Flix snatched Greyhound Lines from the brink. But can its European playbook help this 1-star-rated American “icon” turn the corner?
By Iain Martin, Forbes Staff
If you search Greyhound on Tripadvisor, the adjectives you’re most likely to encounter in the mass of 1 star reviews are “miserable,” “WORST,” and “stranded.” The criticism is vicious and seemingly all encompassing, covering everything from rude drivers and smelly buses to delays and abandonments.
“APPALLING!!!!! Our bus never arrived in LA and we were left to sleep on the streets for over seven hours to wait for the morning bus. Then our luggage got stolen on the bus,” reads one recent review. Another frustrated commenter offered a terse regret: “I guess I should have read the reviews first.”
Despite this reputation,12 million passengers rode Greyhound buses last year to college, a new job or for a fresh start cross country. It remains the cheapest way to get from A to B for passengers who mostly make less than $40,000 a year.
But its reputation for dirty, delayed and even dangerous buses has meant increasing numbers of Americans are instead opting to drive or fly on discount airlines like Spirit. And after the pandemic dealt a painful blow to the 110-year-old American stalwart, halving its ridership, one of its new rivals — an express bus startup called Flix — bought the company for just $172 million, down almost 80% from a $800 million valuation a decade earlier.
“It was run like it was built a century ago,” Flix’s cofounder and CEO André Schwämmlein told Forbes. “There was a lot to be done but we were the best people to do it.”
It was a bold decision for Flix, which over the last 13-years built a near monopoly over intercity bus routes in Germany and then across Europe with a simple formula: Charge rock bottom fares and outsource the messy business of driving buses to contractors, but offer small creature comforts like leather seats, Wi-Fi and power sockets to its riders.
Schwämmlein thinks the same formula could work on Americans. “The hedge fund manager from New York should consider the bus,” he says. “He won’t choose it all the time but he should consider it.”
The startup has struggled to make that happen, given the continuous flood of one-star reviews for both Greyhound and its own, Flix-branded service. The grueling uphill battle to turn Greyhound around began in 2021, with a company whose revenues had slid to $422 million with $14 million in losses the prior year. After the deal, revenues picked up by 50% helping Flix to make $2.2 billion in revenue and profits of $114 million. That catapulted its valuation to $3.4 billion in 2023.
Now, the U.S. accounts for a third of its business. And despite the bad reviews, Flix is increasingly well positioned to become a leader in the global bus market, operating in 44 countries after launching in Chile and India in 2023. And Schwämmlein has his sights set on South America’s intercity network that grosses over $20 billion annually. “Every market from now on is better,” said Schwämmlein.
That potential growth was the lure for Swedish private equity fund EQT to lead a $1 billion investment into Flix in July, valuing the company at $3.4 billion. “ They have a playbook to become number one everywhere they operate,” said EQT’s partner Aschenbrenner.
Schwämmlein originally envisioned Flix as an Airbnb or Uber for buses. He and cofounder Jochen Engert started the company while on study leave from their BCG consulting gigs. They’d told their boss they were working on a doctorate, but instead built the startup with Schwämmlein’s old college friend Daniel Krauss.
Flix would find passengers, plan routes and issue tickets but small bus operators doing school runs, or charters, would handle the driving of a Flix-branded and financed bus. “No one else can drive that bus. It’s our unique inventory,” said Schwämmlein. “We control supply and demand at the center.”
After an obscure German regulation that prevented private bus companies competing with German’s state railway Deutsche Bahn was repealed in 2013, the business exploded. Adding a new route just meant winning over a new contractor, when larger rivals who owned buses had to find drivers, mechanics and garages from scratch.
Flix landed checks early on from German VCs like Cherry, HV and Mercedes-Benz to blitz smaller rivals and convinced New York buyout fund General Atlantic into financing the takeover of a German rival nearly double its size in 2015.
Other countries across Europe were also relaxing transport rules, allowing Flix to grow or buy its way across the continent, with a string of acquisitions. Flix at one point controlled 90% of bus journeys in Germany. “This is a market where the winner takes not all but most,” said Aschenbrenner of new Flix investor EQT, which recently poured $1 billion along with Porsche and German billionaire Klaus-Michael Kühne into the startup.
A checkbook hasn’t been Flix’s only weapon. It also ground down smaller players using its savvy with data to slice and dice routes and ticket prices to fill more seats, and subsidize new territories with profits from its star routes. The company only needs to sell half of the seats on a route to break even.
Its “asset light” model also sidestepped the challenges of maintaining a fleet of buses and drivers. Flix only owns one bus in Europe — currently mothballed in a Berlin parking garage — and that’s only needed to appease German lawmakers.
Flix’s bus contractors take 70 cents on every dollar from tickets and in theory face the chop if they don’t keep a lid on costs, the timetable or bus upkeep. The company sold around 55 million tickets in Europe last year. Still, it has been barraged with complaints about surly drivers, long delays and badly maintained buses.
This low-cost formula turned Flix into a rare success story for a European consumer startup, but the pandemic almost drove the entire operation into a wall. Europe’s lockdowns flatlined Flix’s revenues. Customer refunds and bus partner bailouts saw money stream out the door. Investors wanted to slash and burn to stem the bleeding, but Schwämmlein and his cofounders raised emergency financing and reinvested millions of their own money in a winning gamble on a swift bounceback.
The pandemic also weighed heavily on Greyhound, Flix’s main rival in America, where it had been running its own intercity routes in California, New York, the Southwest and the Gulf Coast since 2018. Then Flix got a phone call from Greyhound. The chance to bag a “crazy icon,” as Engert put it, at a fire sale price, was tempting. Taking out Flix’s largest competitor in the U.S., which was around half the size of its own business, was irresistible.
The German startup had now inherited a fleet of 1,200 of moldering buses, thousands of unionized drivers and a network of routes that didn’t just span a country, but a continent. “It was an odd marriage of a traditional bus company that goes everywhere with a lean, aggressive, tech savvy startup,” said Joseph Schwieterman, a public policy professor with DePaul University.
Part of Flix’s revamp strategy was to overhaul Greyhound’s ticketing and routes to hit new areas and target new riders, like college students and campuses. That meant retiring computers still running code from the 1980s. “There were two people in a room that basically had the entire Greyhound schedule in their heads. It was just insane,” said Engert.
Before Flix bought it, Greyhound’s previous owner sold off many of its downtown terminals to Alden Global; now its passengers wait for rides at gas stations and street corners in cities like Philadelphia and Cincinnati. While the Flix formula of curbside pickups works in Europe on short city-to-city routes, it hasn’t translated to America where longer routes mean customers end up waiting on interstate shoulders and at desolate gas stations. “You can’t cut and paste an European model in the U.S,” said transport consultant Brian Antolin. “You are carrying people for days rather than hours.’
Other elements of Flix’s Europe-centric model don’t translate to the U.S. Take bus station waiting rooms and bathrooms — rather than a perk, they’re crucial for American passengers who can be embarking on a 70-hour odyssey with four or more transfers over the company’s crosscountry network. “The U.S. is a big bone to swallow,” Schwieterman said.
Flix has fixes in the works. It’s shunted bus departures to Los Angeles’s main railway station and is haggling with mayors in other cities for a similar solution. Greyhound drivers now are only expected to drive within set regions rather than coast-to-coast, and keeping buses close to their mechanics has helped improve on-time arrivals year over year.
Still, there are horror stories about broken down buses, strandings and delays stretching into days. It’s a work in progress but Flix says the metrics and reviews are now moving in the right direction. “Flix acquired Greyhound three years ago — in October of 2021 — and has made significant improvements in its operational performance through major investments in technology, fleet, organizational structure and customer service,” said Flix spokesperson Iris Brand.
The turnaround has been a modest financial success. Revenues for Greyhound and Flix’s U.S. operations have clawed back to $670 million in 2023, with routes now stretching across 49 states. The combined business now has as many buses on some routes as all its rivals combined, but revenues are still down 20% on Greyhound’s pre-2020 numbers. With bus demand still recovering from the pandemic, a big rival Megabus filed for bankruptcy this summer, said Schwieterman.
Flix’s margin of error is small. In 2023, it brought in just $114 million of profit on $2.2 billion of revenues. Its founders hoped for a Silicon Valley-sized valuation, but transport plays are often dogged by low multiples. They scrapped plans for an initial public offering over the summer after bankers wavered on a $4 billion price tag. Even pushing through the EQT deal meant that some early investors took a 20% haircut on the $3.4 billion valuation.
With Greyhound still earning hundreds of one star reviews (“WORST bus company”) three years into the turnaround and Flix’s own American ratings not much better, Schwämmlein has his work cut out for him.
But he admits he’s playing the long game, insisting Americans’ jaded views on Greyhound will eventually shift. “It took five to 10 years in Europe to change the perception,” Schwämmlein said. “Over years of hard work it will change. There is now no stigma in Europe.”
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