German postal and logistics company Deutsche Post DHL Group said it was selling its long-distance bus unit, Postbus, to market leader Flixbus due to tough competition. Germany liberalised the long-distance bus market in 2013, prompting a flood of entrants onto the market including the bright-yellow Postbus, but also quickly leading to cut-throat price competition, insolvencies and consolidation. Chief Financial Officer Larry Rosen said the Postbus strategy of offering more comfort and amenities such as wifi had not worked in a market that boiled down to the cheapest ticket prices.
"The main customer base was young people, where price was the most important factor. So we couldn't cover the costs of this premium strategy, and that's why it wasn't financially attractive," he told journalists after the group reported record second-quarter results on Wednesday.
At the end of June, Flixbus bought the continental European operations of UK-based Stagecoach's Megabus. It now offers around 900 destinations in 20 countries.
Postbus in comparison has 90 buses with travel to 120 destinations, most in Germany.
Deutsche Post announced the sale as it released second quarter results. Earnings before interest and tax (EBIT) rose 40 percent to a record 752 million euros ($843 million) with the online retail trend driving parcel deliveries and DHL express shipments. That exceeded the average forecast for 725 million in a Reuters poll. Rosen said Post had not seen any impact on DHL's underlying business from Britain's vote to leave the European Union but that it was looking at hedging, pricing and costs as ways to counteract the resulting drop in sterling.
The group maintained its 2016 target for EBIT of between 3.4 and 3.7 billion euros this year.
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