25-vehicle city2city operation faced ferocious competition

 

 

National Express Group is to close its German city2city coach business in October, 18 months after it started, due to ferocious competition from five rival operators.

The company had grown steadily to run 25 vehicles on routes connecting Munich, Frankfurt, Cologne and Hamburg. However, a final attempt to reduce losses through an expansion of the network during the summer was undermined by cut price promotions from rival operator Flexibus, which made 10,000 €1 tickets available.

NEG’s financial results show city2city made a loss of £2.4m in 2013 and £1.4m in the first six months of this year. A spokesman said that NEG decided to make a “quick, clean exit” after the summer expansion made no impact on reducing losses.

National Express’s rapid exit was widely expected by the German coach industry. It is understood that none of the six operators in the newly-liberalised coach market are profitable. However, NEG’s rivals are run or are backed by giant state-owned or industrial companies. They are regarded as having greater strength to see off competition and establish a potentially lucrative business.

city2city’s competitors include coach services operated by state-owned train operator Deutsche Bahn; a joint venture between the German postal service and the German equivalent of the AA; and two start-up businesses, one backed by automotive giant Daimler and the other by well-funded venture capitalists. It is understood that DB’s motivations include replacing unprofitable and poorly-routed long distance rail services with quicker coach routes which make lower losses.

“No one was surprised that National Express was the first to go,” Passenger Transport was told. “Others have greater financial stamina, do not need to report transparently to PLC shareholders and have a greater strategic need to come out on top.”

However, city2city was also viewed as having the weakest brand. “I think that was a real issue,” one local industry source commented. “It doesn’t have any meaning to coach passengers, and the white vehicles did not stand out compared to the branding of other operators.

“It wouldn’t have made any difference what they did though. Prices are unsustainably low. Other companies are better able to bear that.”

 

This article appears inside the latest issue of Passenger Transport.

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