Stagecoach vows to fight break up of New York tour operation

The US department of justice is unhappy about Stagecoach's Twin America venture. Picture: Getty
The US department of justice is unhappy about Stagecoach's Twin America venture. Picture: Getty
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SHARES in Sir Brian Souter’s Stagecoach transport group slipped into reverse on Wednesday after the firm vowed to fight a law suit seeking to break up its sightseeing bus company in New York City.

Twin America, a joint venture between Stagecoach North America and City Sights, has been told by the US department of justice (DoJ) it has a monopoly over the $100 million (£62m) a year “hop-on, hop-off” bus tour market.

The DoJ claims the venture, formed in 2009, allowed Twin America to hike prices by around 10 per cent for tourists visiting attractions including Central Park, the Empire State Building and Times Square.

Perth-based Stagecoach, one of the UK’s biggest bus and coach operators with around 8,000 vehicles and 2.5 million passengers every day, said it was “disappointed” by the legal proceedings and would “take all actions to protect their interests”.

New York attorney general Eric Schneiderman said: “The formation of Twin America has meant higher prices and less competition. Tourists who come to the Big Apple deserve better.”

The lawsuit, filed in the US District Court for the Southern District of New York, seeks to break up the joint venture or force the sale of some assets.

New York City draws around 50 million visitors each year and an estimated two million of these visitors spend more than $100m each year on hop-on, hop-off tours on open-top double-decker buses.

The DoJ said that, prior to the joint venture, two firms accounted for roughly 99 per cent of the hop-on, hop-off bus tour market in the city. Stagecoach North America – which ran the Gray Line New York brand – and City Sights engaged in vigorous head-to-head competition on price and product offerings that directly benefited consumers, the DoJ said.

Twin America was formed in 2009 and the two firms increased base fares for their products by $5, raising the retail price of an adult ticket for each company’s popular “all routes” tour from $49 to $54.

Stagecoach North America holds 50 per cent of the voting rights and 60 per cent of the economic rights of the joint venture.

Stagecoach said that, since 2009, the sightseeing bus industry has become more competitive as new operators started up in New York, while other companies have announced firm plans to do so shortly.

The Scottish company added that, despite the challenging macroeconomic conditions over the past three and a half years, the joint venture has delivered a range of improvements to customers.

Stagecoach said that it has invested in the development of new tours and has continued to offer flexible, value-for-money tickets.

The transport group, founded in 1980 by Souter, said that – contrary to the suggestion by the DoJ – price increases in 2009 reflected increased wages, fuel and other costs.

Stagecoach added: “Twin America and the joint venture parties intend to robustly defend their position and will take all actions to protect their interests.”

Shares in the bus and train operator dipped just under 1 per cent or 2.4p on Wednesday to close at 300p.