Competition from the Informal Sector
A formal bus operator may be at a disadvantage when informal operators are able to compete unfairly by disregarding regulations that the formal operator obeys.

This has been a common cause of the decline of many formal bus operations in developing countries. Typically, when the formal operator has been unable to meet demand (often because fare controls have resulted in revenues that were insufficient to sustain the fleet or fund expansion) deficiencies in the service have been met by illegal operators — who often charge higher fares than the formal operator.

Illegal operators have tended to operate on the most profitable routes, further undermining the viability of the incumbent.

This has led to excessive fares charged by the illegal operators, low profitability for the established operator, and a general deterioration in service standards.