ON THE ROAD AGAIN : After Years of Lethargy, Greyhound Lines Is Slowly Rebuilding Its Passenger Base and Its Profit Margin

When People Express died, Fred G. Currey was not among the mourners.

In fact, the demise of the no-frills, discount airline in December, 1986, was good news for the Dallas entrepreneur. He had announced just the week before that, together with a group of other businessmen, he was going to buy virtually all of Greyhound Corp.’s money-losing bus operations.

When it made its $270-million investment, Currey’s group, called GLI Holding Co., had high hopes of luring passengers back to riding the buses, which in an earlier era had been the traditional American low-cost, no-frills way to travel long distances. In the late 1970s and early 1980s, travelers had abandoned buses in droves for the lower prices of the deregulated airlines--often led by People Express.

Now the Currey investors--slowly but surely--seem to be bringing people back to the bus.

There is still a long way to go: Many of Greyhound Lines’ terminals are still in bad shape; it lacks an adequate national computer system; its relations with its unionized employees still leave something to be desired, and it is losing some of its share of the competitive small package delivery business.

“There is no doubt that the demise of People Express was a positive factor for us,” said Currey, Greyhound Lines’ chairman and chief executive, in an interview the other day. Even before the airline was sold and absorbed by Continental Airlines, Currey said, when it “went out of markets and raised fares in other markets, it made operating buses relatively more competitive in those markets.”

In the past 18 months, with People Express out of the way, he added, air fares have tended to rise and tighter restrictions have been applied to special discount air fares. Also, Currey said, he knew even before People Express expired that air fares would rise, if only to provide the airlines with the money they needed to buy new planes.

All of these factors have given the 74-year-old Greyhound bus operation a new lease on life, and its ridership has been creeping up.

The company, whose racing Greyhound symbol is one of America’s best-known trademarks, wasted little time trying to lure people back onto the buses. The new owners went to work within hours after they acquired the bus line.

“First, we lowered prices substantially,” Currey recalled--about 10% overall and as much as 40% and 50% in many markets. “Then we went to work immediately, simply saying: ‘We’re back in business.’ People had lost confidence in the bus as a primary means of transportation.”

Besides sounding the horn and cutting fares, Greyhound began improving its facilities. At least $65 million was spent in the first 12 months on new equipment. The fleet was expanded for the first time in seven years with the purchase of 325 new buses, and an additional $6 million was spent to refurbish and upgrade older vehicles. Then late last week, the company ordered 151 more new buses, for which it will pay about $30 million.

Long-neglected bus terminals are being cleaned up and moved out of the worst parts of cities so travelers will feel safer getting to the buses. In 1987 $25 million was spent on terminals, and a like amount will be spent this year, Currey said.

Create New Market

In some cities, Greyhound Lines has moved into new terminals and other facilities have been renovated. Some of the 2,280 terminals are informal places like drugstores, where the owner acts as the company’s agent. Some of the larger terminals are owned by the company, and some are leased.

The company plans to refurbish many of the terminals, at a rate of about 100 a year. “We are trying to create a new market by moving out of the slums,” Currey said. “We want to get near office buildings. We want to get the briefcase travelers.”

To further restore ridership, Greyhound Lines has increased schedule frequencies and reinstated service to communities where it had been dropped.

“We knew that passengers require a very simplistic--sometimes difficult to deliver--formula,” Currey said. “They want a clean and safe terminal, a clean and safe ride and a destination reached on time. And they are interested in price.”

Currey said ridership had been declining for years while the bus company was owned by the Greyhound Corp. of Phoenix. He said the conglomerate had lost interest in its bus business and was trying to shrink it, selling 2,840 of its 5,500 vehicles, among other assets. “They were systematically liquidating the business, and they were systematically raising fares,” Currey said.

The traditional measurement of the intercity bus business is revenue passenger miles, the number of miles ridden by paying passengers. In 1979, Greyhound’s number of paying passenger miles (restated to include the bus system of Trailways Lines of Dallas, which GLI bought last year for $80 million) totaled 11 billion. By 1986, this had declined dramatically, to slightly more than 6 billion. It rose about 3% in 1987, and Currey estimates a 2.4% rise in 1988 to a total of 6.3 billion for the year.

As a result, after many years of losses while it was owned by Greyhound Corp., Currey said, the new Greyhound Lines is beginning to show a profit.

GLI, as a private company, does not have to make its profit figures public. Nevertheless, Currey said the bus operations were “marginally profitable in 1987--sufficient to make the improvements necessary.” He predicted that 1988 will be “very successful financially.” The company had revenue of about $800 million last year, he said, a figure he expects to rise 5% to 8% this year.

Curry concedes, however, that there are other obstacles the bus company must overcome before business really surges. For one thing, there are too many other non-bus competitors.

“Darn near everybody in this country has an alternative,” he said. “We can wait for a cousin or brother to drive. We can drive ourselves. Or, very, very importantly, if we don’t treat the passengers right, they can always stay at home. They can use the telephone instead of making a trip.”

In an effort to induce the people of small-town America to travel, Greyhound is trying something novel--a new type of service called the “rural connection.” It is an effort to restore bus service to many of the smaller communities that have lost it in the past dozen years.

Because there is usually not enough passenger traffic to warrant the use of full-sized, 43- or 47-passenger buses, which cost $200,000 each, smaller passenger vans bearing the running Greyhound symbol are covering the routes.

In much the same way that airlines have instituted hub-and-spoke systems and also use smaller independent airlines as feeders, the new passenger van lines will connect with Greyhound’s national route network at its larger terminals.

One example of such a venture is a new line that provides twice-a-day van service along a 75-mile circular route around Sandusky, Ohio. The line serves five communities around Sandusky and connects with nine Greyhound bus departures from that city, thus linking travelers with the 12,000 communities on the Greyhound-Trailways network. The average customer on the route lives 45 minutes from Sandusky.

Counting on Small Vans

Currey said Greyhound’s plan to reconnect rural and urban America will require no investment on its part. The feeder lines will be operated by independent entrepreneurs, with Greyhound helping them obtain favorable interest rates to start up and lower insurance rates. The Sandusky service, for instance, is being operated by a small company called Arrow Express with one modified van with a two-way radio, seating for 12 and a compartment for packages.

Currey says service on the Sandusky model will become a national phenomenon. Similar vans, some with up to 20 seats, are already operating in more than 32 communities in eight states, and operations in 10 more states are planned this year.

“We are going to revolutionize ground transportation all over America,” Currey said, “by bringing bus service back to communities which had lost it. (But) there is no need for such big buses to go into those small communities.”

The financial arrangements in the feeder bus deals are similar to those used by airlines and their regional partners. The small company, for example, receives a proportionate share of the total ticket cost and also acts as an agent for Greyhound, receiving a commission of 10% to 15% for each long-haul ticket sold.

Greyhound Lines’ relations with its unions have improved considerably since the Currey investors bought the operation, even though salaries were cut radically.

“Many of our people took substantial pay cuts,” Currey said. “Our business objective is to pay market wages wherever we operate; we want to keep our people in the mainstream of American compensation. (But) if we go above that, we would have to raise fares.

“Both Greyhound and Trailways were paying salaries that were not economic. In setting salaries, we have to balance the interests of our employees, our capital providers and our customers.”

Union officials maintain, however, that the bus company now pays way below standard wages. The unions say they had no choice but to accept the lower pay scales for many job classifications if Greyhound Lines was to survive.

Frank Souza, an official of the International Assn. of Machinists & Aerospace Workers’ District 190, which represents Greyhound mechanics in the Western states, says the highest pay for mechanics in the Greyhound system are in San Francisco, where they earn $14.89 an hour. This, he complains, compares to $20 to $21 an hour that workers in similar jobs are paid by other San Francisco companies. The pay is so low, he said, that Greyhound Lines is unable to fill 25 job openings in San Francisco and 25 in Los Angeles.

Nevertheless, Souza said, “Though everybody is underpaid, our relationship with the company has never been better. We finally have a company that is interested in the bus business. The problem with the previous owners was that they forgot the business. They let it go to pot. It was sad.”

Greyhound is also badly in need of a modern computer system, so it can quit handling its reservations and ticketing operations in what Currey calls a “Dark Ages” style. Until a new computerized system is in place, he said, sales and profits will be greatly restricted.

Sales agents can’t tell how many seats are available to be sold in cities ahead. Thus customers are held up when no seats are available until the company can roll out another bus. In addition, with no computers, customers must spend extra time in ticket lines, which cuts productivity.

The new computer system, called Gateway II, will enable agents to properly route passengers and to quote uniform ticket prices nationwide. It also should end the current confusion about the number of seats available and shorten the time passengers wait in ticket lines.

The new system is also expected to help with the correct routing of the small packages that Greyhound carries in the underbellies of its buses and that are an important source of income. Nationwide, 22% of the company’s revenue comes from carrying small packages. In some areas of the country that percentage rises to between 35% and 40%.

“We are losing market share,” the 56-year-old executive said. “We’re losing a little bit to every one of our competitors. We are trying to find out how to compete. The computer will help.”

The Interstate Commerce Commission recently approved the Currey group’s purchase of Trailways of Dallas, which is by far the largest of 35 independent companies operating under the Trailways logo, controlling about 75% of the total business. However, the firm was losing money and was reportedly in danger of failing.

“The primary reason for our acquisition of Trailways,” Currey said, “was that they served 450 cities that otherwise had no other bus transportation. If we had permitted service to be discontinued, we would have been unable to crank it up again.

“Also, it precluded another announcement that the bus industry was going out of business.”