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U.K. players ride U.S. buses
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March 19, 1999: 10:35 a.m. ET
National Express targets student market to launch North American expansion
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LONDON (CNNfn) - U.K. transport companies are turning to the U.S. for new growth opportunities in a move that could see large parts of the country's airport, bus and rail systems shift into British hands.
National Express, a privatized U.K. bus operator with extensive airport interests, is eyeing a third U.S. acquisition to push it into the top three of the $13 billion a year student bus market. Analysts point to Durham Transportation and School Services as two possible targets, though the companies declined to comment.
The European interest comes at a time when the U.S. market is moving through a period of consolidation, including this week's $650 million merger of Laidlaw (LDW) and Greyhound (BUS).
National Express (NEX) has paid $58 million for two smaller student bus companies - Missouri-based Crabtree-Harmon and Robinson in Chicago in the last few months. Durham and School Services rank fourth and fifth behind Laidlaw, Ryder Public Transport and Atlantic Express.
National Express and Atlantic had discussions last year but fell out when the U.K. company made a bid for Crabtree-Harmon under the nose of the U.S. firm.
Transport analysts view the bus acquisitions as a bridgehead into the U.S. market where regional airports remain underdeveloped and the contracting out of public metro systems is on the rise. "North America is an area where they would like to expand and long term their interest will not be limited to school buses," said Gert Zonneveldt at WestLB Panmure in London.
National Express and the other U.K. market leaders - Stagecoach and First Bus - have extensive experience of the tendering and operating process and have already expanded into Asia and continental Europe.
National Express is already preferred bidder for the management of Stewart Airport in New York, following in the footsteps of BAA (BAA), which has contracts at the larger Pittsburgh and Indianapolis airports. Stewart is the first of a pilot program of dozens of regional airports which the Federal Aviation Administration wants to transfer from municipal control.
Analyst Damian Brewer at Paribas believes National Express will focus on regional airports where the FAA is pushing for commercialization and a transfer of operations to the private sector. "They really have to push for growth," said Brewer. They have a large cash pile and earnings growth will be sluggish unless they make some value-adding acquisitions.".
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