What Impact Does Deregulation Have on the Interurban Bus Sector? - "EU Policy Will Make More Integration Possible in the Interurban Bus Sector"

Since the German interurban bus sector underwent extensive deregulations in 2013, licensed bus companies have been able to offer regularly scheduled services on routes of over 50 kilometres. ZEW economist Kai Hüschelrath has singled out the sector as a perfect example for the success of European deregulation and despite the spate of recent mergers sees no reason to be overly concerned about decreasing competition.

How do you see market developments in the three-and-a-half years after Germany’s Passenger Transport Act (Personenbeförderungsgesetz) was amended?

As expected, deregulation brought many new players to the market. Some of these newcomers have a regional focus; others have been intent on building out a Germany-wide network. Some have been very successful; others have been forced out of the market fairly quickly. All this growth and start-up activity, coupled with a large demand for interurban travel, is likely to lead to there being as many passengers in 2016 as had been originally projected for 2030. These impressive figures underline the dynamics enjoyed by the market since deregulation.

Who benefits most from the deregulation of the interurban bus sector?

On the demand side, customers with limited budgets such as students and senior citizens have certainly appreciated low-cost interurban bus options. In this sense, deregulation has improved the mobility of these fractions of the population. On the supply side, every city has an interest in being part of a long-distance bus network. In a recent ZEW study we showed that the likelihood of being added to an interurban bus service network depends not only on the size of a city’s population but also on factors such as average income, the relative shares of younger and older residents, and the density of automobiles.

Some recent mergers in the interurban bus sector have attracted much attention. How should they be seen from a competitive standpoint?

The advantages that mergers bring can very much be in customers’ interest. The most important advantage in the interurban bus sector is surely a larger network. But horizontal mergers also decrease competition, which can ultimately lead to price increases. In another ZEW study we discovered that the average price for a particular interurban bus route was particularly low (in November 2014), when MeinFernbus and FlixBus were in direct competition on that particular route. After the two companies merged last year, price increases on these routes appear likely. But I do not expect serious problems from recent mergers. Much of the demand is likely to respond very sensibly to price increases, while there are still close substitutes such as the train or car-sharing. Moreover, for the time being at least it is still fairly easy to enter the interurban bus market, making substantial long-term price increases unlikely.

What about the liberalisation of the interurban bus sector elsewhere in Europe?

The European Commission has been trying to liberalise interurban bus sectors at the national level for years now. Nevertheless, we are still quite a way from reaching this goal. For instance, while the sector was deregulated in the UK and in Sweden decades ago, the necessary legislative steps in France were not taken until August of 2015. The coming years also promise to be interesting as experienced interurban bus carriers work on expanding their international connections. Thanks to current regulations on the European domestic market, this is not only easy to implement; it is also possible to create an integrated European interurban bus sector in the medium term.

For more information please contact

Prof. Dr. Kai Hüschelrath, Phone +49(0)621/1235-384, E-mail hueschelrath@zew.de