Atlantic Express, New York City’s largest school-bus contractor, is having a rough ride.

Under the city’s new competitive bidding process, much smaller bus companies with cheaper labor costs severely underbid the behemoth operator, which has been a fixture in New York City since 1972. In the meantime, drivers face pay cuts of up to 7.5 percent and the loss of paid vacation during Christmas and Easter holiday breaks. The company’s longtime CEO is retiring in December, with no clear successor.

“We’ll be hard hit by the new bidding,” said spokeswoman Carolyn Daly. “It puts veteran companies at a disadvantage.”

Atlantic Express controls the majority of the kindergarten through 12th grade busing in the city and is the third largest provider of student transportation in the U.S., with contracts with about 100 school districts all over the country. In New York City, Atlantic Express’ Amboy Bus Company unit is the beneficiary of the city’s largest single busing contract, with $213.9 million spent on the company for special education and $317 million for general education busing in the first nine months of fiscal 2013.

At the company’s founding in Staten Island in 1972, it had just 16 school buses. Today, it operates between 4,000 and 5,000 vehicles in five states and employs nearly 10,000 drivers, escorts, mechanics and support staff, according to its website.

Amboy Bus Company, which has the single largest school bus contract in the city, is being outbid by smaller — and nonunion — upstarts. Photo: Damien Roué/Flickr

In the first round of competitive bidding, Amboy was outdone by every other competitor. For one 185-bus contract, the median bid was 36 percent below Amboy’s, while the lowest bid was 63 percent lower. If the next two rounds of bidding look similar to the first, New York City taxpayers could potentially save more than $300 million a year, out of the $1.1 billion the city currently spends, as a result of the new bus contracts.

That would reduce the average cost of transporting a student down to about $5,300, down from more than $7,000 per child.

That’s exactly what the Bloomberg administration wants. “This week,” Mayor Michael Bloomberg announced in his January State of the City address, “we received opening bids for the new contracts and there’s the potential for hundreds of millions of dollars in savings.” The mayor pointed to onerous union contracts as a major driver of the city’s high busing costs.

Atlantic Express drivers belong to Amalgamated Transit Union Local 1181, and its contracts with workers call for pay scales and benefit packages that will no longer be required under city contracts . As a union shop, with many veteran drivers, Atlantic adheres to work rules that pay much higher wages for seniority, may require pay when drivers are not working, and include pension and generous healthcare benefits.

“Labor costs are so high we won’t get picked,” said Daly.

Although Atlantic and its affiliates are still being paid at their existing rate by the city, they are slashing labor costs now, with the possibility looming that they will lose the city contract in the fall.

Last week, as New York City schoolchildren were on spring break, Atlantic Express driver Martha Germain expected to be on vacation, too, from her job shuttling students across Brooklyn. Instead, she was fretting over how she’s going to make ends meet. The employer had just informed her that her $1,000 a week pay was about to be cut by 7.5 percent. Contract-mandated health benefits remain in place, but school vacation pay has been eliminated. Germain was not paid for the Easter holiday week.

Germain has been working for Atlantic Express for eight years on bus route 2138 in Brooklyn. She picks her bus up at Surf Avenue every morning at 6 a.m. to begin her day, driving anywhere from five to 60 children to school. She said she loves the kids but she isn’t so sure now about her job.

“We are suffering,” said the 53-year-old. “It’s not fair what they’re doing.”

On Jan. 16, more than 8,500 bus drivers in the Amalgamated Transit Union 1181 went on strike over Mayor Michael Bloomberg’s decision, in response to a court ruling, to eliminate protections for employees under new bus contracts. New York State’s top court ruled in 2011 that bus companies competing for city business would no longer be required to hire senior drivers previously employed by a losing contractor. That seniority rule protected Atlantic Express, by making it difficult for new companies to  underbid it. Any company bidding for city bus routes would need to absorb the full cost of the unionized workforce.

Now, the bus contracts have opened up for competitive bidding for the first time in over 30 years, and non-union shops can compete.

Bidders for the new bus contracts must provide extensive evidence that their drivers are trained, physically qualified, have clean driving and criminal records, show references, undergo annual refresher courses and, of course, have the appropriate commercial driver’s license. In an email, Department of Education spokeswoman Marge Feinberg said, “Safety is a top priority. The bid we have released includes the same safety provisions [as] in the current contracts.”

The open bids have revealed how much taxpayers could be saving.

In the first round of bidding, Amboy’s bids were on average about $1,000 per day per bus versus competing bids of about $400 to $800 per day per bus. The competing bids submitted to the Department of Education in the first round were 2 to 65 percent below Amboy’s, making it unlikely that the company will retain the bus contract.

During the strike, union leaders warned that inexperienced drivers and matrons posed unacceptable risks to school children. Their view runs counter to the accounts of employers under the city’s pre-K busing contracts, which were never subject to the provisions that protected the jobs off workers with seniority.

Union contracts are not the only way to establish good service and working conditions, according to Andrew Imperato, owner of the Happy Day Bus company. Happy Day has a contract with the Department of Education to drive 550 pre-K students to and from school. It pays its employees for full eight-hour days, even though they are only driving for part of that time.

The company buys them uniforms and shoes and pays for licensing and safety classes. It also offers eight paid holiday and eight personal days, as well as extra vacation time based on seniority. Imperato says his labor costs, while higher than some, are still well below Atlantic Express’.

“Amboy will probably be out of business after the summer,” Imperato said, commenting on their probable contract losses.

Atlantic Express’s pay and vacation cuts are scheduled to go into effect April 15.

With Bloomberg’s elimination of drivers’ job protection, there is no guarantee that veteran drivers like Germain will be retained if their company does not win the bid.

“I haven’t been looking for other jobs,” Germain said. “But maybe I will.”

Meanwhile, in early October, company founder and CEO Domenic Gatto announced he plans to retire at the end of the year. The company is still searching for someone to fill his shoes.