Coach Travel Next Stop Monopoly

Following the collapse of its only real rival, Flixbus now has a stranglehold on the German long-distance coach travel market. Yet the cartel office still shows no sign of intervening.
Flixbus is dominant in the German coach market.

Its lurid-green coaches have become a ubiquitous sight on Germany’s autobahns as they ply their trade between cities and towns. Such powerful branding has helped Flixbus to establish itself as the undisputed leader of Germany’s fledgling long-distance bus market, which was only deregulated four years ago. And now it seems that dominance is set to rise.

The company’s sole remaining rival of any size has filed for insolvency. Deutsche Touring, which had only a 3 percent market share against Flixbus’s 92 percent, fell victim to tough price competition in the German market. It’s not clear if the company, owned by a Spanish-Portuguese consortium, is interested in carrying on the business. But its possible collapse has once again led to calls for something to be done about Flixbus’s near monopoly.

Privately operated inter-city coach services were strictly regulated in Germany for decades because authorities deemed that new competition would hurt the existing public transport network. The market was finally liberalized in 2013 in response to criticism that travelers were being denied access to low-cost coach travel that had been available in other countries for many years.

What followed was four years of cut-throat price competition, insolvencies and consolidation.

There’s no discernible abuse of its market position on prices. Christoph Gipp, managing director, Iges consultancy

German Economy Minister Brigitte Zypries saw the results during a visit to the Berlin office of Flixbus on Monday, when she was shown a screen with a live map of Germany covered with a sea of orange dots, each one a Flixbus coach en route.

Ms. Zypries congratulated the company’s founder, André Schwämmlein, on his success story. The company has survived or swallowed up each its rivals, first the start-up MeinFernbus, then Postbus, a subsidiary of mail group Deutsche Post. Its last big rival, rail operator Deutsche Bahn, pulled out of the German inter-city bus market last fall because it was losing millions.

The Federal Cartel Office has been powerless to stop the acquisitions because Flixbus hasn’t yet reached the revenue threshold of €500 million ($530 million) above which authorities can take action to ban mergers. Regulators could intervene, however, if they perceived that a company was abusing its market position, and they’re keeping a close eye on Flixbus. The cartel office, responding to a Handelsblatt enquiry, said it saw no need to review the company.

Ms. Zypries isn’t worried either. “It is how it is,” she told Handelsblatt during the visit.

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In a recent market analysis, consultancy Iges concluded that Flixbus hasn’t been exploiting its market dominance so far.

“There’s no discernible abuse of its market position on prices,” Iges managing director Christoph Gipp told Handelsblatt.

But Flixbus is growing. It now offers 252 routes compared with 241 in the first quarter, including more services between smaller German cities. It’s also expanding abroad, in particular in France and Italy.

Flixbus doesn’t own its fleet. It uses 3,000 buses owned by 250 subcontractors. “If Flixbus shuts down tomorrow they’ll have a problem,” said Ms. Zypries. “But it won’t,” she quickly added.

 

Dieter Fockenbrock is Handelsblatt's chief correspondent for the companies and markets desk, focusing on corporate governance, opinion and rail transport. Dana Heide is a political correspondent for Handelsblatt in Berlin. To contact the authors: [email protected], [email protected]