Arriva: growing its bus business in Spain

Arriva plc – one of the largest and fastest moving operators of public transport in Europe – operates in a total of 12 countries: the Czech Republic, Denmark, Germany, Hungary, Italy, the Netherlands, Poland, Portugal, Slovakia, Sweden, Spain and the UK. Providing a wide range of bus, rail, waterbus and coach services, Arriva employs approximately 40,000 people to operate more than 15,000 buses and almost 500 trains.

Until recently, Arriva’s operations in Spain have been on a relatively small scale compared to its activity in some of its other markets. At the beginning of 2008, Arriva’s Spanish businesses had a combined fleet of just 200 vehicles and 350 employees. But with the recent €100 million acquisition of the Madrid-based bus company De Blas, Arriva has tripled its size in Spain where it now employs more than 1,000 people and can boast a fleet of almost 500 buses.

Arriva’s play to expand its presence in Spain has come at a time when the country has seen a steady growth in its public transport market over recent years and opportunities from further liberalisation of the market make it an interesting and dynamic environment in which to do business. Many bus concessions with exclusive rights over long periods are set to expire over the next year, bringing more opportunities for Arriva to grow in Spain through its strong local subsidiaries.

Outside the major cities, the Spanish bus market is fragmented with operators historically being awarded long, fixed concessions which can run up to 20 years. Over recent years, Spain’s rapidly growing population and increased demand for public transport have led to the authorities in many major cities introducing tenders or starting to think about bus tendering as a means of coping with the investment needed to accommodate growing demand.

Starting off along the pilgrim way in Galicia

Arriva first entered the Spanish market in 1999 through the acquisition of a local bus company in Galicia in north west Spain, which is now well established as Arriva Noroeste.

Over the past nine years, Arriva Noroeste has developed well and now operates in three out of four provinces within Galicia – La Coruña, Lugo and Ourense. The individual regions are served by a fleet of 142 buses of which 53 are operated in Ferrol, 39 in La Coruña, 37 in Ribadeo and 13 in Santiago de Compestella. Arriva Noroeste’s fleet is made up of buses from a wide range of manufacturers including Iveco, Man, Volvo, Scania, Pegaso, Setra and DAF.

As an operator in the Galician area and in the city of Santiago de Compestella, Arriva Noroeste provides services along the world-famous pilgrims’ route into Santiago de Compestella, known as Saint Jacobs Way.

Arriva Noroeste has secured close relationships with the metropolitan transport authorities, by continuingly improving local operations and services for passengers in La Coruña and Ferrol. The company’s focus on improvement and innovation for customers has been demonstrated by Arriva Noroeste being one of the first bus operators in Spain to introduce a free Wi-Fi network in its buses for passengers. The launch of the Wi-Fi network in February this year caught the attention of the Spanish national press. The wireless internet access service is available on coaches covering the 45 minute motorway journey between Ferrol and La Coruña. The media coverage has reflected Arriva’s innovative approach, describing it as an interesting way to improve the quality of local public transport. In its first seven months, the free Wi-Fi service had a fabulous response, especially among younger travellers and business people.

Arriva’s professional approach to its operations was recognised further in May 2008, when Arriva Noroeste was awarded the ISO 140001 environmental management standards certification and the ISO 9001 quality management certification. The awards acknowledged Arriva Noroeste’s continuing approach to reduce fuel usage, the better use of energy to achieve higher efficiency and also the effort to reduce noise impacts of its operations within cities.

Mobility in Mallorca

Having made a modest start in the country’s transport market, Arriva strengthened its Spanish network by buying two companies providing bus services in the Balearic islands. In Mallorca in 2002, Arriva acquired local Alcúdia-based company Autocares Mallorca and Bus Nord. In total, there are 13 lines operated by approximately 80 buses and coaches in the northern and western part of the island, which connect the capital Palma de Mallorca with local cities including Soller, Inca, Polença and Alcúdia.

Autocares Mallorca also offers local people or visitors the option of renting buses or coaches on request.

Arriving in the Capital

Madrid, the fast growing capital of Spain, has approximately six million inhabitants which accounts for approximately 14% of Spain’s population. Over recent years, Madrid has not only grown but had also demonstrated a consistent growth in passenger transport having almost doubled over the last 20 years. Arriva believes there is further exciting growth potential on the horizon.

For Arriva, Madrid therefore represented an attractive potential to increase its portfolio, gain experience of the wider Spanish market and grow from the centre of the country through the acquisition of the right locally well established companies.

In December 2006, Arriva made the significant move to step into Madrid with the acquisition of Esfera Group, consisting of subsidiaries Esfera Bus, Actijoven and Nectosec. With this acquisition, Arriva made an important market entry establishing a good platform from which to develop further in central Spain.

Esfera Group, founded more than 40 years ago, is a small company of 34 people operating 27 buses for school contracts and private hire. Esfera’s private hire is mostly provided through Minibuses (13 – 19 seats), Microbuses (30 seats), Midibuses (38 seats) and also coaches with up to 50 seats. Most of the coaches are being used for Esfera’s national and international bus services which can be booked through the subsidiary Actijoven.

Actijoven, founded in 1997 to provide separate booking arrangement services, is not only responsible for booking and planning coach tours for passengers, but also offers a wide range of cultural and indoor and outdoor leisure activities. It also owns so called ‘hotel buses’ which can be rented by either families or even sometimes celebrities wanting to travel around the country in a comfortable bus, being able to sleep, live and travel in it.

Responsible for Esfera Group’s maintenance, the subsidiary Nectosec is located in the heart of Madrid with its own workshop. It provides reliable and secure bus servicing for the Esfera group but could also contract out work to third parties at any time. Due to its centralised location, Nectosec offers easy access parking spaces for Arriva’s Spanish vehicles.

Arriva made a second acquisition in Madrid in December 2007, strengthening its local presence by acquiring Autocares Fray Escoba. Operating 14 coaches with 20 well-skilled employees, Escoba provides local bus services in the greater Madrid area as well as in-house maintenance.

In July 2008, Arriva made its most significant step into the Spanish market through the acquisition of bus operator Empresa de Blas y Cia S.L., known as De Blas.

Family-owned De Blas was founded in 1993 by the De Blas and Gomez families and had strengthened its position to become one of the largest privately owned contractors to the Madrid transport authorities. By 2008, De Blass was operating a total of 222 buses in the greater Madrid area. As one of the largest inter-urban passenger transport providers in Madrid, De Blas operates 32 interurban bus services as well as some 56 routes in the south-west of Madrid. With its extensive network, De Blas connects Madrid with important local cities such as Alcorcon, Mostoles, Navalcarneo, Madrid-Norte, Fuenlabrada and Villaviciosa de Odon. De Blas also has the licence to operate the Highway A5 corridor.

De Blas carries more than 31 million passengers a year in the greater Madrid area and has a stake of 30% in the city’s new transport interchange – Intercambiador de Transportes Principe Pio S.A. The Intercambiador is a huge, newly-built transport hub for buses, the local metro service and overland trains. Located in the south-west of central Spain the Intercambiador offers a great resource to help passengers to use public transport more easily.

De Blas wholly owns two regional subsidiaries, Servicios Integrales Bus & Truck S.A. and Greisi S.L. – both companies share responsibilities for maintenance and repair of heavy vehicles for both De Blas and third parties.

Spain’s future

Madrid is a growing and expanding city which holds many opportunities for Arriva. While current concessions are due to run through to 2013, the transport authority has announced intentions to extend all concession in the area until 2018.

Considering the whole of Spain, many bus operations with current exclusive rights will be expiring during the next five years. Additionally, there is a gradual move towards competitive tendering in some cities, such as Madrid, where Arriva has established a good position.

The last two years have been exciting for Arriva in Spain, and now we believe we have the scale to consolidate our position in the market and grow even further through acquisitions and further market liberalisation by competing and winning tenders. Our transformation to become a significant player in the Madrid public transport market in such a small timeframe, has reflected our attention to the local market conditions while drawing on the expertise and experience from the local team as well as the wider Arriva group. Arriva has a team in place in Spain with considerable experience in the public transport market. Its innovative approach to problem solving and development of strong succession plans within the business underlines its commitment that Arriva’s people are the assets for the future.

While opportunities are good to expand within the bus market the rail market will be offering some great changes and opportunities as well in the near future as market liberalisation is anticipated starting from 2010.