Jefferson Lines: Flying low

Jefferson Lines, the venerable Minneapolis regional bus company, is expanding and focusing on students, seniors and green-minded travelers.

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CEO Charlie Zelle is adding trips to Duluth, Fargo, N.D., and other key markets in a service expansion for Minneapolis based Jefferson Lines.

What's "green," just expanded service to key Midwest markets and is much cheaper and more convenient than a short-haul Delta jet ride?

Answer: Jefferson Lines.

The 80-year-old, Minneapolis-based regional bus company last week added express service from the Twin Cities to Duluth, Fargo, N.D., Des Moines and Kansas City, Mo., on several new luxury motorcoaches that boast free Wi-Fi service, satellite radio and movies.

The round-trip fare to Duluth is $29 as part of an open-ended promotion to build ridership.

It's the latest wrinkle in a several-year-old strategy by Jefferson to largely exit the charter bus business and build frequency among its most popular routes along a corridor between Kansas City and Minneapolis, and on to Duluth, Fargo and Winnipeg.

"We've been working and waiting 20 years to be able to take this company to the next level," CEO Charlie Zelle said in an interview last week. "We just need to serve our communities well. You know, we provide more passengers daily to the Mason City, Iowa, airport than Delta Air Lines."

Zelle, 54, quit a Wall Street career with Merrill Lynch more than 20 years ago to come home, take over for his late father, Louie, and work out his family's money-bleeding commercial real estate and bus businesses.

It took a trip through bankruptcy in 1991 and an infusion of about $4 million in cash from local investors for the modern-day Jefferson Lines to emerge. Over the years, Zelle has acquired about 60 percent of the company. His partner, Fred Kaiser, a mentor and retired bus company owner from Texas, owns 40 percent.

"Other than taxes, Fred and I haven't taken a dime [in dividends] out of the company," Zelle said. "This was about building a sustainable family business."

Jefferson, now the largest regional carrier outside the East Coast, has sold off or closed far-flung charter operations, bought some small independent scheduled service providers within Jefferson's 13-state territory that runs from Canada to Fort Worth, Texas, and picked up key regional routes as coast-to-coast carrier Greyhound retrenched.

This year, Jefferson Lines expects to be profitable on revenue of about $25 million. That's not much more than 20 years ago. But it is a leaner, more flexible operation with a 70-bus fleet that averages only six years old, including more than 20 new coaches that have been acquired over the last two years.

"We haven't grown much, but we have invested, rebuilt our asset mix, developed our relationships with states, universities and regional airport authorities, which are as much rural transportation hubs as anything, and launched premium service throughout the Jefferson system," Zelle said. "We can grow significantly from here."

Airport strategy

Students are Jefferson's No. 1 passengers, followed by senior citizens and working-class folks, with a sprinkling of affluent pleasure travelers and environmentalists who choose not to drive or fly. (The federal government says it costs about 50 cents per mile to operate a late-model vehicle.)

Jefferson has found success with convenient service between Minneapolis and Duluth and Minneapolis and Fargo. John Brostrom, an administrator at the Duluth campus of more than 11,000 students, said Jefferson has worked with local authorities to establish four departures daily for Minneapolis from the University of Minnesota Duluth and the Duluth airport, also a hub for commuter vans.

"The daily service has been a terrific deal for us," Brostrom said. "The students can bring their suitcase from their residence hall or apartment. These buses are clean, safe, reliable and the parents save money by not having to send a car with junior and worry about parking, insurance, gasoline."

Traffic on daily roundtrips has risen from 16 passengers a day between Duluth and Minneapolis when Jefferson took over from Greyhound in 2004 to about 90 a day. And that's before Jefferson added two more express routes last week.

When communities are interested, Jefferson also will stop at local airports, which generates connections and business.

"Jefferson brings eight buses a day through the airport," said Pam Osgood, manager of the Mason City airport in northern Iowa, which otherwise is served by three Delta flights to the Twin Cities. "They provide high-quality service and a lot of traffic to our restaurant and facility."

Zelle, a personable, analytical fellow who is paid more than $200,000 annually, never envisioned a bus career when he was in corporate finance at Merrill Lynch in the 1980s. But he's intrigued by the business of knitting together public-private partnerships with a network of communities and colleges over a system that will carry up to 700,000 passengers this year.

He also doesn't mind bragging about one thing that also attracts discretionary travelers concerned with the environment.

"We are second only to bicycling as the most fuel-efficient transportation choice," Zelle said. "One coach can replace 55 cars. And our newer coach engines are 90 percent cleaner than their predecessors."

The American Bus Association Foundation commissioned a study by DePaul University Prof. Joseph Schwieterman that found that motorcoaches are the most fuel-efficient transportation mode. They provide, on average, 207 passenger miles per gallon, compared with 27 miles per gallon for single-occupant automobiles, 44 miles per gallon for airlines and 92 miles per gallon for commuter railroads, based on typical passenger loads.

What's more, the airlines need something more than 80 percent of seats full to make money. Zelle needs fewer than half the seats filled on a 55-passenger coach to make a profit.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com

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    Monday June 28, 2010

    JEFFERSON LINESBusiness: Scheduled motorcoach service to 13 states, including 70 Minnesota communitiesFounded: 1919Headquarters: MinneapolisWebsite: www.jeffersonlines.comExecutives: CEO Charlie ZelleEmployees: About 2252010...

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