The MacNeil/Lehrer Report; Buses

JIM LEHRER: These are intercity buses -- hardly the sex objects of American transportation -- but they have suddenly become the object of much concern. Bus ridership is down, along with the image, while expenses and competition are up. It`s a combination that means serious trouble; so serious, say the bus people, that they`re on the verge of becoming America`s next major industry disaster.

Good evening. As of last week it cost less to fly from New York to Miami than to go by bus, a startling, very pleasant news development for people who wish to travel between those two cities, but a startling and terribly unpleasant one for the people who operate intercity buses. The bus industry sees it as one more nail in its coffin. They`re running scared, and they`re running to Washington for help, saying unless the federal government comes to the rescue, bus service to many small towns will be cut in the short run, several major bus companies could go under in the long run. Critics in Congress and elsewhere say that`s nonsense, they`re not that bad off; they charge the industry with using scare tactics to rip off tax money for an industry controlled by huge corporate conglomerates. Tonight, a look at this argument surrounding buses -the least glamorous and chic of all modes of transportation. Charlayne Hunter-Gault is sitting in for Robert MacNeil in New York tonight, as she will be regularly from now on when either one of us is gone. It`s her debut, in other words. Charlayne, welcome.

CHARLAYNE HUNTER-GAULT: Thank you, Jim. As you said, not everyone looks on the bus industry plight with sympathy. On October 27 the Senate defeated a portion of the energy bill designed to help bail out the buses,

Disguised as a tax credit, it would have meant for the bus industry $200 million in tax credits each year for five years -- $100 million directly to fare reductions, $100 million to capital improvements, such as bus stations. The forces opposing the credit were led by Senator John Heinz. Those in favor of the credit were led by Senator Russell Long, the czar of the tax portions of the energy bill. The vote seemed close. At first it appeared to be forty-two, forty-two, which would have meant passage of the bill as it stood with the tax credit. But then a clerical error was discovered, and the vote became forty-three, forty-two with Senator Heinz prevailing, thus killing the credit.

Not all was lost for the industry, however; Congress had already passed a mini bailout in the form of 16.5 million in exemptions from excise tax on things like tires, bus parts and fuel. But the bus people say it`s not enough. They point to overwhelming problems which they claim will send the bus industry down the same dismal road as the Penn Central and Railway Express.

On Monday Jim Lehrer went to the Trailways and Greyhound terminals in Washington in an attempt to illustrate the industry`s problems. But before his report begins, he`s got a confession.

LEHRER: The confession is, I have a personal interest in this story. Not a prejudice, not a bias, just an interest. I come from a bus family. My father worked in the bus business for forty years, all his adult life. During one brief time back in the forties, both he and my mother drove buses. Later my brother and I both worked as bus ticket agents while going to school. My first public pronouncement into a microphone, in fact, was to call buses at a small Texas bus station in the 1950`s. Thus, my interest.

But unless you live in a rural area, have a low to moderate income, are elderly or very young, it`s probably not an interest you share with me, or with anyone else.

So let`s begin at the beginning.

This is a Trailways bus, parked at the Trailways terminal here in Washington. Across the street is the Greyhound terminal. Greyhound is the largest bus company in the country; Trailways is second. The competition between them is ferocious, out of the cats-and-dogs mode of Macy`s and Gimbels, Hertz and Avis. Together they operate more than 6,000 buses and account for seventy percent of the nation`s intercity bus traffic. The rest of the business is split among 998 small companies all over the country. They have names like Zephyr Lines, Short Way Lines, Scenic Hawkeye Stages, New Mexico Transportation Company, Bluebird Coach Lines, Indian Trails and Gulf Transport.

Intercity buses serve 15,000 cities, towns and communities around the country, more than 14,000 of them as the only public transportation available. Thirty percent of all bus passengers travel to or from these smaller places where you either go by bus or by car, or you just don`t go.

To complete the portrait of the average bus passenger, industry research shows over sixty percent of them have a family income of $10,000 or less. Thirty percent are fifty-five years old or older, thirty-one percent are under eighteen. So, it`s those with no alternative, plus the poor, the elderly and the young. In their total numbers the passengers carried by bus sound impressive -- 340 million last year, many more than rode either trains or planes. But that total is four percent less than 1975, and the overall trend is downward. Except for an upward blip during the oil embargo period, ridership has been steadily decreasing over the past ten years. Greyhound says it has lost thirty percent of its passengers since 1970, and the story is similar for Trailways and the others.

The bus people cite many reasons for this, but let`s take two of the more obvious. One is cost -- cost to the passenger. Bus travel has always been the cheapest form of public transportation. But as the president of Greyhound wrote to his employees recently, the day Greyhound Lines ceases to be the most economical way to go is the day it ceases to be. That day has already appeared on the immediate horizon. Airline fares, once so much higher than the bus, have suddenly gotten competitive. Amtrak`s passenger train fares are already right at bus fares, in some cases lower. A couple of other fare examples in addition to the New York-Miami one already mentioned: Houston to Dallas is $18 by train, $17 by air, $14.50 by bus. Los Angeles-San Francisco: $25.50 by train, $20 by air, $23.50 via bus. The handwriting is on the wall, and the traveler is reading it.

And that brings us to the second part of the equation. Without the cheaper advantage, buses don`t do that well out in the cold marketplace of competition. It`s a mixture of image and reality. First there`s the question of terminals. Bus stations have a terrible reputation. As the president of Trailways says himself, rundown and dilapidated terminals frighten many people. Even where there are new or remodeled terminals, as is the case with both of these here in Washington, there`s sometimes a location problem. Many bus stations are in the rattiest parts of downtowns, amidst porno joints, derelicts, streetwalkers, deserted buildings and high crime rates. Then there`s the ride itself. If you haven`t been on a bus for a while you might be pleasantly surprised. They are a smooth ride; most are equipped with rest rooms; the windows are big, for a good view of the countryside; Trailways is even experimenting with showing movies on long- distance runs.

But there are still problems. Regular passengers tell me their major complaint is simply about the size of the seats. They`re narrow. And unlike airplane and train seats, there are no armrests between them. So if you happen to sit down next to someone of considerable heft, as in the case here of our director, Duke Struck, there`s no way to avoid a lot of bodily contact. No offense to Duke, but this could get tiresome after a few hours.

The other competitive disadvantages are more obvious. You can get up and walk around on trains and planes, particularly trains. Food and beverage service is available on both. And finally, there`s the simple matter of time. Using the New York to Miami example again, it`s a two and a half hour flight, a twenty-six hour train ride, and a twenty-eight hour trip by bus.

It all adds up to one question: how can an industry with problems like these survive?

LEHRER: The presidents of both Greyhound and Trailways say the answer to that survival question is simply, it can`t without some outside help. Those two men are with us tonight. Harry Lesko, President of Grey hound, joined the company as a dispatcher in 1940; he`s been the top man since September of last year. J. Kevin Murphy, his counterpart at Trailways, came to the bus business a year ago; he`s an attorney and was president of an armored car security delivery company before joining Trailways as President.

Gentlemen, in specific terms, in how bad a shape are your companies right now? Greyhound, Mr. Lesko?

HARRY LESKO: Well, Jim, the required capital to invest in our equipment and our terminals has reached the point that the cash flow is insufficient for us to make those replacements as we go on year to year. On an operating ratio basis last year our company had a ninety-six percent operating ratio, which in effect means there was four cents before tax to draw to the bottom line for purpose of investment and for the purpose of improving our services. Inflation has been a dominant factor in the cost of doing business, in equipment and in terminals; the inflationary factor in the cost of living, in paying our employees, all of whom are union members; the fact that the inability to attract sufficient capital unless our earning posture improves is a very dominant factor that concerns us. Principally, we`re the most dominant, perfect transportation system in the world -- surface, that is -- and it would be a crying shame that our Congress would sit idly by and not give us an assist, the same as they had over the years for the airlines domestically, who carry less passengers than the intercity bus companies, and Amtrak, who is a nationalized transportation system that is in effect a national system supported by tax dollars.

LEHRER: We`ll get to a lot of those points in just a moment, but I think you`ve laid out the case in terms of how bad it is for Greyhound. How bad is it for Trailways at this point, Mr. Murphy?

J. KEVIN MURPHY: Well, of course we`re a good deal smaller than Greyhound, being a little less than half their size. This year we`ve laid off 700 people, we`ve cut out seven and a half percent of our scheduled miles, we`ve discontinued service to many communities necessarily because there was just not enough money to continue to operate. But the most important part, I think, for the bus industry is the fact that the cash flow is at a point where in our case, for example, this year we would have to generate an additional $32 million that is nowhere to be found just to buy the buses we need to buy to replace our fleet and maintain a modern fleet; and secondly, to do one third of the cost of the terminals we presently require to renovate. And that doesn`t mean in the quality that an airport is or the quality that Amtrak`s doing with the $1.1 billion provided to it just this past year by the Congress between Washington, D.C. and Boston. So the bus industry is in a tremendous problem from a cash flow standpoint, and you just can`t get the investment from the outside because the return on investment is just totally inadequate; you could put your money in a bank and get more money out of a bank savings account than you could in a bus company.

LEHRER: Well, both of you gentlemen plus the president of your trade association, Arthur Lewis, have said that serious cuts in service to rural areas are coming, even more than have already been made. How drastic would they be, Mr. Lesko?

LESKO: They could be materially drastic, for this very reason: that only eleven percent of our total route system turns in a profit on an annual basis. Eighty-nine percent of our routes are subsidized by the bread and butter primary routes, as we would call them. The obvious answer is that if we are to keep our lines running and the scheduled miles operating on the primary routes to satisfy the high-density population factors, the rural areas are going to have to suffer because they`re the ones that are draining and straining the main line system.

LEHRER: All right, well let`s go to the long-term, Mr. Murphy, the long- term possibility of actual bankruptcy for your company, Greyhound and other companies. Is that a real possibility?

MURPHY: Of course it is, unless something`s done, and I really can`t believe the Congress of the United States is going to stand idly by and continue to vote the way it just recently did. When you have 340 million Americans traveling by bus each year presently and you only have less than 20 million going by Amtrak -- just think of that -- that`s like six percent of the number of bus passengers; and yet they`re receiving in operating welfare, I call it, or operating subsidy, if you care to call it that, $500 million a year, on top of which they presently have three billion dollars in capital welfare provided to them, and so the bus riders are being completely ignored. They`re being treated like second-class citizens, and that`s got to stop.

LEHRER: Gentlemen, you know what the critics say: both of your companies are part of conglomerates. Trailways, in your case, is owned by Holiday Inns; Greyhound, in your case, is in fact a conglomerate, owns Armour meats and others. Why can`t they pump the needed money and this investment money? Isn`t that the purpose of a conglomerate?

MURPHY: That`s a phony argument, you know. There`s one Amtrak; there are a thousand intercity bus companies. You can`t run a bus or a personal car over a railroad track. There`s only one Amtrak, and it`s getting $500 million. How could you get a return on your investment if you put up the money? Where are you going to get it? You can`t get that kind of a profit out of a bus company. You`re a regulated industry, and you just cannot get that kind of a return on your investment.

LEHRER: Mr. Lesko?

LESKO: The major portion of the bus company earnings are plowed back into the bus company. A certain percentage of those earnings, be they existent, go to the corporate parent to pay the stockholder a dividend. If we couldn`t attract investment capital for the purpose of running the bus company, there wouldn`t be a bus company, or there wouldn`t be an Armour, or there wouldn`t be a Holiday Inn. So the question of investment capital needed to perpetuate not only the bus companies but the other companies is a necessary element in our existence. The Interstate Commerce Commission certainly would not permit Trailways or Greyhound to take their earnings and plow it into the conglomerate as opposed to utilizing those earnings for the perpetuation of a better bus company and the provision for adequate service to the public.

LEHRER: All right. Gentlemen, thank you. Charlayne?

HUNTER-GAULT: As I said earlier, the person who led the move that defeated the tax credit was Senator John Heinz, a first-term Republican from Pennsylvania. In his successful floor argument, Senator Heinz said the industry was not in as bad trouble as they said, and he said the tax credit would be taking from the poor and giving to the rich. Senator Heinz, Mr. Lesko and Mr. Murphy have painted a pretty bleak picture of their industry. You don`t believe them. Why not?

Sen. JOHN HEINZ: Well, the bus industry may have some problems, and I`m particularly sympathetic to the fact that it may have some problems serving the rural areas. After all, there are some 15,000 towns that the bus industry has to serve, in contrast to Amtrak, which only serves 400 towns. But the fact of the matter is that we are talking, of course, about two very large companies that do seventy-five percent of the bus business. Not only that, I have a very real problem with government intervening every time somebody in the free enterprise system gets in trouble, and that`s what`s happening here. It seems to me too that the case is a very bad case. It`s not only my judgment, but the Interstate Commerce Commission, that regulates the bus lines, said it was without merit; the Congressional Budget Office turned thumbs down on it; and the Department of Transportation said no. Finally, I think if we do care about the taxpayer, we don`t give away without a very, very good and careful rationale one billion dollars to anybody, let alone two very large corporations to get seventy-five percent of that. Finally, I think that it`s a very poor way to legislate to have somebody, as Senator Long did -- and this is nothing against Senator Long, but he came to the floor of the Senate not having held one day of hearings in the Senate Finance Committee; the legislation had never been studied by either the authorizing or the appropriations committees of the Senate; and he wanted to give, over five years, one billion dollars to the bus companies. It certainly wasn`t an energy-saving measure. By Senator Long`s own staff, if it did save any energy it might save a thousand barrels of oil a year, and that`s one one hundred thousandth of one percent of all the oil we use, and the cost of it would have been around $548 a barrel. Sure, I think there are people that the bus companies should serve and should help, and there are a lot of old people, there are a lot of intercity people, there are a lot of people in rural areas who need the help. But I`m not convinced that a one-billion-dollar grant like this is the way to help those people the most.

HUNTER-GAULT: Okay. You talked about this measure as taking from the poor and giving to the rich. What did you mean by that?

HEINZ: I mean the poor taxpayer. We have a $60 billion federal deficit right now. We have a bud et that is growing every day. If we give away one billion dollars or V 00 million a year to every corporation that comes in the door, there`ll be no way we can ever make the federal budget be responsible. And if we really care about our free enterprise system and making it serve the country, if we`re going to allow the workers who work in the free enterprise system to earn wages and pay their taxes, if we`re going to allow the companies such as Greyhound and Trailways, they should do it within the context of competition or within the context of proper regulation -- in this case, by the ICC.

HUNTER-GAULT: Okay, so you`re opposed to this on principle. Are you opposed to this just on principle -- would you oppose any kind of subsidy?

HEINZ: I would oppose any kind of subsidy such as this, yes. This is a regulated industry. That means the Interstate Commerce Commission sets the fares. In fact, these bus companies just got a ten percent fare increase; they`ve asked for an eleven percent fare increase for next year; and if there need to be adjustments, either in the fares or in the route structure, I think it`s up to the regulatory body to ask for relief. I`m not alone in that opinion. In fact, the chairman and chief executive officer of Greyhound says that "we`re determined to obtain adequate fares, through, we trust, the present regulatory system but, if necessary, deregulation." Well, that`s what the chairman and chief executive officer of Greyhound says he wants. I do not read him as saying that he wants a one-billion-dollar handout for the bus industry.

HUNTER-GAULT: Okay, let`s talk to Mr. Lesko and Mr. Murphy about that. Do you agree with what the Senator just said, Mr. Murphy?

MURPHY: Absolutely not. I think it`s interesting, the Senator spoke about discriminating against the bus industry -- and, I might add, the people who ride on the buses -- and when you think about what comprises bus riders, namely poor people, senior citizens, minorities and youths, that`s what makes up two thirds of them; and much wealthier people, all demographic studies show, ride on Amtrak and the airlines. And the Congress and the Senate sees no problem in providing them with hundreds of millions of dollars each year in operating subsidy; there are some two and a half billion dollars given by this country to run the airports that the major airlines operate to and from. This year over $500 million will be spent by the federal government to improve the airports, and almost three billion dollars is provided to improve the Amtrak terminals; and our little company -- we only represent nineteen percent of the industry -- we serve more people than Amtrak, we serve ten times as many communities in this country as Amtrak, and the Senator`s saying, "Don`t give those people a dime. Make them ride in and out of those terribly disheveled terminals, and we`ll give all the money that Amtrak wants;" and there`s only one Amtrak, but there`s one thousand intercity bus companies.

HUNTER-GAULT: So you`re saying that the federal government is giving Amtrak a competitive edge and causing you to ...

MURPHY: It`s discrimination of the worst kind. Why should 20 million Amtrak riders get three billion dollars of the taxpayers` welfare money, and the 340 million Americans who ride on intercity buses get nothing?

HUNTER-GAULT: Senator Heinz?

HEINZ: Well, first of all, let`s be very clear on the people we`re talking about. First of all, eighty percent of the people below $10,000 who travel don`t travel by bus; they travel by their own car. Seventeen percent of them travel by either air or by train; and three percent of them travel by bus. So if we`re talking about the people under $10,000, let`s recognize that ninety-seven percent of them travel by some other means than bus. Now, as to the subsidy...

HUNTER-GAULT: Are they being discriminated against?

HEINZ: Well, ninety-seven percent of them are traveling some other way, so we are focusing on three percent of them. The second thing is, if there`s a case to be made regarding discrimination, it`s that you`re saying, Mr. Murphy, that we`re subsidizing other modes of transportation. Now, I happen to have very grave reservations about the $500 million subsidy that Amtrak`s getting this year, particularly in light of the quality of service. The trains don`t run on time, in spite of that subsidy; and I think buses probably have a better on-time departure than trains do ...

MURPHY: Absolutely.

HEINZ:..and I congratulate you for it. But the fact is that the airlines receive no subsidies at all other than for the Class 3 air carriers, who got a grand total of some $56 million last year, I believe it was, and that`s just for the little puddle-jumpers who serve a few small cities -- the Eastern Airlines and the TWA`s, and the people who are out doing you on Miami to New York cost fares don`t receive a penny. What there is is a trust fund which they pay into, some two billion dollars a year, which is invested in terminals, invested in runways. In contrast, if I may just make this point, Charlayne, the bus industry is the indirect beneficiary of a much larger subsidy, namely, a seven-billion-dollar a-year subsidy, of which they now will be paying only a few million dollars, some five million dollars a year -- and that`s five million dollars of seven billion -- in the form of the highway trust fund, which goes to interstate highways and federal aid highways, over which buses probably travel most of the time. So I`m sympathetic to the problems of any industry that`s in trouble; but it seems to me that the point is not well taken that the others are being subsidized unfairly. They are getting the benefit of money that people who use those transportations are putting in.

LEHRER: Let me pick up on that point with you, Mr. Lesko. Let`s take the Senator`s point -- and you`ve also spoken on this before, too -- that if the airlines can effectively compete, maybe there shouldn`t be as many buses, maybe there should be fewer. Are we going through a natural adjustment of progress in the marketplace? Is that a possibility?

LESKO: There is no way, Jim, that the airlines or Amtrak could supercede the intercity bus industry -- the 15,000 communities we serve, the 14,000 of those communities that are served by no other public carrier mode, the flexibility of the intercity bus, and the fact that it`s the most energy- efficient vehicle of all public carrier modes. In terms of average passenger miles and practical load, the intercity bus attains 126-passenger miles per gallon of fuel consumed, compared with forty--four by Amtrak, forty by the private auto, and sixteen by jet aircraft. The capital intensity of airlines in terms of aircraft and facility, or trackage, stations, et cetera for railroads to supplant the intercity bus industry is a frivolous judgment if one is considered. The equality of treatment -- I see no argument whatever on the part of the Senator that we should not be considered in the same light as Amtrak or the airlines in terms of their facilities and the FFA control towers and all of the other paraphernalia. I strongly resent the argument that we ride the highways free. A Congressional Budget Office report says the intercity, bus industry more than pays its fair share for the use of the highways in taxes.

LEHRER: Gentlemen, we must leave it there. Thanks to you all. Charlayne, thank you and good night. I`m Jim Lehrer, and thank you and good night. The next voice you are going to hear is also mine -- a little bit of 1950`s nostalgia from the Victoria, Texas bus station.

LEHRER: This is your last call for Continental Trailways Silversides Air Conditioned Throughliner to Houston and Dallas. Now leaving for Inez, Edna, Ganado, Louise, El Campo, Pierce, Wharton, Hungerford, Kennelton, Beasley, Rosenberg, Richmond, Sugar Land, Stafford, Missouri City and Houston. Connecting in Houston for Huntsville, Buffalo, Fort McKenna, Dallas, Fort Worth, Wichita Falls, Amarillo, Tucumcari, Albuquerque, Flagstaff and Los Angeles. This is your last call. Don`t forget your baggage, please.