SIC 4131
INTERCITY AND RURAL BUS TRANSPORTATION



This category includes establishments primarily engaged in furnishing bus transportation, over regular routes and on regular schedules. The transportation is principally outside a single municipality, outside one group of contiguous municipalities, and outside a single municipality and its suburban areas. Charter bus transportation services are classified in SIC 4141: Local Bus Charter Service and SIC 4142: Bus Charter Service, Except Local.

NAICS Code(s)

485210 (Interurban and Rural Bus Lines)

Industry Snapshot

Intercity and rural bus transportation appears to be a declining industry. According to the Department of Transportation, only 15 companies were providing regular route intercity bus service, and only one carrier, Greyhound, maintained a national network in 2003, compared to 143 intercity bus companies in existence in 1960. The corresponding decrease in passenger miles was largely due to competition from private automobiles, Amtrak, and the airlines, which offered greater speed and convenience at a comparable price. The number of locations served by intercity bus lines also declined, totaling about 4,000 in 2002—fewer than half the number served in the early 1980s.

Organization and Structure

For years, Greyhound has dominated the intercity and rural bus transportation industry. The carrier's position was secured in 1987 when Greyhound acquired Trailways, the nation's second largest bus line. That purchase left Greyhound the only bus line in the United States with routes covering the entire country. In the early 2000s, a handful Class I bus companies (companies with average revenues of $5.3 million over a three-year period) competed with Greyhound to provide regular route intercity bus service regionally. Greyhound accommodated about 58 percent of the industry's passengers in 1995, as compared to the next three largest carriers, which together carried only about 28 percent of intercity bus passengers.

Trade Associations. A number of trade associations served a variety of functions in the bus industry. The American Bus Association, in Washington, D.C., was founded in 1926. Of its 500 bus operator members, 75 provided intercity service on regularly scheduled routes. Another Washington, D.C. group, the National Bus Traffic Association, founded in 1933, served as a publisher of bus tariffs. The National Trailways Bus System was what remained of the Trailways system after the Greyhound merger. The system was an association of 32 independent, intercity bus companies, which coordinated schedules and promoted a unified approach to marketing and operating procedures.

Background and Development

Intercity bus services sprang up independently in different regions across the United States in the early part of the twentieth century. Some of the earliest intercity bus lines began as extensions of urban jitney operations. Minnesota is often named as the birthplace of intercity bus transportation. The Mesaba Transportation Company, of Hibbing, Minnesota, transported miners between mining villages over regularly scheduled routes as early as 1913. Around the same time, the Pickwick Transportation Lines initiated intercity bus service in Southern California. By 1918, this company had expanded its service area to include Northern California and Oregon.

As road conditions improved, bus companies began to appear by the hundreds across the country. Over 4,000 intercity bus companies were in operation by 1926. Soon, the number of companies began to decrease as the industry consolidated. Mergers, acquisitions, and bankruptcies became commonplace, a trend that continued until the 1970s.

In December 1926, the Motor Transit Corporation, a $10 million holding company, was organized by Eric Wickman, the founder of the early Hibbing bus operation. A few years later, the Motor Transit Corporation was restructured as the Greyhound Corporation. Greyhound acquired smaller bus companies and had routes covering most of the United States by the mid-1930s. In 1936, the National Trailways System was formed by an association of railroad-owned bus lines, including Missouri Pacific Trailways, Burlington Trailways, and Santa Fe Trailways. As the system grew through acquisitions, it evolved into the Continental Trailways System, a nationwide bus service. In 1943, the Continental Coach Company was launched. Continental, after changing its name to Transcontinental Bus System, was a nationwide line by 1953.

World War II brought about a dramatic increase in intercity bus ridership. Between 1940 and 1945, traffic grew from 10 billion to 27 billion passenger miles. After the war, the share of the intercity travel done by bus began to decline, although the number of bus travelers remained fairly steady. By 1960, only about 2.5 percent of intercity trips were made by bus, compared to a wartime peak of 10 percent.

As competition from air travel and improvements in automobiles increased, the industry's share of passengers eroded further. In the 1970s, the bus lines came under pressure from low fares offered by Amtrak. The deregulation of airlines also brought about the emergence of low-cost air operations. These events cut into the profitability of the bus lines significantly. Between 1975 and 1982, intercity bus service (measured by number of weekly bus departures) declined by nearly 5 percent a year. Greyhound lost about 30 million passengers, roughly half of its ridership, between the mid-1960s and the mid-1980s.

Greyhound spent the late 1980s and early 1990s in the throes of a drivers' strike and its consequences. The strike resulted in a number of violent confrontations and quite a bit of negative publicity for the company. Four months after the strike began, Greyhound declared bankruptcy. The company emerged from bankruptcy in 1992 under new ownership and management.

Role of Government. Federal agencies had no jurisdiction over bus companies that operated within one state. Bus lines whose routes crossed state borders fell under the regulatory jurisdiction of the Surface Transportation Board (STB), formerly the Interstate Commerce Commission (ICC). Regulation was cut sharply, however, by the Bus Regulatory Reform Act of 1982. Following the 1982 Bus Act, entry into the industry was open, and applications for authority to operate rarely were challenged. Minimum insurance coverage and knowledge of safety regulations were the only requirements to prove a carrier's fitness to operate. Passenger carriers were required to file rate information with the STB, but these filings seldom were rejected since 1982. Only Class I companies were required to report financial statistics to the STB. Federal regulations pertaining to intercity bus drivers were somewhat stricter. Drivers had to be at least 21 years old and were required to pass a physical examination. Drivers operating vehicles designed to carry 16 or more passengers were also required to obtain a commercial driver's license from the state in which they lived. Additionally, most intercity bus companies required drivers to complete two to eight hours of classroom and behind-the-wheel training that included instruction in federal and state driving regulations and safe-driving practices.

Government Regulation. Regulation of intercity bus transportation arose during the industry's infancy. Pennsylvania became the first state to regulate the operation of passenger buses in 1914. By 1925, a majority of states had followed suit. That year, the industry's first national organization, the National Motor Bus Association, was formed. The U.S. Supreme Court determined, however, that state regulatory agencies had no jurisdiction over interstate bus lines. It was not until 10 years later, with the passage of the Motor Carrier Act of 1935, that the ICC was authorized to regulate fares, safety, routes, entry, exit, mergers, transfers of operating rights, and other service and financial matters of the interstate bus lines.

In the 1970s, Greyhound began to push for deregulation of the intercity bus industry in hopes of competing more effectively with the heavily subsidized Amtrak rail service. The ICC made entry regulations more liberal in 1977 and 1978. In 1980, the Motor Carrier Act was amended by Congress. The new version of the Act made the process of applying for operating authority easier and required quicker decisions on the applications.

The Bus Regulatory Reform Act of 1982 brought about major changes in the industry. Entry was liberalized to the point where any prospective carrier that was "fit, willing, and able" was granted authority, barring evidence that this authority was contrary to the public interest. The act also empowered the ICC for the first time to overrule state regulatory authorities on matters of intrastate rates if their rulings were harmful to interstate commerce. A 1992 report by the General Accounting Office (GAO) suggested that the deregulation that took place in 1982 did not address the causes of the industry's decline, and a major result of the deregulation was the elimination of service to areas where there are fewer transportation alternatives, particularly rural areas and small towns.

Since deregulation in 1982, hundreds of routes in rural areas have been discontinued. Many of the areas that are no longer served are not accessible by air or rail systems, leaving residents without automobiles completely isolated. A 1992 study by the GAO recommended that the best way to address this problem was through more widespread use of a set-aside provision in the Intermodal Surface Transportation Efficiency Act of 1991. Section 18(i) of the act requires each state to set aside money to support intercity bus transportation. By 1992, 20 states had instituted such programs, which included subsidies to firms for continuing service on endangered routes, price breaks on vehicles, and financing for building and repairing terminals.

Current Conditions

By the beginning of the 2000s, there were between 5,000 and 8,000 intercity buses on the road. There were just 14 Class I carriers in the nation in 1999; they carried 42 million passengers in that year. Gross passenger revenues for regular-route intercity buses totaled over $1 billion. Intercity bus service is provided to over 4,000 points, but this compares with over 16,000 points of service prior to deregulation. The industry continues to be dominated by Greyhound Lines and its subsidies.

Industry Leaders

Greyhound Lines, Inc., a subsidiary of Laidlaw, Inc. since March 1999, boasted 25 million passenger boardings for 2002. Revenues that year were $991.9 million, resulting in a net loss of $111.6 million. The company operates a fleet of approximately 2,900 buses and employs 12,200 people nationwide.

Although Greyhound was the only bus line with a nationwide scope in 2003, several other companies had achieved solid positions in specific regions. With operating revenues of $60 million at the beginning of 2002 from its intercity, charter, and other bus services, the 800-employee Peter Pan Bus Lines, Inc., of Springfield, Massachusetts, more than doubled its earnings from the early 1990s to become the second largest player in the intercity bus travel market. The company's growth came out of aggressive marketing efforts to increase ridership, including the addition of express services between major cities and advertisement on rock music radio stations to attract college students. In 1998, Peter Pan Bus Lines was voted the safest bus company in America by the National Safety Council.

Other prominent companies—all of which operated in the New York metropolitan area—included Connecticut Limousine; Hudson Transit Lines, Inc.; and New Jersey Transit Bus Operation, Inc.

Workforce

According to the U.S. Department of Labor, Bureau of Labor Statistics, in 2001 the intercity and rural bus industry employed 25,640 workers. Bus drivers, which accounted for nearly 48 percent of all jobs, earned a mean annual income of $30,510.

Research and Technology

Advances in technology historically played a part in the rise and fall of the intercity bus industry. It was improvements in road conditions and the development of the interstate highway system that made a nationwide network of bus routes possible. Later, the increased availability of private automobiles and affordable air travel contributed to the bus lines' loss in ridership share.

Since fuel was a major cost in running a bus company, companies were always on the lookout for equipment that would improve fuel efficiency. Diesel engines were in regular use in buses since the 1950s, and steady advances were made in their engineering, leading to developments such as the turbocharged diesel engines introduced around 1980. In 1992, a new bus called the Neoplan Cityliner was unveiled in Colorado. Used mostly for organized tours in the early 1990s, the City-liner featured a smoke-free diesel engine that polluted significantly less than traditional models. Bus manufacturers were also experimenting with fueling buses by way of pollution-free battery cells.

In the mid-1990s, technological innovations in intercity buses focused largely on reducing trouble-shooting and repair time. The newest motor coaches featured sophisticated systems monitoring and recording devices that allowed drivers and maintenance personnel to diagnose malfunctions in a fraction of the time previously required. Buses also were likely to sport electronic brake and steer-by-wire systems, similar to the fly-by-wire systems used in airplanes, which would offer drivers better feedback and control of the vehicle, as well as increased ease of maintenance.

Further Reading

Bernier, Brad and Tom Seekins. "Rural Transportation Voucher Program for People with Disabilities: Three Case Studies." Journal of Transportation and Statistics, May 1999, 61.

"Capitalize on New Opportunities." Metro, November-December 2001, 40-41.

"DaimlerChrysler Unveils New Commercial Bus Organization for North America." Fleet Equipment, February 2002, 13.

"Fact Sheet," Greyhound Web Site, 1999. Available from http://www.greyhound.com .

Federal Transit Administration, Transit Cooperation Research Program. TCRP Report 79: Effective Approaches to Meeting Rural Intercity Bus Transportation Needs, June 2002. Available from the National Transportation Library at http://ntl.bts.gov .

O'Brien. "The Peter Principal." Business West, November 1999, 22.

U.S. Department of Labor. Bureau of Labor Statistics. Occupational Outlook Handbook 1998-99, Washington, DC: 1999. Available from http://stats.bls.gov .

U.S. Department of Transportation, Bureau of Transportation Statistics. Bus Profile, 2002. Available from http://www.bts.gov .



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