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Suddenly, It's Cool to Take the Bus-- BusinessWeek
New low-cost operators are attracting air travelers

by Brian Burnsed

When Bobbie Joe Crail prepared to return home to Detroit after visiting friends in St. Louis in mid-September, she checked the online fares for flights she had taken in the past. Stunned at the high prices for a seat on JetBlue Airways (JBLU) and Southwest Airlines (LUV), Crail, 22, cast about for alternatives. After a little digging, she stumbled on Megabus, an upstart bus line that would get her home—albeit over a two-day trek that wound through Chicago—for a mere $30. "The bus can be inconvenient," Crail sighs. "But it's so much cheaper to string bus trips together than to fly."

If airline deregulation spawned a generation of low-cost carriers, the era of $100-a-barrel oil is giving rise to a new breed of discount bus operators. And unlike discount airlines, low-cost bus lines are thriving. While overall bus travel continues to grow in the mid-single digits, discount operators such as BoltBus, DC2NY, Vamoose, and Coach USA's Megabus are enjoying heady growth by offering cheap, no-frills travel. "People are looking for alternatives...that are safe, reliable, and affordable," says Dale Moser, COO at Coach USA. "We think [growth] is going to continue."

Six-month-old BoltBus (a joint venture of Greyhound Lines and Peter Pan Bus Lines) won't disclose revenues, but it says it has ferried 225,000 passengers among the high-traffic cities of the Northeast—about 10% more than originally forecast. And Chicago-based Megabus says it has grown at a rate of 107% annually since its 2006 launch, prompting it to expand as far afield as Memphis, Toronto, and Boston with fares starting at $1, though only one seat per bus is guaranteed at that rate.

"It's not just high fuel prices—it's the hassle factor at the airports that has left many fliers disenchanted," says Joseph P. Schwieterman, a professor of transportation at DePaul University. "Travelers who wouldn't have given a thought to bus travel are now stepping on board."

For bargain bus lines, the key to success is their ability to keep costs to a minimum. BoltBus, for instance, picks up passengers curbside, sparing it the expense of leasing space at a terminal. And it only sells tickets online, which eliminates the cost of employing ticket agents. (Roughly 90% of Greyhound's tickets are sold either by phone or at a terminal.) BoltBus is also building business with a frequent-rider program.

Whether such players are making fistfuls of money at these prices is open to debate. But passengers are enjoying the ride. BoltBus offers free wireless Internet and power outlets. And at no point do passengers have to take their shoes off, undergo a pat-down, or deal with long airport delays.