Intercity Bus Service Has Come Back, offering new services and price competition, without rail’s taxpayer subsidies.
By Baruch Feigenbaum
Intercity bus service was decimated during the COVID-19 pandemic. Most customers quit traveling, and about two years ago First Group, owner of market leader Greyhound, sold the company to FlixBus.
But over the past 18 months, the intercity bus industry has made a tremendous comeback.
Joe Schwieterman of DePaul University notes that many new services have been started in the Midwest and California. Both Intercity Trails Bus and Flix Bus operate multiple daily trips between Chicago and Detroit. Flix Bus operates service between Chicago and Michigan State’s campus in East Lansing.
There are now three different companies offering bus service between Los Angeles and San Francisco. Megabus offers new service from Los Angeles to Las Vegas and to Sacramento. Luxury provider Vonlane now offers service between Memphis and Nashville adding to existing Greyhound service between the cities. In fact, many of the bus operator route maps, including the Megabus map, now stretch almost coast to coast.
While the pandemic slashed ridership and led to bankruptcies, the strong demand for bus service post-pandemic coupled with the relatively low costs (both capital and operating) of bus service has led to a resurgence. Most bus lines operate with no explicit subsidy compared with passenger rail lines. And while they might not attract the attention of politicians the way passenger rail does, bus service is more widespread than Amtrak in most areas of the country.
Even between New York City and Washington D.C. where Amtrak has the two services that lose the least amount of money (Acela, Northeast Regional), there are almost 50 bus lines serving different demographics. The Chinatown buses that originate in certain geographic areas are the most well-known. But there are also luxury bus operators such as The Jet and discount operators like FlixBus. Some bus lines such as Tripper Bus operate between the suburbs in those two cities. And there are still plenty of traditional buses such as Greyhound or options that use technology such as Megabus.
And bus prices are typically very affordable, even for the more upscale options. Bolt Bus, Megabus, and Tripper Bus have tickets for $1 to $25 each way, depending on how far in advance tickets are purchased. Mid-priced options such as Greyhound charge about $20 per trip. The most expensive options charge $30 to $100 one-way, although they offer a $50 to $150 round-trip options.
Amtrak’s regional trains offer a $20 one-way fare for travel purchased a month in advance but are a much pricier $115 when purchased a week before travel. Acela trains are $143 one month in advance but about $250 if purchased one week out. And first class on Acela can cost $500 for a one-way ticket, sometimes more expensive than a first-class airplane ticket. Amtrak is able to match bus tickets at the low end of the price range, but its higher-end products cost much more, even compared to buses that offer amenities such as food, wi-fi, and reserved seats.
And, anecdotally to this author’s eye, the Amtrak experience is not noticeably better for that higher price. That $250 Acela service comes with access to the food car where passengers can buy sandwiches and snacks. Only first-class passengers receive free food. And Amtrak New York-to-Washington, D.C, trains have at least five stops while many buses have no stops and some have one or two.
Competition is important. Customers should be able to choose the option that works best for them, and rail may be a better option between Manhattan and downtown Washington, D.C. The problem for taxpayers is that every rail line that Amtrak operates is subsidized—when including the track and electric power as well as the other capital and operating costs. And when minimally subsidized bus service can provide similar services at much lower costs, policymakers need to question the need for the subsidized service.
I compared Amtrak and bus services in the Northeast, and even in that most rail-friendly environment, buses had an advantage. But the difference is even starker in the rest of the country, where Amtrak operates on freight rail lines. On some lines, Amtrak loses $500 per passenger on its service. Many political leaders think that if the law mandating that Amtrak trains get priority over freight rail was enforced more strictly, it would improve Amtrak’s on-time performance and financial picture. But since Amtrak often operates behind schedule and is financially in the red on the track it owns in the Northeast, that seems unlikely.
Yet, many politicians love trains, and the most recent federal surface transportation law—the Infrastructure Investment and Jobs Act (IIJA)—increased passenger rail funding by $66 billion. Other changes to the rail program allow federal funding to cover 90% of the costs of new service, an increase over the 80% federal funding currently covers. Further, this provision previously applied to discontinued passenger rail service; now it is for any new line that would, “Enhance connectivity and geographic coverage of the existing national network of intercity rail passenger service,” which is any new line. Sections 21201 and 21202 of the law give the railroad $12.5 billion in supplemental appropriations it can tap from the Office of the Secretary of Transportation.
Given that intercity buses are an excellent substitute for, if not an improvement in many ways over, Amtrak service, it makes no sense for taxpayers to heavily subsidize trains. In many ways, providing Amtrak with subsidies is a wealth transfer from the working class to wealthier train riders. If the market is providing a better option, in this case, cost-effective bus service, it is poor public policy for the government to use taxpayers’ money to prop up a failing alternative.
Originally published by Reason Foundation. Republished with permission.
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