FlixTrain: a change of strategy?
Things are moving fast for the privately owned Munich-based firm FlixMobility, which has been running FlixTrains since 2017. The acquisition of the American bus icon Greyhound in 2021 has shown a change in strategy for the company, which is taking on a long-term view. This could also have implications for the company’s rail policy and vision in Europe.
FlixTrain’s business model differs fundamentally from that of others new entrants on the railway market. It is a unique business model, which combines digital technology with a traditional transport company. But unlike many traditional transport companies, parent company FlixMobility does not own a fleet of buses or trains. In fact, FlixBus only owns one bus, for licensing reasons.
In other words, FlixMobility can be considered an asset-light supply chain management company par excellence. Rather than owning buses and employing drivers, they are the link between customers and bus owners or operators.
To finance the cost of its operations, FlixMobility has implemented a revenue sharing business model. This means that the company shares the revenue from each booking with the partner who made the journey possible. In the case of FlixBus, they keep 25-30 per cent of the booking price. The rest goes to the train or bus operator.
Contracts with their partners normally last 3 to 5 years. Then, depending on performance, they are usually renegotiated. And because FlixMobility is very confident in their ability to dynamically calculate the ‘right’ prices and attract enough customers, they guarantee to pay a minimum of revenue to their partners.
Towards a different model
The coronavirus crisis seems to have led to a rethink of the asset-light strategy and a shift to a different model. FlixMobility could afford to do so as soon as the Munich-based company raised a Series G round of capital of 650 million euros in June 2021, the largest ever in Germany. FlixMobility is now valued at over three billion dollars after its seventh round of funding, and currently has 2,000 employees. This is a far cry from still being a start-up company.
FlixMobility’s initial ‘asset light’ strategy also has its shortcomings, as it is slow to set up and requires much energy at the contractual level. Even if the idea of outsourcing train operations to external partners is a good one, the system carries a certain risk of inertia. A growing company cannot afford this, while young travellers want to choose rail transport more and more.
This is why FlixMobility ‘bought’ American bus company Greyhound, adding 1300 buses and 2,400 new employees to the company’s balance sheet. The idea of also acquiring its own trains would fit into this logic of controlling its growth.
A brand and a strategy
By the end, the mobility company is positioning itself in a very promising niche. Firstly, by creating a strong and visible brand. Secondly, with the importance of sustainable transport at a time when travel is a critical issue with the under-thirty crowd, due to CO2 emissions. The vision of the founders is to create ‘intelligent and green mobility so that everyone can discover the world’.
As such, FlixMobility wishes to contribute to the reduction of emission levels through collective travel solutions and electric vehicles. That supported by a very strong digital strike force thanks to the hundreds of developers working within the firm.