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New York City by bus: $1


Low-cost coach company Megabus is betting low-income travellers will jump on its cheap seats

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Mar 27, 2008

Low-cost airlines such as WestJet helped to pioneer the concept of a flying bus, but now some motor coach companies are fighting back with cheap seats of their own.

When Megabus pulls into Toronto on May 30, it will boast one-way fares to New York City for as little as $1 (plus a 50 cent booking fee) in a bid to whip up interest for the 10-hour road trip.

The pitch resembles those offered by discount airlines such as Europe's Ryanair. The airline regularly advertises ultra-cheap flights on its website, although analysts say average fares paid by passengers are generally more in line with industry norms – particularly when all the extra fees and charges are taken into account.

Megabus, meanwhile, typically offers a handful of $1 seats on each trip to early bookers and then charges higher prices as the date of travel approaches.

Dale Moser, the president and chief operating officer of Megabus, said the last-minute, walk-up fare from Toronto to New York was about $85, and that there were no hidden charges beyond the 50-cent booking fee.

"That is still more economical than all the other alternatives out there – flying, driving your own car or taking the train."

Megabus opened its first hub in Chicago nearly two years ago and now serves 17 cities in the Midwest and another seven on the West Coast. A division of Scotland's Stagecoach Group, Megabus will also offer service from Toronto to Buffalo, in partnership with Coach Canada, as part of an eight-city East Coast expansion that's being rolled out this spring.

The company relies almost exclusively on the Internet for bookings and keeps costs down by avoiding the use of brick and mortar terminals. In Toronto, for example, Megabus passengers will be picked up on York St. beside the Fairmont Royal York Hotel.

Megabus is also hoping to change people's perceptions of bus travel by offering guaranteed seating, as well as free video entertainment and Wi-Fi service onboard.

"We're trying to take the bus industry to the next level," said Moser, adding that Megabus appeals to a mix of cost-conscious young professionals, single women and their children and "silver surfers," or retirees.

But Megabus will be entering a competitive market in Canada.

In addition to Greyhound, the continent's biggest bus line, Megabus will be competing with local package tour companies that target mainly Chinese visitors and recent immigrants with cheap trips to the New York area for sightseeing and shopping.

Meanwhile, there's a price war brewing between Air Canada and upstart Porter Airlines on flights between Toronto and New York, with one-way fares to Newark's Liberty International Airport advertised for as little as $95 plus fees and taxes.

Observers say it could be difficult to coax people to spend all day on a bus when they could spend just an hour and a half on the plane without breaking the bank.

"Sure, they'll attract a few people that are leery about flying or fed up with security issues at airports," said David Newman, an analyst at National Bank Financial. "But, at the end of the day, you've got a fairly compelling set of (airline) competitors going down to New York."

Megabus is betting there's a sizeable market of cost-conscious travellers such as students and other low-income earners.

For example, Greyhound says on its website that 60 per cent of its passengers earn $35,000 per year or less. The iconic bus company's parent, Burlington-based Laidlaw International Inc., was bought by the U.K.'s FirstGroup PLC last year.

thestar.com

Low-cost coach company Megabus is betting low-income travellers will jump on its cheap seats
consumerist.com



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