Until deregulation, bus companies like Ribble and West Yorkshire ran a network of services. I think they took the hit of some of the thin workings from the profits of the busy services. But they did go to councils with a begging bowl for some services.
Of course, they had economies of scale of running an operation with more buses/staff. If you have a garage operating some profitable busy services and also some poorer performing services, then they can share costs between the profitable and non profitable operations. (or maybe hide costs of unprofitable services in the costs of the profitable ones!
That seems to have changed - now the bus companies look at each route, or even each working, and decide if its profitable. Maybe a change of management style, maybe better data by analysing waybills/ticket machine data to better identify the revenue.
The basic tenet of the regulated period (1930-1986) was that, in exchange for a monopoly and control over routes timetables and fares, bus companies would cross subsidise the loss making services from the profitable. This worked reasonably well into the 1960s but then shrinking demand and inflexible control, coupled with rising costs made the bus companies unprofitable. Initially this manifested itself in insufficient re-investment money being available, and a headlong conversion to one-man buses, but around 1970 most companies plunged into losses. The more rural ones such as Western National were already there, and the more northern urban such as Northern General took a few more years.
The privately owned BET group saw this coming and sold their bus companies (such as Ribble) to the state, and were put under the same management as those already nationalised, such as West Yorkshire; in a company known as the National Bus Company (NBC). London Transport was also split up and the seriously loss making country services were hived off to the NBC. The NBC was in a dire financial state, and in 1971 started sending letters of demand, with menaces, to Local Authorities.
At that time, Local Authorities had no clear legal mandate to subsidise bus services (other than own municipal operations), and anyway they largely saw this as a Central Government owned company trying to push losses onto Local Government, without the funding (aside from Rate rises) to go with it. [sounds familiar]. Some quite wide areas lost their 'company' buses completely - parts of East Cornwall, West Wales, Suffolk etc. Some Local Authorities paid up. The following year, legislation was introduced giving the clear legal mandate, and the NBC started negotiating with Local Authorities. Those of us who were around then will remember the cut after cut every year, the constant timetable changes and the ongoing march to full one man operation over the next 10 years, as companies grappled with reducing demand and (in some areas) Local Authorities wishing to reduce their commitments.
In 1974 the NBC introduced their costing model, which is the root of most large company's models today. Prior to that, profitability or otherwise of individual routes was little understood.
Now, at the time there was a growing disquiet about the monopoly, and especially the distortions caused by the cross subsidy - the belief that the good routes had relatively poor services and fares were higher than they should be relative to the demand, to pay for the rural and affluent areas receiving more service and cheaper fares than was justified by their use. Compounded by the unreliable services that the big bus companies ran in some areas, and the quantity of subsidy being siphoned off into better terms and conditions for the staff. There was no doubt some truth in all of this.
The result was the controversial policy of deregulation, which sort of solved some of the issues whilst bringing a load more, as the market didn't quite work as expected (and in hindsight was pretty obvious). Now bus companies couldn't so easily milk the best routes, because if they did then a competitor would come in and undercut. This reduced the opportunity to cross subsidise, but anyway why would a company want to cross subsidise when they can pay out the profits of the good routes as dividends. (Yes, they may, and do, even now cross subsidise some weaker services in order to keep a coherent network and discourage a competitor from establishing themselves, but nothing like the practices in the regulated era).
And that is the one thing I wish I could get over to these companies. Removing journeys because they don't make enough will make people who would use other journeys as well make other choices. Just because a journey makes a loss does not mean it is not important for the whole service and does not mean it can be cut without consequences.
As an example, in Essex, the 71 (Chelmsford to Colchester) at 1825 used to have 20 people on it. They cut it (as there was one at 1755 and one at 1845). As I was a regular, I knew most of them. 8 of those 20 disappeared from bus usage, not using either of the other 2 options. I saw 2 of them over time in Chelmsford, and it was the last straw for them, and they found another way.
This is how death spirals happen. When reviewing a service, the service as a whole needs to be reviewed.
That is all well understood, but if money in is being exceeded by money out, the bus company has got to reduce its costs quickly, or put the fares up, or both. Just like the railway industry is going through at the moment (on other threads in this forum) every service cut and fares rise is wrong and every way to improve revenue relies on faith and taking a long time to build up (and often copious quantities of upfront expenditure). If you're staring bankruptcy in the face you have to do things that are not ideal.
