Management & Operations

Motorcoach Industry Battered by Terrorism’s Shock Waves

Posted on August 1, 2001 by Steve Hirano, editor

Although not as badly ravaged as the airline industry, motorcoach operators have been hammered in the wake of the Sept. 11 terror attacks. Business has fallen off drastically, causing widespread layoffs and prompting calls for federal aid in the form of low-interest loans, fuel tax relief and dedicated funding for upgraded security. One major player in the industry, VecTour Inc., is a financial casualty of the terrorist assaults. The Blue Bell, Pa.–based company filed for Chapter 11 bankruptcy protection on Oct. 16, citing a 50% drop in travel following the Sept. 11 attacks. “The motorcoach industry has been hurt pretty bad,” says Victor Parra, chief executive of the United Motorcoach Association (UMA). “I don’t think we can lessen what has happened here. Some of our business is gone forever.” Hardest hit have been operators who rely heavily on service to New York City and Washington, D.C. Venture Tours in Chesapeake, Va., has seen its service to D.C. drop off tremendously. Cancellations began to roll in after the attacks and continued through October. “We’ve lost quite a bit of business,” says Jimmy Hall, vice president. “Things are getting tight.” Worse yet, Hall says, the traditional spring bookings for travel to the nation’s capital are not materializing. “People are definitely not going into that area,” he says. To compensate for the lost business and a hike in insurance premiums, Hall instituted a 5% to 11% rate increase. He’s also started targeting non-traditional sources of business, such as college and semi-pro sports teams that normally fly to their destinations. To accommodate longer trips, he has one sleeper coach and likely will acquire another. “I’m trying to make my fleet more versatile,” he says. In the past few months, he’s downsized his fleet from 24 to 19 buses because of the double whammy of the faltering economy and the Sept. 11 attacks. In Lorton, Va., a suburb of Washington, D.C., New World Tours has seen a decline in corporate and school travel. But Dave Bolen, New World’s president, says the situation could have been worse. “Fortunately, we’re well diversified in the market,” he says. Business has fallen off, mainly due to a widespread notion that D.C. is a risky destination. “We’re discouraged by the fact that people outside the D.C. area think that we’re under siege.” But it’s not just the carriers who primarily serve New York City and Washington who’ve been hurt. Tony Grassano, owner of Bristol Tours Inc. in Vermont, says he had 12 nine-day fall foliage tours in New England lined up before the attacks. Nine of them have since been canceled. “It really affected us because we count on the fall for a good chunk of our revenue,” he says. Grassano, who operates seven coaches, says he’s going to hold off on any expansion plans or the purchase of new buses, but he’s still guardedly optimistic. “We’ve been booking school trips for the spring and New York and Washington, D.C., trips are coming back, providing nothing happens between now and the trips,” he says. Media coverage assailed Gwen Elmore, president and general manager of Fun Tours Inc. in Norfolk, Va., says business has been off about 10%. “And we’re one of the lucky ones,” she says. The greatest loss of business has been in her package tours for seniors, who she says are unduly affected by coverage of the terrorist attacks. “The news media try to scare us to death,” she says. “They’re hurting the country just as much as [Osama] bin Laden.” In Wisconsin, motorcoach business is also falling short of expectations. Bonnie Grueneberg, coordinating director of Progressive Travel Inc. in Spencer, Wis., says her company has lost tour business from international travelers. “We had some German exchange students who were due here on Oct. 3, but they canceled,” she says. Grueneberg says school trips have also been affected. In one case, the customers didn’t cancel the trip, they just changed the destination. “This fifth and sixth grade group from Wausau chose not to go to Washington, D.C., and will go to St. Louis instead,” she says. Like Elmore, Grueneberg’s also seen a sharp decline in interest from senior groups. “They just don’t seem to be traveling,” she says. “We have just one Branson [Mo.] tour scheduled instead of the normal three. And that one isn’t even full. It’s just a matter of people wanting to stay closer to home and not wanting to spend their money.” In Missouri, one charter bus operator says he hasn’t been significantly affected by the events of Sept. 11. Gary Deeken, president of Central States Charter Coach Inc. in Fenton, Mo., says he saw a drop in business immediately after the attacks as schools canceled field trips and athletic events. A week and a half later, however, business was back to normal. “I can’t say we’ve seen a lot of cancellations,” he says. “We’ve even heard comments from schools about chartering buses for trips instead of flying because they’re safer.” Push for assistance Both the American Bus Association (ABA) and the UMA have lobbied vigorously on Capitol Hill for financial assistance. According to ABA officials, the U.S. motorcoach industry has seen up to a 25% drop in ridership since Sept. 11, requiring the layoff of approximately 20,000 to 40,000 of the industry’s 200,000 workers. (One operator’s adversity is profiled in the sidebar below.) To help convince Congress and the White House that motorcoach operators need assistance, the ABA and UMA have enjoined their members in letter-writing campaigns. The UMA requested its members contact Sen. John Kerry of Massachusetts in support of SB 1499, the American Small Business Emergency Relief and Recovery Act. It also surveyed its members on the impact of the terrorist actions. Steve Sprague, UMA’s chief operating officer, says the surveys helped to build “one of the most compelling and convincing portraits of an industry in trouble yet presented to the members of Congress or the White House.” SBA expands loan offers Some relief has been offered by the U.S. Small Business Administration, which expanded eligibility for its Economic Injury Disaster Loans. Initially, only businesses located in communities declared disaster areas, such as New York City and Washington, D.C., were eligible to apply for the low-interest loans. As of Oct. 22, all eligible small businesses (with annual revenue of $5 million or less) that suffered significant losses due to the Sept. 11 attacks could apply. Applications for assistance will be accepted until Jan. 22, 2002. But many in the motorcoach industry believe that the government needs to do more, especially in light of the $15 billion bailout of the airline industry and continued fiscal support of Amtrak. Bolen of New World Tours says his 26-coach operation doesn’t qualify as a small business, yet could use some government relief. “I think we’re due some consideration, particularly since the airline industry is getting assistance,” he says. “The motorcoach industry has rarely asked for anything, and if we do, it’s not very much.” Peter Pantuso, president and CEO of the ABA, agrees. Along with UMA representatives, he met with President Bush’s economic advisers in mid October to lobby for “the broadest possible forms of assistance at sufficient levels.” In Canada, motorcoach operators are also feeling the sting of lost business. Motor Coach Canada has requested relief from the Canadian government, arguing that September and October are normally the busiest months for its members. Japanese tourists, especially, have been canceling tours, both in the near future and in the longer term. Spotlight on security In addition to confronting a significant loss of business, motorcoach operators are also being called upon to upgrade the security of their buses. Anxiety about hijacked airliners and outbreaks of anthrax have been heightened by recent attacks on drivers of Greyhound buses. The worst attack, of course, was the Oct. 3 tragedy in which a passenger slashed the throat of the bus driver, causing the bus to crash. The assailant and six passengers were killed in the accident, which occurred in Manchester, Tenn. In the following weeks, two other attacks of drivers took place on Greyhound buses. No one was injured in either incident, but Greyhound responded with new security measures, both in terminals and on buses. “Depending on the location of the terminal, we have added security guards and surveillance cameras,” says Greyhound spokeswoman Lynn Brown. “And we’ve begun providing drivers with cell phones with programmed emergency numbers.” To deter passengers from bringing weapons aboard buses, Greyhound also has begun testing of random passenger searches using hand-held metal detectors. Those passengers who refuse to submit to the inspection are not allowed on the bus. Hoping to safeguard drivers, Greyhound has made front seats off limits to passengers, except in the case of unaccompanied children, Greyhound employees or passengers with special needs. Moreover, passengers who encroach into the driver’s area face possible prosecution. Brown says the security enhancements are a work in progress. “We will be modifying them to make them more effective,” she says. The company saw a spike in ridership after the Sept. 11 attacks, but has returned to more normal business levels. It is asking the federal government to provide funding for beefed-up security on intercity buses, much as it has for Amtrak. The ABA’s Pantuso says several security measures have been discussed by industry working groups, including creation of a government-industry task force to evaluate needs and make recommendations, security training programs for motorcoach personnel, compilation and dissemination of best practices of other industries, new passenger and baggage screening methods and changes to the CDL program. “It goes without saying that it will be impossible to apply one security solution to the entire industry,” Pantuso says. Parra noted that the industry traditionally has not viewed security as a critical issue. “I don’t think there’s a single security director in our industry,” he points out. “We have safety directors, but no one to address security. It’s a whole new focal point for us.” Some motorcoach operators have had upgraded security forced upon them. For example, Grueneberg of Progressive Travel says she recently transported a group to the Mall of America in Bloomington, Minn., on a shopping trip and was surprised to discover that security guards inspected the coach twice, once in the morning and again in the afternoon. “They checked underneath the bus, in the coach and in the luggage bays,” she says. “It’s a higher level of security.” Border crossings also require greater security inspections of motorcoaches. Al Morris, operations manager of Quick Coach Lines in Vancouver, B.C., says the company’s regular service between Vancouver International Airport and Seattle-Tacoma International Airport has been slowed by aggressive security checks at the border. “It takes us longer so our schedule goes out of whack,” Morris says, adding that customers have been forced to take earlier buses. ***************************************** One dispirited operator’s testimony On Oct. 11, David Cheseboro, president of Daytona Orlando Transit Service (DOTS), testified before the U.S. House Subcommittee on Regulatory Reform and Oversight. He described the financial problems he encountered in the month following the terror attacks. Founded in 1982, DOTS operates 14 vehicles, mainly for shuttle service to and from Orlando International Airport but also for tour and charter service throughout the United States. Cheseboro walked the panel through his operation. . . “Normally, at this time of year I can count on shuttle gross receipts of approximately $78,000 per month. Against this I have to maintain the vehicles and make monthly payments on most of them. Also, I employ three full-time reservationists, two part-time dispatchers and some 30 full- and part-time drivers. Given an average price of $25 for a one-way ticket to or from the airport, my gross revenue during any given day is likely to be $2,600. Beginning with the attack on the World Trade Center and the Pentagon and ending with the last day of September, DOTS revenue has been down some $21,000. This is a great deal of lost revenue for a business that grosses $1.7 million per year. This figure includes shuttle, charter and tour business. Indeed, on Sept. 18, I sent a memo to all my employees asking that they voluntarily take time off each week so that I could keep all part-time drivers on the payroll. The effect of the attacks on DOTS is even worse than it sounds. There was a lull in my business the spring and summer of 2001, and I was counting on September and October to take up the slack from that period. In fact, August had seen an increase in business that I hoped would be a harbinger of a good, solid autumn. Of course, the events of Sept. 11 eliminated that possibility.”

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