Bus company Coach USA, which is owner of the Megabus brand and commuter bus lines connecting New York and New Jersey, filed for bankruptcy. Coach USA sell assets saying it was unable to recover from a decline in ridership brought on by the pandemic.
Coach USA owes creditors between $100 and $500 million, according to its Chapter 11 petition that was filed on Tuesday in Wilmington, Delaware. Chapter 11 of the US Bankruptcy Code is designed to allow companies to keep operating while they shed debt and reorganize.
Coach USA bankruptcy
Coach USA operates a number of commuter services in the New York City area, including Rockland Coaches, Short Line, Suburban Transit and Community Coach.
Private equity firm Variant Equity Advisors purchased Coach USA from British bus company Stagecoach Group in April 2019, less than a year before Coach USA’s business was decimated by the pandemic. Commuter ridership of Coach USA declined by 90% in 2020, according to court papers. The company turned to Covid relief funding to help stay afloat.
Coach USA expenses
Ridership has partially recovered, but last year was only about 45% of prepandemic levels. Meanwhile, the company was contending with higher expenses due to rising fuel, insurance and labor costs. Its management began to explore a possible sale late last year.
Struggling transportation industry
Across the US, the transportation industry has had to contend with low ridership levels on trains and buses as many Americans now work from home or only commute into the office a few times a week. In 2019, there were about 3,000 bus companies, according to Peter Pantuso, the chief executive officer of the American Bus Association. Since then, about half have closed, many of those remaining are operating at about 70% capacity, he said.
Just last year, popular New Jersey-based operator DeCamp Bus Lines ceased its New York City commuter service due to low ridership.
Many transit services rely heavily on fares, operators have had to seek out other sources of funding as that revenue dwindled. Unless the government steps in or new sources of money are found, many operators may be left with two choices: cut services or raise fares.
Coach sell assets
Coach USA said in a statement that the filing is intended to sell certain bus lines to an affiliate of Renco Group, as well as its Megabus intellectual property and retail operations. Avalon Transportation has also agreed to buy some Coach assets, the company said.
Both buyers have agreed to act as initial bidders at a court-supervised auction, the company said. The auction process and the initial bids must first be approved by the judge overseeing the bankruptcy.
Coach USA has arranged to borrow as much as $20 million to help pay for the restructuring case and to keep operating during bankruptcy.
Coach USA services
The bus company offers services in 27 locations in the US and Canada and carries more than 38 million passengers every year, according to its website. Its Megabus service has carried more than 50 million people through more than 280 cities since it was started in 2006. The company employs about 2,700 people.
Coach USA hopes the bankruptcy will preserve thousands of jobs all while maintaining an uninterrupted passenger transportation service to its millions of customers.
