FirstGroup America's business is on a roll, in bus form. The company, through its First Student unit and sister unit FirstCanada, provides school bus services, as well as charter services and transit management, under contract with public districts throughout the US and Canada. FirstGroup America's First Transit unit manages transit systems and contracting for agencies in North America, and First Services, a division, provides vehicle maintenance and related support services to private fleet operators in the US. Greyhound is North America's leading intercity coach service. FirstGroup America has a fleet of about 60,000 vehicles. The company is a subsidiary of FirstGroup plc, a leading UK bus and rail operator.
FirstGroup America is the significant revenue driver for its parent company, generating about 37% of total revenue, and with Greyhound it tallies just short of 50%. Its First Student unit operates in some 40 US states and eight Canadian provinces and one territory, and commands an 11% market share.
The ups and downs in the economy, however, create a bumpy business environment for FirstGroup America. Most significantly, the downturn in the economy forced school budget reductions and, combined with severe winter weather conditions in the US, eroded the company's operating profits by more than 10% in fiscal 2011 from the prior year. The company's diverse portfolio of contract-backed and passenger-sales helped to mitigate the decline. First Student's lack luster business was refocused in late 2010 with the acquisition of Star Shuttle Company, a school and charter transportation service provider establish in the New Jersey area. Concurrently, First Transit and Greyhound delivered modest gains in profitability thanks to contract wins by First Transit (one of the largest shuttle bus services in the US) and a streamlining initiative by Greyhound.
FirstGroup America's momentum has also been mired by integration costs associated with FirstGroup plc's 2007 acquisition of Laidlaw International, formerly North America's #1 school bus operator and a leading provider of paratransit (transportation of people with disabilities) and fixed-route bus services. Laidlaw's school bus business was combined with First Student, and Laidlaw's paratransit and fixed-route bus operations were integrated with First Transit. Nonetheless, in the course of folding in the former Laidlaw operations, FirstGroup America identified opportunities for cost savings, particularly in procurement. It also has managed to renew existing service contracts and win new ones.
Buying Laidlaw also gave FirstGroup ownership of Greyhound. FirstGroup rolled out a cost-cutting program at Greyhound and modified the company's pricing and sales strategies in an effort to boost online booking and better manage capacity over lower-performing routes. Streamlined, Greyhound eliminated some offices and reduced headcount. In late 2010, Greyhound Express took off. The new operation offers non-stop service from Chicago to cities in the Midwest, and in 2011, between Boston and New York, and other major markets. – less