Building the partner's business case

An inventory of variables

Amortization schedule

Show the outcome in a sync table or calculate on the flow.

Evolution of fuel prices in BE

regular updates and governemental interventions

Investments

The evolution of the price of a bus

Driver costs

Unpacking the Labor Cost Divide Between the Netherlands and Belgium

In the previous post, we explored the complexities of the FlixBus partnership model and concluded with a crucial question: how can an operator build a reliable business case when so many critical variables are dynamic and externally controlled?

Perhaps you've had the same experience I have: arriving at a bustling bus station like Brussels North and seeing a wave of green buses. It’s a powerful image, a business model in action. It signifies that the bus companies who own these vehicles have invested in the branding, staffed them with trained drivers, and aligned their operations with the FlixBus system.

But what happens when the time comes to replace one of those buses? How does an operator approach that crucial calculation? This post is dedicated to exploring that question by taking an inventory of the many financial and operational variables that must be considered.

The vehicle investment

For a new line, a single-deck bus is often a logical starting point due to its relative affordability. While partners have flexibility in their choice of manufacturer, any vehicle must meet FlixBus's specific criteria, which is a considerable list. For an established, successful line, a double-decker might be a viable upgrade. Financing these vehicles typically involves a loan, which introduces several market-dependent factors: the interest rate, the repayment term, and, crucially, the expected annual mileage of the bus.

The total kilometers a bus covers is a primary determinant of its operational lifespan. If an operator aims to replace a bus after it reaches one million kilometers, a vehicle covering over 340,000 kilometers annually will be on a roughly three-year cycle. If the annual usage is closer to 200,000 kilometers, that cycle extends to about five years.

These factors form the foundational layer of the financial calculation. The purchase price, interest rate, and repayment term determine the fixed monthly outgoings. It's also important to remember that even after its primary service life, the bus will retain a residual value—an asset that should be factored into the overall equation.

The calculation, however, extends beyond the primary vehicle. An operator must also account for replacement buses. If a main bus is unavailable due to an accident, repairs, or extended maintenance, FlixBus expects a substitute to be provided. I recall instances where partners required an extra bus simply because the daily cleaning requirements were so intensive that an overnight turnaround was not feasible. The cost of maintaining this "spare" capacity must be carefully considered in the overall investment.

The drivers

Driver costs are a significant component of any business case. This is particularly true for night lines, which require two drivers per journey. A night operation also necessitates an additional relief team, as individuals cannot work around the clock. Recruiting a sufficient number of qualified drivers to form a cohesive team is a major operational task.

The cost structure for drivers varies considerably between countries due to differing regulations. In the Netherlands, for example, costs are typically calculated per hour. In Belgium, they are often based on day parts (e.g., 6, 12, or more than 12 hours), which changes the dynamics of the calculation. Other factors, such as government support for new corporations, can also influence the final cost. These country-specific regulations make driver expenses a critical area for close examination.

Beyond the direct costs, operators face the challenge of recruitment. There is no surplus of high-quality, motivated drivers. It presents a unique business paradox: one might hesitate to lend a new car to a neighbor, yet a bus company may entrust a new, half-million-euro double-decker to a driver with limited experience. This isn't just about the expense of a skilled team; it's also about the direct risk tied to their performance. Experienced drivers tend to have fewer accidents, which directly impacts operational stability and the bottom line.

The fuel

Fuel and AdBlue consumption are major operating costs that scale directly with mileage. Interestingly, thanks to technological advancements, the fuel efficiency gap between double-deck and single-deck buses has narrowed in recent years.

The core of this calculation lies in tracking both "empty" and "loaded" kilometers. Empty kilometers include all driving done without passengers, such as trips from the depot to the first stop or from a route's end point to a hotel. These non-revenue-generating kilometers must be accounted for. Fuel prices themselves are famously volatile and difficult to predict. We have seen periods of low prices followed by significant increases, and today's prices remain substantial compared to just a few years ago. This makes fuel a critical and unpredictable variable in any forecast.

Accident risk and insurance

As mentioned in my previous post, the two traditional activities for bus companies—tourism and local transport—often involve driving in less congested areas. Operating FlixBus lines, however, means navigating through or around major cities daily. This inherently increases the risk of being involved in an accident. This elevated risk profile is a significant factor that must be calculated into the business case, primarily through its impact on insurance premiums.

Repair and maintenance

Beyond accident-related repairs, the high mileage associated with FlixBus lines accelerates the need for regular maintenance. Routine servicing, general repairs, and monitoring components like tires become more frequent and thus more costly compared to traditional, lower-mileage operations.

Cleaning

The cost of maintaining a pristine bus is a significant operational expense, but the effort required can vary considerably depending on the route and time of day. Some routes attract passengers who leave the bus tidy. Others, particularly night lines, can require extensive cleaning. I recall on the Amsterdam-Paris route, for example, that facilities often required significant attention and occasional repairs. These are the kinds of operational nuances that are difficult to know upfront and are typically learned through experience. While cleaning is a substantial part of the business, its cost is highly dependent on the specifics of each line.

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