Greyhound CEO Promises to Save the Day as Buses and Stock Prices Crash
5/20/2008 at 4:00 PM
Tags: Bus Travel, Greyhound, BoltBus, Buses, Deals, Budget Travel, David Leach (all tags)
It's been a rough month for Greyhound. The bus line has been hit with multiple accidents, stranded passengers and money problems. Meanwhile, Greyhound CEO David Leach says that his company is going to be A-OK despite a plunging stock price and rising fuel costs--because the recession is a good thing for bus travel. Leach also thinks Greyhound has nothing to worry about despite rising competition from low cost rivals because he's got a "secret" new marketing strategy.
Accidents
In the past few weeks, Greyhound buses have gotten in two accidents caused by bad driving. Six people were injured after a Greyhound heading from Massachusetts slammed into an overpass on the Henry Hudson Parkway in the Bronx on May 10. The driver was going the wrong way and missed signs warning of low clearance. In North Carolina, 12 passengers were injured on April 23 after a bus flipped over when the driver fell asleep and drove off the road.
There have been three serious accidents on Greyhound buses in North Carolina since July 2006. Over on the West Coast there haven't been any crashes of late, but last Wednesday, riders traveling from Los Angeles found themselves stranded in El Paso for ten hours without any explanation.
Financials
Greyhound's financial situation seems just as grim as these scenes from the road. After teetering on the brink of bankruptcy for many years, Greyhound's parent company Laidlaw was purchased in 2007. At the time, the buyer--British transit company FirstGroup, agreed to take on Laidlaw's $700 million of debt. Initially, FirstGroup sold around $394 million of their own stock to finance the deal.
This week, FirstGroup announced that they were getting rid of 43.8 million more shares reducing their ownership stake by nearly 10 percent. The new sale came as a surprise to analysts and the number crunchers at Standard & Poor's changed their outlook for FirstGroup from "stable" to "negative." This bad news comes as Greyhound is facing growing competition from cheaper, smaller rivals in key urban markets.
Marketing
In the midst of all these problems, Greyhound's chief executive gave a confident interview to the New York Times on Saturday. Leach didn't discuss the recent accidents and delays, but he did address his company's financial issues. The paper asked Leach if he was worried that the recession might affect his business. Leach told the Times that the bad economy is great for a low cost travel outfit like Greyhound because
As people have less disposable income, we become more of a viable option.
Leach talks as though the travel industry is recession-proof and rising fuel costs are no big deal to a bus company. Financial types are much more skeptical about the future at Greyhound. Earlier this month, Tom Shepard, an analyst from Charles Stanley, told LDP Business:
There are some concerns about how Greyhound will perform in a recessionary environment as, in the last recession, Greyhound profit margins declined sharply.
Competition
Leach also dismissed the threat from the independent low cost carriers that have been snatching up Greyhound's customers all over the Northeast Corridor. He says BoltBus will bring new riders to its parent company because "it's almost a secret." Wow. What a strategy!
Unsurprisingly, BoltBus hasn't exactly gotten off to a great start. (Our ride this weekend was maybe 20 percent full.) The inaugural BoltBus run from Boston to New York was nearly 80 minutes late because the bus was damaged in a collision with construction equipment. David Hall, the Greyhound manager who supervised the development of BoltBus laughed the accident off telling the Boston Globe:
It's going to happen. It's almost bumper cars.
Just terrific!
Related Stories:
· Smoothing the Rides on Greyhound [NYT]
· Buses coverage [Jaunted]
[Photo: Omar Omar]
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