The takeover of Ouibus by BlaBlaCar, or the great upheaval in the mobility offer

Since the opening up of the long-distance bus market to competition in August 2015, operators have been looking for critical size to become profitable.

Thierry Blayac, University of Montpellier and Patrice Bougette, Université Côte d'Azur UCA

As soon as this new market was created, the strategy developed by the new entrants was to charge attractive fares in order to induce demand for this new mode of transport, which suffers from a lack of recognition in France. In 2017, 7.1 million passengers used long-distance bus services, up 14.5% on the previous year.

As soon as this new market opened up, we saw the emergence of a younger, more price-conscious clientele, including families and retirees. Changing consumer habits also play a role, with the example of "Millenials" who favor thecollaborative economy. More recently, during the SCNF strikes in spring 2018, this new mode of transport was able to attract a more professional clientele.

On the operator side, a "club of five" quickly formed after the opening up of the long-distance bus market, with the main players being SNCF subsidiary Ouibus (formerly IDBus), German market leader Flixbus, Isilines-Eurolines, which belongs to the French Transdev group, Megabus, from the English Stagecoach group and, finally, Starshipper, which brings together independent coach operators based mainly in south-west France. A few months later, in July 2016, Flixbus and Ouibus announced the acquisition of Megabus and Starshipper respectively. These acquisitions enabled the two groups to consolidate their market positions and expand their services geographically.

Acquisition as a strategy for entering a new market

In a market that is still maturing (only three years old), operators' fare policies have not yet fully stabilized (although they are close to 5 cents per km per passenger) and have recently tended to increase, even apart from any takeovers that may have taken place. In terms of fare positioning, bus services are close to car-sharing prices, represented by leader BlaBlaCar, the recent purchaser of Ouibus.

A quick glance at recent developments in transport modes or mobility offers shows that consumers are increasingly inclined to use different modes in competition with each other, or to use them in a complementary way to ensure a "door-to-door" trip. The advent of digital technologies, programming and the development of smartphone applications now make this type of combination possible. In its ultimate form, this system tends towards the concept of mobility as a service (MaaS). This refers to the integration, on a single application, of most mobility offers, combining public transport and mobility on demand, with a single billing system. Conclusive experiments in urban environments have already been carried out in Northern Europe (notably Finland and Sweden).

BlaBlaCar is moving in this direction. On November 12, the car-sharing specialist announced its intention to acquire 100% of Ouibus. The amount of the transaction was not disclosed, but the car-sharing leader will need to raise 101 million euros to finance the operation. The aim of the acquisition is to enter a new market, with an operator that is already visible, and to benefit from its international development and data management.

A buyout to develop synergies

Synergies will be developed within the merged group. First of all, the complete transition to a platform-type business model, following the example of Flixbus, which has no buses of its own, will undoubtedly reduce the cost of operating bus routes. The aim is to become an intermediary between passengers and independent coach operators, relying on subcontracting and external partners.

Secondly, the network will be even more flexibly managed. Already, bus routes could be easily varied according to the season and special events (e.g. ski season, Euro-2016), at no great cost. From now on, the offer could vary even more seasonally than it does today, with, for example, off-peak bus routes replaced by carpooling from one day to the next.

Finally, the group will be able to offer consumers a "train + carpooling" package thanks to the partnership created with SNCF, which is taking a minority stake in BlaBlaCar. From summer 2019, oui.sncf, SNCF's travel platform, will combine train, coach and, eventually, carpooling. SNCF's strategy is to make its platform "a real personal mobility assistant ", even integrating transport solutions from other competing mobility players. Following this same intermodal logic, a partnership between Ouibus and Hop was recently signed to pre-book passengers by bus for air routes operated by Hop! A "bus + plane" package will then be offered.

Consolidation logic extended to railways

On the one hand, the platform's business model of not owning the coaches makes it easier to enter this new market. There's no need to invest in network infrastructure or coaches. Sunk costs, derived from the theory of contestable markets, are not high. On the other hand, we must not underestimate the intangible assets required for market performance, such as Big Data management. Investments must be made in the platform's matching optimization algorithms and real-time management of demand and supply (for example, Flixbus employs 150 developers just to analyze the German market). Industry-specific assets become the data processing power at the service of the platform and customer use.

However, the management and location of bus stations within towns and cities remains a shadow over the horizon. The ARAFER has published a study on this subject, which shows the heterogeneity of situations, often leaving consumers to cover the "last mile" to home.

By selling off its loss-making bus subsidiary, SNCF is refocusing its offer on rail, in particular with its low-cost strategy, which is proving highly popular with consumers. The Group is also preparing for theopening of passenger rail transport in Franceto competition, scheduled for 2021 for high-speed lines, and 2023 for conventional services.

Interestingly, Flixbus has entered the German rail market with its FlixTrain brand, following the same platform business model. Intermodality therefore seems to be the strategic key to gaining a foothold in a rapidly consolidating landscape.

Thierry Blayac, Professor of Economics, Centre d'Economie de l'Environnement de Montpellier (CEE-M), University of Montpellier and Patrice Bougette, Senior Lecturer in Economics, CNRS, GREDEG, Université Côte d'Azur UCA

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