Megabus owner files for bankruptcy amid ridership decline

Bus company Coach USA, owner of the Megabus service that connects Detroit with other cities in Michigan and Ontario, has filed for bankruptcy, saying it was unable to recover from a decline in ridership brought on by the COVID-19 pandemic.

The company owes creditors between $100 million and $500 million, according to its Chapter 11 petition filed last week in Wilmington, Delaware. Chapter 11 of the U.S. Bankruptcy Code is designed to allow companies to keep operating while they shed debt and reorganize.

Private equity firm Variant Equity Advisors purchased Coach USA from British bus company Stagecoach Group in April 2019, less than a year before Coach USA’s business was decimated by the pandemic. Commuter ridership declined 90% in 2020, according to court papers, and the company turned to COVID relief funding to help stay afloat.

That year, Megabus halted service to and from Detroit but returned in January 2023.

Ridership has partially recovered, but last year was only about 45% of pre-pandemic levels. Meanwhile, the company was contending with higher expenses due to rising fuel, insurance and labor costs. Its management began to explore a possible sale late last year.

Coach USA said in a statement that the filing is intended to sell certain bus lines to an affiliate of Renco Group, as well as its Megabus intellectual property and retail operations. Avalon Transportation has also agreed to buy some Coach assets, the company said.

Both buyers have agreed to act as initial bidders at a court-supervised auction, the company said. The auction process and the initial bids must first be approved by the judge overseeing the bankruptcy.

To help pay for the restructuring case and to keep operating during bankruptcy, the company has arranged to borrow as much as $20 million.

Coach offers bus services in 27 locations in the United States and Canada and carries more than 38 million passengers every year, according to its website. Its Megabus service has carried more than 50 million people through more than 280 cities since it was started in 2006. The company employs about 2,700 people.

The case is Coach USA, Inc. 24-11258, US Bankruptcy Court, District of Delaware (Wilmington).

With assistance from Claire Boston