Chinatown buses: Driving them out of business; For some 15 years “Chinatown bus” lines have shuttled thrifty folk between east-coast cities for a fraction of the price of name-brand carriers

Chinatown buses: Driving them out of business

Regulators nobble cheap travel

Aug 17th 2013 | WASHINGTON, DC |From the print edition

FRUGAL travellers in America’s north-east have heard the stories. There was the bus that rolled over from going too fast. There was the one that, somehow, lost its rear wheels. A few others burst into flames. Yet potential passengers still gather near the Chinese gate in Washington, DC to catch a cheap ride to New York. A one-way ticket costs around $20, against a whopping $150 on the train. It is far from luxurious, but you can watch films on your iPad or flirt with the other young travellers.

For some 15 years “Chinatown bus” lines have shuttled thrifty folk between east-coast cities for a fraction of the price of name-brand carriers. Chinese immigrants were first to hop aboard, followed by college students and other cash-strapped Americans.There have been—how can one put this?—hiccups. Fierce competition for passengers in New York led to the “bus wars” of 2004, in which coaches were torched, drivers were assaulted and a few people were murdered. (A decapitated torso also made an appearance.) But things soon settled down, and more established companies such as Greyhound and Peter Pan set up discount lines of their own.

Kerbside pick-up reduced overhead costs, but some suspected that the upstart companies were also cutting corners on safety. Each high-profile accident brought calls for investigations. At the behest of Charles Schumer, a senator from New York, the National Transportation Safety Board published a study in 2011 that declared kerbside carriers seven times more likely to be involved in lethal accidents than traditional bus lines.

The report, trumpeted by politicians and the press, was a travesty of statistics, but regulators scented blood. The crackdown began last year when federal officials, citing safety, shut down 26 companies involved in the Chinatown bus business. More was to come.

Unlucky star

In March this year they withdrew the licence of Fung Wah, the longest-running Chinatown bus service. Two other lines, Ming An and Lucky Star, soon followed it off the road. The long list of violations committed by these carriers ranged from inoperative horns to cracked frames. Lucky Star was said to have dispatched one bus with a four-foot by two-foot hole in its floor. Fung Wah had been cited for more than 200 violations over the past two years. Its drivers ranked near the bottom in terms of experience and training.

Each carrier posed an imminent threat to public safety, claimed the feds. But out on the road companies like Fung Wah and Lucky Star were surprisingly safe. Each had been involved in only one crash (with no injuries) in the past two years. That compares favourably with the coaches of Greyhound and Peter Pan, which log more miles and crash more often. The traditional carriers seem to burst into flames more often, too. Driving is never totally safe, but buses are generally safer than cars.

The big boys are gleefully filling the market gap in New York. YO!, a new line jointly operated by Greyhound and Peter Pan, is now the only bus that runs from Chinatown to Boston. The name is derived from a Chinese word that means “to protect”. YO! is keen to protect customers from harm. Or could it be, wags wonder, that incumbents like being protected from pesky new competitors?

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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