Kati Krause reporting from Munich: In just four years Flixbus has created Europe’s largest intercity bus network through smart strategy and strong leadership. Impressive – but the founders are thinking big. Why limit yourself to roads?
The street leading up to the Flixbus office in Munich’s Hirschgarten district hasn’t been finished yet. It’s an indication of how urgently the long-distance bus firm had to move into this six-storey building, having outgrown its previous home. Having launched with just 10 buses in 2013, the start-up is now Europe’s leading intercity bus network, with 200,000 daily connections to 1,200 destinations across 24 countries.
How has it achieved this? Well, the three founders – Jochen Engert, Daniel Krauss and André Schwämmlein – owe some of their success to the German government: in 2013 it repealed a law banning national intercity bus operations originally designed to prop up the state-owned rail network. With the free market let loose, numerous brightly branded coaches suddenly rolled along every Autobahn.
That about 90 per cent of them are now painted in the lime green of Flixbus is down to the start-up’s aggression; it has grown faster than its competitors and has swallowed up many of them in the process. In 2015 it merged with its largest remaining competitor MeinFernbus, creating a behemoth with 1,000 employees and offices in Berlin and Munich. But there is also a smart strategy at play: it doesn’t own a single bus and instead co-operates with local bus firms, acting as a service platform.
We sat down with managing director Engert to discuss the company’s rapid rise and its future ambitions.
MONOCLE: How have you achieved such success in such a short time?
Jochen Engert: We’ve always adapted the product to customers’ needs and we quickly built a service that was better and bigger than our competitors. It’s crucial for us to have extensive coverage; after that it’s small details. How easy is the booking process? How friendly is the driver? How modern are the buses? Does the wi-fi work well? We were always a little faster and maybe a little more innovative. That made the difference.
M: Flixbus doesn’t own a single bus so how do you maintain those standards?
JE: The most important part of the model is that the partners have a share in the business. They profit when a route works well and so have a strong incentive to deliver high quality. We focus on marketing, IT and sales; the partners concentrate on service and quality. Not only are we the only long-distance bus company offering this model, we also consciously looked for partners who wanted to work with us as equals.
M: Most people probably associate Flixbus with low prices. Would you say your success is based on an aggressive pricing strategy?
JE: I think the price is often the first argument to get people onto the bus. But in the end, quality and service make sure that they return. Customers are very critical, especially German customers: even if they get something at a very low price they expect good value. Price isn’t the key criterion to gain loyal customers.
M: Your business model is similar to that of Uber – you even share a large investor. There are parallels in terms of your story of expansion too. Do you identify with the company at all?
JE: We don’t identify with Uber in the way it runs its business. I think we’ve got a very different approach to dealing with our drivers, customers, regulators and cities. Cities and national regulators are very important to us. Our approach is much friendlier. In the end we work with business owners who employ drivers, while Uber works directly with drivers. But the idea of creating a customer experience via a digital point of contact is not dissimilar and we’re always looking at what else is out there, what cool features could work for us.
M: You’ve benefitted from the deregulation of the German long-distance bus market but now you hold a near monopoly. Might you be regulated now?
JE: I don’t think we hold a monopoly position. The goal of deregulation was to create an alternative transport network for customers and that’s been successful. Pre-deregulation you had 132 million long-distance train passengers; last year the new record was 138 million. In addition you suddenly have 25 to 30 million long-distance bus passengers. A large number comes from private transport, which means we relieve motorways. Also, our product has led Deutsche Bahn to give some thought to how to offer better service; suddenly wi-fi works on trains. Still, I think customers decide before each journey what mode of transport to use so you can’t say they don’t have choice.
M: How much does your position in the big mix of transport options influence your strategic thinking?
JE: We don’t have a lot of overlap with airlines; we do with rail networks but there’s a lot of migration to and fro. In the end, both modes of transport mostly contribute to people leaving their cars at home. So we have a similar mission: to make sure fewer people drive. It’ll continue to coalesce; we already have co-operations with private rail networks. For us it isn’t essential that customers travel by bus but that we can offer what they are looking for. We don’t have to limit ourselves to buses in the future.
M: So you’re giving serious thought to branching into other modes of transport at some stage?
JE: We already co-operate with ferry networks but you can imagine this in both directions. I can think about smaller vessels, like minivans. Or I can think one step up, which would be rail. I don’t see a green plane yet but we’ve had co-operations with Air Berlin, Lufthansa and South African, marketing combi tickets that offer rides to the airport. Transport networks will come together much more once technical systems are able to communicate better.
M: How did you decide which markets to go for first?
JE: In the beginning it happened quite naturally. We connected to cities with tourist links to Germany – cities like Vienna, Prague and Amsterdam – and learned that our product works well across borders. But along the way we noticed that there’s a lot of demand in other countries. Markets are underdeveloped. It was like that in Italy, which was the first foreign market we entered to build a national network. In France they deregulated in the autumn of 2015 – and we saw demand in our segment. The more we expanded, the more we realised that our approach works very well. So there’s no reason not to keep looking beyond borders.
M: With that in mind, what borders are you eyeing now?
JE: We’ve only been in Italy and France for two years so we’re planning to expand our networks there. But we’re looking intensively at eastern Europe, where we’ve built a lot of cross-border networks. Scandinavia is a focal point, since we launched in Denmark and Sweden early this year. But I don’t see why Flixbus shouldn’t work outside Europe. Personally I’m a big fan of Asia; however, culturally it might not be the most obvious choice. North America is quite interesting too. The players in that market have been around for a while and they lag a little in terms of innovation.
“Lakes and rivers, that’s what it’s about,” says Stephan Widrig as we pass smoothly through security into the spacious departure hall of Zürich Airport. It would be hard to imagine a more quintessentially Swiss analogy for the usually prosaic process of walking through a terminal. “You want people to go through the rivers quickly and efficiently, and linger in the lakes.”
Widrig has been ceo of Flughafen Zürich since 2015. The company runs Switzerland’s busiest airport as well as developing and operating others around the world, from Bangalore to Belo Horizonte. Although its future growth is set to come predominantly from its operations abroad, its most ambitious project is happening in its hometown: a new commercial and retail development called The Circle, alongside the airport. Due to open around the end of 2019 it will, according to Widrig, transform the city for years to come.
MONOCLE: How will The Circle change Zürich?
Stephan Widrig: Cities in the past century were built around their train stations; before that around harbours. In this century they’re developing around airports. In Zürich, The Circle will become the natural centre for this development – that’s why we want to get away from a pure shopping-mall model and instead create a new urban centre.
M: Where is future growth for Flughafen Zürich going to come from?
SW: We want to remain a premium mid-sized hub in the heart of Europe and further develop the airport into Zürich’s second centre. We also want to continue building and operating airport platforms in countries with growing demand for air travel – places such as Brazil and India. We’re looking at Indonesia and Vietnam too.
M: So you’re not looking to increase capacity in Zürich?
SW: We’re doing that more in Latin America than in Zürich. Here, airport capacity is political. And the more prosperous a country is, the more dominant the issue of noise becomes.
M: You’ve come up against that in Germany too.
SW: People in the direct flight path to our airport, south of the Black Forest in Germany, feel that they are badly affected by noise and they’re forming strong political opposition. So at the moment Germany blocks us from flying over that part of the country at certain times.
M: Zürich could do with more routes. Do you have the capacity to add destinations?
SW: We’re not only an airport for Zürich: we’re also a hub for intercontinental flights. The hub functions using a wave system, which means that all flights arrive together and leave together at peak times. Here we are relatively limited in terms of future growth. Our most important asset is that our passengers can depart punctually and reliably.