Are buses the new way to go?

— -- It's a proven fact that when airfares are cheap enough, more people travel. So could the same principle apply when bus fares fall as low as $1?

Sixteen years ago the term "Southwest Effect" entered the lexicon, after a study by the U.S. Department of Transportation confirmed that when Southwest or a similar low-fare carrier launches a new route, it not only steals away existing traffic, but passengers who otherwise might not have flown are induced to fly.

Now the question is whether the many no-frills, low-cost bus lines that are buzzing along highways in every region of the United States are causing more Americans to consider intercity travel.

Expanding beyond Chinatown

In recent years, dozens of cities throughout the country have seen an influx of what are generally called Chinatown bus lines or dragon buses. They operate under names such as Fung Wah, as well as Double Happiness/AA Bus, Lucky River, Lucky Star, USAsia, and many others. For some riders, such companies may have seemed to spring up overnight, since they're now ubiquitous in cities ranging from Boston to New York, Chicago to Detroit, and Las Vegas to Los Angeles.

With little money spent on advertising or marketing, the dragon bus lines grew through word-of-mouth recommendations, particularly within ethnic communities. But they've quickly expanded, particularly in the busy Northeast corridor. At first the large network bus lines may have wanted to ignore the upstarts, but after a while that probably didn't seem like a feasible strategy. Consequently three motorcoach heavyweights entered the low-fare fray.

One was the Stagecoach Group, the British transportation conglomerate, which launched Megabus (megabus.com/us) in the U.S. in 2006; currently the domestic brand operates from 30 cities in North America. Then last year Greyhound and Peter Pan teamed to introduce BoltBus (boltbus.com), which currently serves five destinations between Boston and Washington, D.C., and offers Wi-Fi access, power plug-ins, and even a frequent rider program. If this proposition sounds familiar, think Continental Lite or Ted, only with diesel fumes.

So what effect are all these low-fare bus lines having on the industry? According to the latest Bureau of Transportation Statistics (BTS) data, more Americans are traveling more miles by bus, and those numbers have been steadily increasing in recent years. And several months ago, the Chaddick Institute for Metropolitan Development at DePaul University in Chicago released a policy study that found scheduled bus service—which had been declining for more than four decades—had fallen by 10.2% between 2002 and 2006. However, it then rose by 8.1% in 2007 and again by 9.8% in 2008. Evidence suggests such growth is continuing.

All this indicates that Megabus seems to be the Southwest of bus lines. The Chaddick study concluded: "The renaissance of intercity bus service dates to May 1, 2006, when Megabus introduced service." In fact, that bus line's traffic grew by 97% between 2007 and 2008, and this January, Megabus boarded its 2 millionth customer. As for BoltBus, the study notes that it has not released traffic statistics but has reported profitability and steady growth.