Profitable business?

[brmdmorais]

I have a question is it possible to have a profitable city bus business?

[krustyklo]

You could argue that currently all private city route operators are profitable, otherwise they would all be out of business! It just so happens that part of the business model would include revenue from government subsidies.

Otherwise, if the question is really whether a stand alone unsubsidised city route bus service could be profitable, the answer would basically be asking how long is a piece of string. For example, a small one man band operating a short specialised route with a cheap 20 year old bus with a well defined audience willing to pay a reasonable fare possibly could get a foothold in the industry. However, I suspect this model was killed off some time ago due to regulation. For example, 20 year old buses would be high floor which is probably not acceptable in any state of Australia due to disability accessibility regulations. There may be hope in around 3-5 years time when operators are looking to retire their first low floor buses, however commentary here has suggested that the earlier versions may not be as likely to age as well as high floor buses due to compromises in structural design required to design a low floor bus. I would be interested to hear from anyone with more experience in this regard, although the Combino issues from around 10 years ago would indicate some truth in this.

The other issue is that governments would be less than keen to allow genuinely private unsubsidised regulators to abstract their revenue given most Australian cities public transport is effectively subsidised by government due to system wide fare schemes (eg, Melbourne zones). The closest we have to a free market system may well be Sydney, but even there I'm pretty sure private operator fares are regulated as to what they can charge, and they are effectively given a monopoly in their contract area.

The only examples I can think of in Melbourne where bus operators have tried private route buses were the original East West route 571 in Melbourne's north and the various "commuter bus" services tried since at least the 80s which have generally been unsuccessful. The 571 was probably loss making and I'm guessing was an attempt to show the need for such a service to be included in Melbourne's route structure (which it later was after a few years) hence a small loss was probably deemed acceptable. The commuter bus services fail by being limited in what they provide - usually a single trip each way each weekday which if you missed it by being held up at work, you do your dough.

I don't think anything with a larger cost base such as several employees needing to be paid and relatively modern buses with a higher capital requirement and need for finance requiring interest payments would be viable in a city. The currently profitable services all exist and are run at a subsidy (meaning no chance of cherry picking unless you're providing something exceptional in comparison - which requires more money and would attract adverse government attention if you were too good at it). The only possibility would be a direct commuter bus service from somewhere like Endeavour Hills or Rowville - but I suspect costs would be too high to provide a good enough service that is flexible enough to overcome concerns about missing the last bus, although if it is run on a walk up basis that may alleviate those sorts of concerns (you haven't lost $20 if you miss the bus and decide to take normal PT services). It probably also wouldn't be very profitable on a walk up basis...

Overall I suspect that it probably would be close to impossible unless you were really keen given governments aren't especially supportive of such operations due to their sunk investment and lack of desire to deal with any more operators than they already have (and at least in Victoria there is some level of policy which suggests the former Department of Transport wanted no more than 5 of which the current number is still larger but shrinking through continued industry consolidation).

To try and be positive, some ideas where something might work if costs could be kept low (cheap first bus, owner operator):

• A short service in an elderly area linking nursing homes to a regional shopping centre on an hourly basis. This may be preferable if you could provide a higher level of service than existing bus routes by picking them up within their nursing homes. The downside is fares would need to be cheaper than ideal due to elderly people getting cheap fares. You may however be able to find a niche where current public transport goes only to the local station rather than providing a direct service to a slightly further away shopping centre. An example may be a service along Mitcham Rd then Blackburn Rd to The Pines.
• A decent commuter bus service where existing PT might be considered less than ideal. For example, somewhere accessible via bus lanes on a freeway up to half an hour away that is currently only served by feeder buses to a local railway station, assuming current laws don't prevent this. The only example I can really think of in Melbourne might be somewhere north of the Eastern Freeway, say along Heidelberg Rd, but I can't see that being a bus using demographic - I suspect a higher inclination to drive if they aren't already using the crowded trains.
• To be honest the above ideas are only as examples of what might be possible with a lot of careful research - I don't think either idea is really viable. Where something might be more viable would be a regional city where you might be able to carve out a niche providing a marginal service to a smaller town just outside the large town. A cheap operator might be able to provide a service where a larger operator with higher overheads may not. Bendigo to somewhere not currently served outside the current town bus network would be an example where you would go from maybe the station and a central point at the main shopping area (say Pall Mall near Myer) to a small town no more than 30 minutes away (to be able to provide an hourly service) such as Axedale or Lockwood. Bridgewater may be an option, but it's more than 30 minutes away so the frequency possible for such a service may not be attractive enough to convince people not to get in their car. Someone with more regional knowledge would probably be able to give you better ideas on possible operations in that area, or others. To be honest, I think this is the niche with the most potential as governments tend to be a bit slow to keep up with growth (and the Victorian government supposedly has a pro-growth attitude to regional towns), government money for improvements tends to flow to large capital cities (having the most perceived need for a very small pot of money for improvements), and existing operators have a larger cost base (being a larger business - not necessarily an inefficient one) meaning new services may not be seen as potentially profitable enough to push governments to fund.

Tl;dr - it is theoretically possible for a small niche operation who has done a lot of research and is prepared to take a risk, but there are better and easier ways to make money running a small business in today's society.

[brmdmorais]

Thanks for your reply i really appreciate it.

[brmdmorais]

Krustyklo the reason why i asked its because i pretend to start a city bus business.
Currently i have noticed an opportunity which I'm uncertain of due to the way people run things.
We are talking about a city with 320.000 people and there is no bus service at all not for children (school) or for any person for any kind of porpuse.
Therefore the only means of transportation is the private taxi which will take max 4 people in one trip, where prices will vary based on where you are going and there is no way you can get away from it. But funny enough there is no bus operating there which i wonder why?
I have owned a smaller bus business which could take up to 15 people but somewhere else which now i wish to expand. But im not so familiar with bigger buses and how expensive can they and which one should i start with and all sorts and how many litters on average it takes for a full tank.
Can anyone give me a hand of explaining

[brmdmorais]

Basically what's happening here is that i intend to start a small route for city bus transportation but the town im interested in only has 320.000 people and besides that there is no competition in terms of buses where the means of transportation are small taxi which can only take up 4 people max and it becomes slightly expensive because it's not a fixed fare.
And this is why i wish to expand my small van which can take up to 15 people to a bigger bus that would be appropriate for the population size in discussion.
Bear in mind im not so familiar with prices of buses or how many litters a tank should take and whatever i would be glad if someone would give me a hand.