBus quickly emerged from the fray as Germany’s undisputed market leader, and expanded to other European countries too. This year, FlixBus expects some 40 million customers and sales of hundreds of millions of euros.

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Here comes a road race. Source: DPA

FlixBus now hopes to replicate this rapid growth in the US. The company says its buses will hit American roads next year, in time to take advantage of a growing market. Last year, 62 million bus trips were booked in the United States, a rise of 23 percent over the level in 2010.

Greyhound, the US’s largest bus transportation service, now has 1,200 buses traveling to 3,800 destinations across the country, and it controls some 31 percent of the market. With roughly 18 million customers, the company rakes in sales of around $900 million annually.

FlixBus says it stands to profit in the US from its more nimble business model, which resembles that of ride-hailing companies such as Uber. Like Uber, which works with independent drivers and cab companies, FlixBus does not own its own buses. Rather, the firm works with private bus companies that adorn their coaches with the FlixBus logo.

“The cooperation with our bus partners is our strategic advantage,” said FlixBus founder, André Schwämmlein, comparing his firm to Greyhound and other American companies, which largely own their own buses. “That makes their model cumbersome.”

Mr. Schwämmlein says his company plans to recast the “uncool” image of intercity bus travel in the US. The idea, he said, is to make bus travel more than just the cheapest option, but technically advanced and easy to use, in part through the ease of use of the company’s smartphone apps.  

Greyhound, however, has undertaken its own efforts to modernize its service, setting aside $15 million to modernize its website and apps. Greyound has also started an offshoot, BoltBus, that offers more upscale seating and wifi access. The expanding American firm Megabus has also established itself as a more modern, convenient alternative to Greyhound.

The growing competition, some analysts say, means FlixBus will not have an easy time as it expands into the US. “I don’t see how FlixBus can operate at a lower price than Greyhound or Megabus,” said Joseph Schwieterman, an expert in transportation and urban planning at DePaul University. Megabus, he added, is already seen as a trendier alternative to Greyhound, although FlixBus might have some success if it focuses on less traveled American routes in the Midwest or Southwest, where there is scarcer competition and potentially more money to be earned.

For their part, FlixBus executives say the company already has a proven track record entering new markets, having rapidly expanded not only in Germany, but in 26 European nations.

“We believe in our chances,” said Mr. Schwämmlein.

A version of this article first appeared in Handelsblatt’s sister publication WirtschaftsWoche. To contact the authors: christian.schlesiger@wiwo.detim.rahmann@wiwo.de

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