The Rise of the Budget Bus

(MoneyWatch)  As news reports chronicle Depression chic and declining air travel, it can be easy to think people aren't traveling anywhere and wallowing in despair. Then you see the ads for budget bus service for as little as $1, or 100,000 seats free. While air travel is down, the bargain bus battle is heating up.

The biggest battle is between three companies, all primarily in the Midwest and East Coast.

There's Megabus, with the healthiest marketing budget, which advertises its $1 fares on its buses (there are restrictions, today I reserved a January jaunt from Ann Arbor to Chicago, the ride was $10 round-trip.) It's a division of Coach USA, now owned by the UK's Stagecoach Holdings, and originally operated out of eight Midwestern states but extended destinations into Pennsylvania, New York, New Jersey, Maryland and Massachusetts. Since 2006, Megabus has served more than 1 million customers and poured $60 million in new double-decker buses.

BoltBus, a partnership between Greyhound Lines and Peter Pan Bus Lines Inc., was created to take on the Fung Wah and Lucky Star bus lines that traveled the profitable New York City-Boston route. By also offering fares starting at $1, new buses, less cramped seating and wireless Internet, BoltBus exploded into the region and quickly garnered some market share. (A January round-trip fare from Boston to New York City was $30.50.)

Another new competitor is Greyhound's NeOn, a partnership with regional busline Adirondack Trailways, which competes directly with Megabus in New York City, Toronto, Buffalo, Syracuse and Rochester/Henrietta. The bus line began only a few weeks ago after Megabus announced it would serve the New York state area. (It was $30 round-trip on NeOn from Buffalo to Penn Station.)

Greyhound is behind two of these bargain buses. The company must have realized the new market is in regional lines where a company could make millions with inexpensive amenities like more legroom and WiFi -- and passengers used to cramped, old buses, will pay slightly more to compensate. By introducing this "fighter brand" under a different name, Greyhound can get those bargain customers as well as keep those that rely on its recognizable name.

There's another reason why these bus services are working so well in the East and Midwest -- proximity, which is why travelers may not see them any time soon in the West. Boston to New York City is around 210 miles, one of the longer trips. A trip from Los Angeles to San Francisco, is about 400 miles. San Francisco to Portland, 640 miles. Las Vegas to Denver, 753 miles. For a bargain bus line, adding 400- to 600-mile trips may not pencil out.

Photo courtesy of Megabus