FirstGroup expects to see passenger volumes on First Bus return to 80-90% of pre-COVID-19 levels within one year of social distancing requirements on public transport ending. It anticipates further growth thereafter, but says that reduced demand on some routes may “no longer support previous levels of commercial operation.”
The projection was divulged among wider information relating to the disposal of FirstGroup’s First Student and First Transit contract divisions in North America announced on 23 April. Those two businesses are set to be sold to EQT Infrastructure for around £3.3bn, with completion expected in the second half of 2021.
‘Readying plans’ for realigned networks beyond the pandemic
FirstGroup adds that significant work is underway in its UK Bus arm in preparation for life beyond the pandemic. Management is “readying detailed plans to realign networks in several potential passenger volume scenarios,” the Group says. Those “will be adapted to align with demand and growth potential, significantly aided by the digital transformation of First Bus’s capabilities in real-time passenger volume data capture.”
It adds: “Management expects that the revenue effect of any volume reductions will be mitigated over time by… targeted network changes together with a new data-driven pricing strategy which is already underway and other ticketing innovations.”
While the level of sustainable commercial operation on some routes may be impacted by the level of patronage return, FirstGroup notes that the National Bus Strategy (NBS) for England provides a framework and funding for operators and local transport authorities (LTAs) to promote bus use. The group says it will work with LTAs to access money made available through the NBS.
First Bus is targeting a 10% margin in the first full financial year after social distancing restrictions on public transport end, the group adds. From financial year 2023 onwards, it plans to invest around £90m per annum, mainly driven by its commitment to operating an entirely zero-emission bus fleet by 2035.
Greyhound: ‘All exit options’ being pursued by FirstGroup
When completed, the sale of First Student and First Transit will represent the culmination of a disposal process that was embarked upon in March 2020. The deal does not capture the group’s Greyhound business in North America. FirstGroup regards Greyhound as non-core and says it is pursuing “all exit options” for it.
Chairman David Martin states that the planned sale of First Student and First Transit will enable FirstGroup to “address its longstanding liabilities, make a substantial contribution to its UK Bus and Group pension schemes and return value to shareholders, while ensuring [that] the ongoing business has the appropriate financial strength and flexibility to deliver on its goals.”