Bidders Welcome

First Bus is never far from the headlines these days. There’s the question of its rebranding exercise, for one thing. Its TV advert. And news that it wants to prune its UK bus business… but can’t.

All it’s managed to offload so far is King’s Lynn. It ditched Bury St Edmund’s without a sale. But it wants to shift more. As the headline in Passenger Transport reads, “First struggling to find bus business buyers”. Economic conditions are getting in the way. But, were the economy is better shape, it may be that First would want to sell off less than it does. Could be a catch 22.

If this is affecting First, how will it affect other, smaller operators? Speak to independents and, for some of them, they’re reaching crisis point, one perhaps like no other in their histories (particularly if they are a post-1986 start up, as most are, having never experienced bus services in the dark days of the 1970s). The traditional route out is via a sale but this may be difficult at present, which means some smaller operators are stuck because:

• They can’t hedge on fuel like the groups


• Many rely disproportionately on local authority contracts—and we all know that 75 per cent of local transport authorities are forced into making cuts


• They’re about to face a 20 per cent reduction in BSOG, in two months. Opportunities to claw some, any, of this back from beleaguered LTAs is minimal


• The whole industry is experiencing zero growth, as high streets are increasingly under pressure


• Many smaller operators in the tendered arena operate in either more rural or less attractive settings, which leaves little opportunity for passenger growth even in good times—and, with a smaller customer base, less to be gained from fares increases


• Free travel reimbursements don’t cover costs especially, again, in a rural context where free travellers are at saturation and longer distance journeys may mean even poorer reimbursements per passenger

Back to First and the reasons why potential bidders are cautious at the moment align themselves near enough to some of the above. You need to add any competitive pressures First may face (where these exist) and the potential effect of the Competition Commission report. We don’t yet know where the government will take this. And this seems to be a sticking point: simple sales that might’ve gone through on the competition nod a year ago may need OFT guidance.

But, surely, some of First’s potential cast off businesses might be a worthwhile punt, given where they are. With the right management, the only way, surely, is up. Nevertheless, according to Passenger Transport at least, larger disposals are unlikely to go ahead. It could be that First has missed the boat: the previous policy of holding on to its businesses no matter what may have been a folly.

First isn’t saying which businesses (or parts thereof) are potentially for sale. First has, however, intimated that these won’t be in the north or in Scotland. This in spite of business growth there of below one per cent, compared to 3.7 per cent in the south.

So, the $64,000 question is, which parts of First’s huge empire would it like to sell?

• Cornwall? First has followed in Western National & Badgerline footsteps finding this county a tough area of operation. In spite of slamming the door to outside group interests by buying the Truronian business, there’ve continued to be cuts in this area.


• West Wales? The Welsh regional assembly last week announced a significant reduction in both its own BSOG and funding for council bus services—all from April 2012. Does this leave the area west of Swansea (more) vulnerable?


• Rural areas of East Anglia? Following Bury St Edmund’s and King’s Lynn.