Tuesday 5 August 2014

More Apples : the Crunch of Competition

But first, to Cardiff ...
Ex Manchester PTE vehicle

In 2004, 2Travel, a company operating significant numbers of school contract services in South Wales, launched low-cost services in Cardiff and Swansea to utilise its fleet between the school runs. Low fares were achieved by omitting major bus stations avoiding hefty access fees. Cardiff Bus launched a basic service in competition with 2Travel, using white buses ...
Cardiff White Bus; formerly a Clipper

... bearing no livery also stopping short of the bus station. The Office of Fair Trading launched an investigation in 2007 into claims of predatory behaviour 18 months after 2Travel had ceased trading and gone into liquidation. The investigation found that Cardiff Bus had engaged in predatory behaviour.

Cardiff Bus has appointed a temporary new head to replace its former managing director who stepped down last week following a damning report on the firm's tactics.
David Brown quit after a tribunal found Cardiff Bus chose to "disregard the law" in its response to a rival firm. The Competition Appeals Tribunal ordered it to pay £93,000 to the directors of now-defunct 2Travel.

The tribunal, headed by former MP and ex-Welsh Lib Dem leader Lord Carlile of Berriew, found Cardiff Bus "abused its dominant position" when it set up a no-frills alternative to 2Travel. It rejected much of Mr Brown's evidence about the introduction of the firm's White Service as "untrue".

It found the firm put up "a deliberate smoke-screen" about why it had brought in the new service in 2004.

The report said: "They were, not to put too fine a point on it, lies. From this conclusion follows the clear inference that Cardiff Bus knew that it was doing something illegal."
The tribunal found Mr Brown and the former MD, Alan Kreppel, were in on the scheme "from the beginning". The directors of 2Travel had asked for £20m compensation but the tribunal rejected its claim for a "loss of a commercial opportunity"..

The judgment was politically astute. The damages were, frankly, insignificant for a large and apparently successful company. The lambasting of David Brown, creating a fall-guy, was a warning to others to play by the rules. But the rules are strange. It is all right for 2 Travel to compete against Cardiff Bus, creaming off daytime revenue and possibly undermining their profitability to the ultimate detriment of the worthy citizens of Wales' capital city. But it's wrong for Cardiff bus to protect their corner by being nasty to the intruders.

Some commentators felt that the tribunal was really saying, "we don't blame you, Cardiff Bus; we would have done the same. But we must maintain our Solomonic Judgement role pour déourager les autres." Be a bit more subtle in your response the next time and we'll let you get away with it!"

And it's OK for Tesco to set up a huge supermarket in a market town thus putting most of the smaller grocery shops out of business.

But, we hear our readers cry, why is fbb dragging up old news taking us back to 2004?

Because the authorities make it really hard for the incumbent operator to respond to competition.
So how does the rejuvenated Buses of Somerset/Taunton [BoS] ...
... respond to the ongoing onslaught by newcomer Webberbus? Personal observation on street corners in Taunton suggests that neither is "packing in" the punters.
Webber's route 38 runs to Somerton and on to Wells every hour.
BoS' 54 was hourly from Taunton to Yeovil via Somerton.
So from 27th July the apple-green service was doubled between Taunton and Somerton to challenge the 38. Service 29 to Wells via First's traditional route was improved to hourly.
Both changes will put "pressure" on Webberbus, but presumably, because they don't form a direct copy running ten minutes in front of the competitor, this is not deemed to be predatory.

Webber have run the service to Creech Heathfield, every hour, Monday to Saturday, for some time.
BoS have started (re-started?) their own direct copy version, service 26 ...
... also every hour, but spaced more-or-less evenly between the other guy's buses. That's all right. then.
To complete this July expansion, trunk route 21 which runs from Taunton to Weston-super-Mud ...
... was doubled in frequency between Taunton and Bridgwater.
When BoS first budded from its First Bus root stock, the 21 ran every 20 minutes Taunton to Bridgwater and every hour on to Weston. Earlier this year it was changed to run every half hour all the way, to match Webber's frequency.
Now it is every 15 minutes to Bridgwater and every 30 onwards northbound.

All 21s are extended cross town to Taunton's Musgrove Hospital contributing to 8 buses an hour Monday to Saturday; two local 7s, two 54s and four 21s. This is a substantial increase, far too many for the number of passengers and it will, without a doubt, bring more pressure on to a congested bus marketplace. But, of course, it also helps passengers from Bridgwater, Somerton etc. to get to their hospital appointments without a change of bus. Competition is good for passengers, see.

Bearing in mind that Webbers have lost the Taunton Park and Ride contract in favour of BoS ...
... it might be that First is gaining the upper hand without employing "predatory competition". What we don't know, of course, is whether BoS is profitable and will continue to earn First's shareholders a reasonable crust after the service increase. Neither do we know how well Webber's finances are coping with the increased apple activity.

Yet again, watch this space!
      but not all of them - yet!     

 Next bus blog : Wednesday 6th August 


  1. Nothing wrong with a bit of healthy competition to protect your market share. Just be open and upfront about it.
    Don't pretend to be (a) somebody else) or (b) devious. You will get caught out!

  2. Cardiff's problem was that they never really knew what they were trying to achieve & never committed to any action fully which meant that it was easy to paint it as a spoiling action and difficult to justify it as a business strategy. This was made all the worse by the fact that it was utterly unnecessary as the failure of the venture by 2-Travel was almost guaranteed from the start, it was effectively designed to utilise spare resource between the school peaks but they didn't use their school buses & returned to the depot to swap buses before taking on service, adding cost & worsening the offering to passengers.

    If they had branded the buses with any name (they were white as they were due for sale & quickly restored to service as a response) & if they had run actually into the estates, they ran to the edge where the frequent service on the existing service died out using those registrations to hide the journeys, they could have justified this as a commercial initiative. They all ran to poorer estates where bargain buses of some sort could have a business model (as per Stagecoaches Magic bus) if implemented properly.

    As Greenline said this doesn't stop other operators responding, it doesn't even stop direct responses on a like for like basis, simply it requires you to know what you are doing, have a proper business case for doing it, commit properly to the action you have taken (so it cannot be accused of a spoiling action) and don't try to confuse passengers into thinking you are your competition by running unidentified.

  3. As an aside I note that Webberbus do have some printed timetable leaflets once more - there was a report a few weeks ago that they had stopped producing them.

    The ones I have obtained are for the 12/27, 15/75/12/15/75/76, 15/75/670/27, 18/10/106/101, 26/37/38/67/76, 67, 76/26 (number sequences as on front of the leaflets).

  4. The bus service between Creech Heathfield and Taunton was operated for many years under contract to Somerset County Council until May 2009, when WebberBus commenced a commercial route over this corridor (formerly service 15A, currently service 27). Following the registration of the Buses of Somerset competing service 26, WebberBus has immediately deregistered service 27 from Sunday 7 September in order to increase competition on the Taunton - Wellington corridor. From Monday 8 September, Buses of Somerset will be providing the sole bus service between Creech Heathfield and Taunton commercially - a route First previously operated until May 2009 with tens of thousands of pounds of annual financial support from the local authority!

  5. Cardiff buses had a bit of history in the way that they responded to CK Travel and Cardiff Bluebird.

  6. Not really seeing the parallels between Cardiff Bus' chequered history (they were asking for trouble in competing how they did with 2 Travel, and they have form for vigorously defending their patch) and the events in Somerset.

    The Creech Heathfield service is one example where Webberbus have allowed their own issues to cloud what should be a successful operation, just like with Park & Ride. It has been subject of local media interest, due to the constant 'missed' trips and BoS have no doubt decided that Webberbus cannot provide a reliable service, so they will step into that breach and provide it.

    Rumours persistently abound of drivers not paid on time, which suggests that they prioritise vehicle lease payments ahead of staff wages, with the consequential effect that they cannot recruit or retain staff or worse still, they get the drivers no one wants who will not follow instructions, all of which then impacts upon service delivery. But the leased fleet nonetheless needs to generate cash to pay the leases - the P&R replacements will not generate the same cash as the tendered services they have lost.

    Thus, another business failure in the making. It is a matter of when not if, cash must be continually coming in to pay the leases and if it doesn't, then the business will ultimately fail.

    First on the other hand have pulled their socks up and are investing a lot into PVR, and thus drivers to drive the additional buses. One hopes the 'increases' remain as such when the competition finally implodes - First's history in this area has to been to double frequency and slash fares and then when the competition has gone, cut it all back 'to a more sustainable level'.

    Investment in new stock was woeful, around 10 short Enviro 200s in 15 years of ownership, with a smattering of youthful B7RLEs for a relaunch that were swiftly taken away, doing nothing for the average age of the fleet. Instead BoS land has had to make do with battered hand-me-downs, and its only recently they've taken a long hard look at what is there and sought to improve the offering. Cawlett on the other hand managed to buy around 10-15 new buses annually and maintained a much younger vehicle age on the mainline services. Alongside which they had a rolling museum of large vehicles working peak orientated services.

    One hopes BoS are playing the long game, and one hopes that these increases in service remain permanent fixtures. Elsewhere in the country operators doing more with what they have leads to increased income, with costs contained, and thus begins a virtuous cycle of continual investment and upgrading. If BoS generates increased turnover and makes money they will apply it elsewhere. It would be a massive turnaround from what has been a neglected and unloved operation.

    Has First finally turned a corner? The new image is wearing very well, and unusually for a Stenning brand, has some thought into the colours and how it sits - dark ones at the rear of the vehicle where the road grime goes, lighter ones at the front with the livery mostly following the panel lines of the bus, so when a panel needs replacement, it won't be so obvious.