Darlington Bus War

The Darlington Bus War refers to a series of events between 1986 and 1995 in the UK bus industry in the town of Darlington, northern England, culminating in the wholesale entry of Stagecoach Group onto the Darlington bus scene, and the collapse of Darlington Corporation Transport.

In November 1994, the events in Darlington and in other areas prompted the Director General of Fair Trading to request the MMC to investigate the supply of bus services in the North East.^[1]

Background

As a result of bus deregulation in 1986, the National Bus Company as the largest regional bus operator was split into pieces and sold off, and municipal bus companies were being put into stand alone companies, with many being privatised. In March 1986 the bus operations of Darlington Borough Council (DBC) were incorporated as the Darlington Transport Company Ltd (DTC), although not initially sold.

In August 1986, United Automobile Services began hail and ride town services within the Darlington area, using a number of Mercedes and Dodge S56 minibuses, under the Roadranger livery, resulting in a doubling of services and intense competition with Darlington Transport. From 1988 to 1992 many requests and attempts were made to sell DTC, all coming to nothing. Your Bus, another operator set up by ex-United employees, entered into Darlington in May 1993, prompting a response from United with further registrations, later described as predatory and anti-competitive by the Competition Commission. By 1993, with 3 competing operators, concerns had been raised over 'over-bussing' and congestion in the town centre. By 1994 all three operators were making financial losses.

Due to its financial state, DTC was put up for sale in July 1994. In response to the sale announcement, United registered additional services on DTC’s routes.

Busways interest

In early 1994 independent Busways had explored the possibility of entering into the Darlington market, as a possible option for expansion. This was shelved as bids from major groups for the Busways company were considered. Busways were sold to Stagecoach Group in July 1994. After a meeting with Stagecoach executives, the decision was made to enter Darlington, either through a bid for DTC, or as a new operator. Accordingly, Busways as a subsidiary company set up Stagecoach Darlington, and registered a small network in Darlington in September 1994, due to start in December, as a result of concerns over availability of drivers. Exclusive bids for DTC by Stagecoach had been previously declined.

Bidding process

According to government rules, DBC were obliged to sell DTC by competitive tender. After initial enquiries, from 11 initial interested parties, 3 were short listed as preferred bidders for DTC on 14 October 1994:

• Yorkshire Traction: £1.5m
• Busways: £1,033,333
• Badgerline: £825,000

As United were already a competitor in the town, they were barred from the bid process on competition grounds. Accordingly, on 24 October 1994 DBC selected Yorkshire Traction as the preferred bidder.

Collapse of Darlington Transport Company

On learning of the successful bid by Yorkshire Traction, the drivers union of DTC made representations to Busways that Yorkshire Traction were not their preferred bidder, and the majority of drivers would probably be interested in joining Busways' new operation. Accordingly, with worries over recruitment and training now reduced, Busways registered all of DTC's commercial routes, and commenced a recruitment drive.

Busways quickly recruited over 60% of DTC's drivers by 7 November. Amid concerns that DTC would not be able to fulfil its services due to driver shortage, and with concerns over United having a free hand in Darlington if DTC collapsed, Busways requested an advance on their registration date. This was refused. Busways exploited a loophole in the regulations, and began operating free buses on their Darlington network. Busways called in several vehicles from its other subsidiaries, and repainted several of its surplus Atlanteans into Stagecoach stripes,^[2] notable because none of Busways Atlanteans were ever painted in Stagecoach livery.

In response to Busways initial route network, and on commencement of driver recruitment, Yorkshire Traction withdrew their bid for DTC on 2 November. DBC were unable to reach a sale with any other buyer, and Busways declined a new approach.

With no other buyers, with difficulty running their services due to driver shortage, and ongoing concern at the financial viability of DTC in the long term, DTC was placed into administration on 9 November 1994, with all services withdrawn by 11 November. Due to DTC’s collapse, Busways was then granted permission to start running revenue collecting services from 28 November.

Aftermath and inquiry conclusions

Your Bus ceased operations on 16 December, selling its vehicles to West Midlands Travel. This left just Busways and United operating in Darlington. On the instigation of DBC, still concerned at over-bussing and congestion, both companies agreed to reduce service levels by March 1995.

In the summary of the competition inquiry into the larger issues in bus services in the north east, concerning the collapse of DTC, the commission stated:

"It was the combination of Busways' actions in recruiting so many of DTC's drivers so quickly, registering services on all its routes and running free services which caused DTC's final collapse. We find these actions to be predatory, deplorable and against the public interest."

It stated that while registration of routes and recruitment of competitors drivers was not against the spirit of deregulation, it commented that the scale of Busways actions were unprecedented, and were attributable to Busways considerable dominance in the region, and ability to absorb losses due to free services.

Busways response

In response to the inquiry report, Busways defended its actions in launching free services as being intended to prevent United gaining a monopoly in Darlington after the collapse of DTC, and only expected to run free buses until the traffic commissioner could bring forward its registrations. It denied poaching DTC’s drivers highlighting that the drivers had instigated contact with Busways first, when it became clear Busways would not be purchasing DTC. It contended it had always intended to enter the Darlington market through purchase of DTC if an appropriate price was agreed, to preserve goodwill and prevent a driver shortage of their already intended entrance. It also contended that Yorkshire Traction’s bid was unrealistic given the market, and contended that its price indicated that Yorkshire Traction anticipated being the only eventual operator in Darlington, thereby possibly acting as an agent for United. It contended that Yorkshire Traction's attempts to reduce its bid while still only aware of Stagecoach’s initial small registration, supported this belief.

Stagecoach management broadly agreed with the actions of Busways as being fair in the environment of deregulated bus services and within the confines of the rules governing registration of services and the instruction of compulsory tender sale of municipal bus companies. It did concede that possibly the free bus services had not been necessary and it could have achieved market entry by waiting for the traffic commissioner to advance its registrations once evidence of DTC's impending failure came to light.

Stagecoach saved approximately £100,000 in the cost of market entry in not purchasing DTC, even after 2 weeks of free operation and paying bonuses to DTC drivers for joining Busways. In November 1994, Stagecoach completed the purchase of Cleveland Transit, and in December the purchase of Hartlepool Transport. Stagecoach Darlington was later transferred to Transit under the umbrella of Stagecoach North East.

Present day

Yorkshire Traction eventually came under Stagecoach ownership. United Automobile Services eventually came under the ownership of Arriva. Stagecoach later sold its Darlington operation to Arriva, leaving Darlington bus services solely in the hands of Arriva. Stagecoach chairman Brian Souter later went on record to say the negative impact of Stagecoach's actions had outweighed any financial gain it had made from operating in Darlington.^[3]

Industrial economics

The Darlington Bus War is widely discussed in the topic of Industrial Economics after being publicised by the highly regarded micro-economist Daniel McMahon. It serves as the perfect example to demonstrate the effect of price wars and also incorporates the debate on Nationalization vs Privatization. The Darlington Bus War has arguably been the focus of his research as demonstrated in his 2009 article Global Crises and Darlington's Bus War.

See also

• Stagecoach North East
• Stagecoach Yorkshire
• Arriva North-East

References