Pandemic Creating Existential Crisis for Nation’s Bus Industry
By John Kingston
September 16, 2020
There may not be a private sector transportation business more devastated by the pandemic than the bus industry.
Certainly mass transit has been hit hard too, but it isn’t privately owned, it has the backing of governments and data is showing ridership is starting to move off its low levels.
But for certain segments of the bus business, like private charters, there has been no recovery and there is none in sight.
This industry that employs drivers who hold the same CDLs that truck drivers do has been hoping for relief from a federal stimulus package. But so far, the industry hasn’t gotten it.
That led Peter Pantuso, the president and CEO of the American Bus Association, to write a recent unusual blog post/email to the media and to the group’s members. It’s an expression of despair far different than the usual media outreach we hear from a Washington-based trade group.
Entitled “The Death of an Industry,” Pantuso plaintively asks, “As we mourn the demise of this industry, we need to ask ourselves, ‘Who will fill the gap?’
“Who will help when hurricanes rage?” he continues. “Who will move our troops? Who will drive our children to school? Who will provide Americans affordable travel?”
And then he blamed Congress. “This all could have been avoided had Congress provided a lifeline to the motorcoach industry by passing the Coronavirus Economic Relief for Transportation Sectors (CERTS) Act and delivered the much-needed money for the industry to survive this pandemic.”
Pantuso, in an interview with FreightWaves, said the motorcoach industry — the preferred term — is normally about a $15 billion business annually. “We knew back in March as we were beginning to shut down that this was going to have a huge impact on our industry,” he said. “We didn’t know how long it was going to last or how deep, but we know that this year the industry might do a little over $4 billion in revenue.”
The American Bus Association’s membership falls into three buckets, Pantuso said. Charter business is the largest; scheduled service, operated by companies such as Greyhound and Megabus, is second; and private commuter buses moving in to and out of major cities is the third piece.
While that could pick up with the start of school and the resumption of interscholastic sports — a big if — Pantuso conceded that the industry just doesn’t know whether there will be an impact or how significant it might be.
The CERTS package that so far has not advanced in Congress was backed by not just the American Bus Association but by similar trade groups in the bus industry.
The package, Pantuso said, is modeled after the bailout package that airlines got early in the pandemic. The size of that package differs in various reports; it has been described as $60 billion but Pantuso referred to it as $80 billion, though he also talked about aid to Amtrak and public transit systems as well as to airlines.
The size of the funding under CERTS would be $10 billion, Pantuso said, with half of that targeted to be grants. The wording of the bill on first glance also reads much like the provisions of the Paycheck Protection Program. But the PPP required a certain percentage of funds to be used for maintaining workers on the payroll, first at 75% before being cut down to 60%.
While employee pay is listed as one of the acceptable uses of the funds under CERTS, there is no hard percentage minimum specified. Given that, companies would appear to have more leeway using funds under CERTS toward other ongoing costs: “continued operations and maintenance of existing capital equipment and facilities.” And that includes the things that would be likely to kill off bus companies waiting for a recovery: “rent, leases, insurance and debt service.”
Pantuso said the bill has 45 Senate sponsors and a bit more than 100 sponsors in the House. He said the organizations backing CERTS had hoped the legislation would have passed on its own, and if not, would be part of a broader stimulus package. Neither of those things happened.
Bus companies can be large, but a charter bus company can be small, with an individual owner having a fleet of just a few vehicles. Inevitably, there is a natural tendency to compare it to independent owner-operators of trucks or small fleets.
But a bus is about a $600,000 acquisition, Pantuso said, much more than a truck. Insurance can run $20,000 to $30,000 per year. “It still costs money to keep the business up and running,” Pantuso said. “They now have nothing but outflow and absolutely no income for the most part.”
Pantuso was unsure how many bus companies got funds under the PPP. Just as with the trucking industry, there were larger companies that received more than $150,000 and were not publicly identified.
But he did hear from some of his smaller members who simply didn’t bother with PPP. There was no work to be had in the spring — charters were kaput, schools were closed and commuters were staying home — so all that would happen is that drivers would be kept on the payroll and then laid off. “So PPP would just add to expenses,” Pantuso said.
The question now facing the bus business is how many of those small operators who might eventually go under, or who have done so already, will come back. Pantuso, making the comparison to trucking, noted again the high cost of buying just one bus and the possibility that high level may create what economists would see as a more significant “barrier to entry,” or in this case a barrier to reentry, for somebody looking to get back in the business.
“What I do know is that the void will be filled by less than qualified companies that pick up cheap equipment and run on the cheap without the experience and knowledge that the company going out of business brought to the table,” Pantuso said.