A number of services run by First Scotland East in Midlothian and East Lothian will be withdrawn under the proposals.
The company said it had come to the difficult decision after years of poor trading performance, blaming a “challenging” economic climate, high fuel prices and cuts in funding.
But Gavin Booth, of passenger watchdog Bus Users UK, voiced fears for “smaller places that maybe get a less frequent service”. He said: “There’s a danger that some of them might be left without a bus service at all.
“The main roads’ services will be picked up by other operators and I would expect to see them expanding to fill some of the gaps, but it is the smaller communities and some of the more unusual links that will suffer.”
Whitecraig and Pencaitland are among the villages at the centre of concerns, according to Mr Booth. “There’s a danger some of these places may not get the level of service they’ve had up until now,” he said.
First Scotland East said it would discontinue several services at the same time as it started a consultation process with trade unions about possible redundancies at its Dalkeith and Musselburgh bus depots.
It is proposing to close Dalkeith and significantly scale back its Musselburgh depot. About 200 staff are set to go.
Managing director Paul Thomas said: “We appreciate this will be distressing news for many of our staff and also unwelcome news for customers. However, we have for some time been running a number of services in the East and Midlothian regions at a loss.
“Over a number of years, we have tried many marketing and pricing initiatives to change this, but the extra financial pressures put upon us by the current economic climate, high fuel prices and cuts in external funding mean that we simply have no option other than to discontinue the bulk of our operation in East and Midlothian.”
A Scottish Government spokesman described the news as “obviously disappointing” and said First Minister Alex Salmond had spoken to First Group chief executive Tim O’Toole on Monday.
The spokesman said: “The company indicated that strong competition from Lothian Buses made it impossible to sustain the services. First Group hope to avoid compulsory redundancies, and staff at risk of redundancy will be offered positions elsewhere within the group where possible. First Group’s preferred option remains identifying a bidder for the routes but market conditions make that difficult.”
Transport minister Keith Brown will have talks with First Group and Lothian Buses about services in the affected areas.
East Lothian Council leader Paul McLennan said he was “disappointed” at the news and would be seeking meetings with both the minister and the company.
“I can assure parents that school buses will continue to operate on normal timetables until the summer break,” he added.
Labour urged the Scottish Government to step in and reverse cuts to the Bus Services Operators’ Grant, paid to bus firms to help them keep fares down, enabling operators to run services which might not otherwise be commercially viable.
Lothians MSP Kezia Dugdale said: “It is simply unacceptable that people across the Lothians are going to be left without a decent bus service.
“The SNP must reverse their cut to the Bus Operators’ Grant immediately, before it does any more damage.”
However, Christine Grahame, the SNP MSP for Midlothian South, Tweeddale and Lauderdale, said action was needed from the UK government to reduce high fuel prices
She said: “This is very unwelcome news for residents, commuters and staff employed by First Scotland East. Hopefully, we will see a sale of the operations and the continuation of the services.”
She added: “I will be in contact with the company to urge for no compulsory redundancies and to seek further information on the impact of these cuts, and hope Lothian Buses, new operators or local authorities are able to assist.”