Greyhound to whisk people to a competitor's front doors: an airline
New York — Greyhound and People Express - rather an odd link at first blush. Just one year ago, Greyhound Lines was bemoaning competition from other bus companies and discount air carriers. To keep the sputtering bus line running, management insisted on a pay cut from its drivers and mechanics.
So Greyhound drivers may be expressing some befuddlement this Friday when they begin dropping riders off at the competition's front door.
Greyhound Lines, a subsidiary of the Phoenix-based Greyhound Corporation, has agreed to provide service to and from towns surrounding five airports and at times that coincide with People Express flights. The airports with this new service: Newark, N.J.; Detroit; Miami; Burlington, Vt.; and Portland, Maine.
Stealing a march on its big rival, Trailways Lines Inc., based in Dallas, started a similar service two days before the Greyhound-People Express announcement. Airports that Trailways now serves are in Boston; St. Louis; Chicago; Newark; Kansas City, Mo.; Wichita, Kan.; Dallas; and Fort Worth, Texas. Trailways is planning to add 12 more cities by Christmas.
''It's called survival,'' said Terry Underwood, vice-president of Greyhound marketing, at a recent press conference.
Ridership on the nation's largest intercity bus line has been declining for the last 15 years. The company has 62 percent of a dwindling market. ''Eighty-two percent of intercity travel is done by car, and, frankly, the growth for us just isn't there,'' Mr. Underwood says.
So Greyhound hopes to piggyback on the growth in airline ridership. Citing federal government figures, Underwood says the number of people leaving the driving to pilots is projected to soar from 290 million in 1982 to more than 400 million in 1990.''We believe it's better to work with and seek growth of that nature.''
In the months ahead, Greyhound intends to expand the program to include 17 additional airports and plans to include other airlines. Preliminary discussions have been held with American Airlines. The bus line initiated the program with People Express because Greyhound believes the two transportation companies serve similarly cost-conscious travelers.
Greyhound expects $500,000 in new revenue this quarter and ''at least $1.5 million'' in the first year from this service.
That will help, but it is small in relation to the Greyhound company's overall income. ''Total revenues last year were in the neighborhood of $830 million for Greyhound's transportation segment,'' notes Lloyd Zeitman, an analyst with the Value Line investment survey.
Nonetheless, Mr. Zeitman is encouraged by Greyhound's progress: ''The company as a whole has been utilizing it's assets better, and this is just a part of that effort.'' He grants that substantial revenues could be generated if the service expanded to other airlines. ''And the experience Greyhound gains in doing this automatically gives it an advantage over other bus lines if the concept catches on,'' he says.
As for People Express, the Newark-based carrier could use a ridership boost, too. ''There certainly is a need for People Express to increase load factors,'' says Alfred Norling, airline analyst at the Kidder, Peabody & Co., the securities firm. In the past, the discount carrier's planes have been 70 to 75 percent full. In October, the figure was 65 percent.
''That's a good number for most commercial airlines, but it's not for a low-fare carrier, because the break-even point is higher,'' Mr. Norling says. In the last year People Express has expanded into larger and more competitive markets. People could use the Greyhound ridership as it battles the incumbent carriers, he notes.
As yet, customers will not be able to buy a single ticket that would cover both the Greyhound ride and the People Express flight. If the marriage proves successful, then joint tickets may be considered, bus officials say. In the meantime, the two carriers will promote the service to their respective passengers.
Two years ago, the bus industry was deregulated, thus fostering stiff competition. This made for slender or nonexistent profit margins. As gasoline prices have declined, travelers have opted to drive themselves. And the deregulation of the airline industry has given rise to such low-cost carriers as People Express.
Says Value Line's Zeitman: ''If you can't beat 'em, join 'em - especially if you can make a profit at it.''