Competition: Flixbus will find the Baltic market difficult

Flixbus.

PHOTO: Flixbus

Competitors believe Europe’s largest coach operator Flixbus will have a hard time on the Baltic market as international lines have to compete with cheap airline tickets. Operators have dialed back Tallinn-Berlin lines as they have not proved profitable.

Flixbus founded Flixbus Estonia OÜ in December of last year. The company is run by Michal Jakub Leman and Nikolai Alexandrovic Voitiouk-Blum. Flixbus plans to launch long-distance lines from Tallinn to Central Europe.

Minister of Economic Affairs and Infrastructure Taavi Aas greenlit Flixbus Polska’s line permit applications for Berlin-Tallinn, Warsaw-Tallinn and Prague-Tallinn connections on Monday.

“We are making preparations for launching operations in the Baltics,” executive director for Flixbus in Poland, Ukraine and the Baltics Michal Leman told ERR. “Our main priority covers lines connecting Tallinn to other European capitals, such as Berlin and Warsaw, which we plan to launch in the first half of 2020.

International coach operators in the Baltic region include LuxExpress, Ecolines and Eurolines, with the latter also operating a Warsaw line. Head of international travel for Eurolines Edmundas Pavlovas said that competition is fierce. “We welcome a fourth competitor, but our market is not as big as those in Germany or Poland,” he said. “Perhaps Flixbus has a different economic position and strategy than Superbus that was forced to leave the Baltic market, but we will see.”

Pavlovas said that the market is not big enough for so many operators and is furthermore affected by cheap plane tickets. Eurolines is concentrating more on Eastern European countries, like Belarus, Ukraine and Poland, while Tallinn is a small market for a coach operator.

Estonians like trains

Ecolines that used to operate a Berlin line left the German market a few years ago. “Long-distance buses cannot compete with the price of plane tickets. Eight hours is the absolute maximum length of a bus trip, and even that is very difficult. Flixbus operates long lines, while they also sell tickets for stops in between destinations. This allows them to sell a single seat to several passengers during a single trip and it has worked on some markets,” Pavlovas said.

Owner of LuxExpress Hugo Osula said that he has not heard about Flixbus’ plans, adding that plane tickets could be a problem. “We operated those lines in the 1990s and ended up abandoning them. They can give it a shot. I dare say that long-distance travel by bus ended a long time ago, and I would not dare recommend anyone build their business on that model,” he said.

Osula said that competition is indeed very close. “Those who manage to operate based on ticket revenue alone are the craftiest. Estonians believe in trains, while I have always wondered why we’re burying taxpayer money in the railroad in a situation where we can see people opting for the plane for longer distances. I knew 15 years ago that flying would become cheaper and smarter,” the businessman said.

Hugo Osula also believes there are not enough passengers in Estonia. “The market is so complex that reading it and setting up a suitable product takes a long time. Every minor mistake culminates in bankruptcy here,” he added. According to Osula, Superbus that operated lines between Riga and Kaunas before coming to Estonia did not do its homework. “We wondered whether they had really though things through when they first arrived. After operating here for eight-nine months, they realized there is fierce competition in Estonia and getting a foot in the door in a situation where the railroad is subsidized using taxpayer money cannot possibly be profitable,” Osula said.

The Scots failed

Superbus found itself in a legal dispute with the Estonian Road Administration in 2015 the culmination of which was a decision to leave the market after just one year. The administration denied the company express line permits as departure times for lines from Tallinn to Narva, Tartu and Pärnu were already covered by other operators. Superbus contested the call in court and won as the court found the administration’s decision had not been justified. The Road Administration did not appeal the ruling and paid Superbus’ legal expenses of €5,000. Even so, Superbus said the victory was hollow and found it easier to just give up on the Estonian market. “We were very surprised to find the Estonian transport sector is shut tight,” head of Superbus Lauri Helke said at the time.

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