Birmingham-based bus firm National Express said that it could not guarantee the future of services in the city – despite announcing increased profits.
The transport firm said restructuring its network in the West Midlands had added £5 million to year-on-year operating profits.
It has controversially cut quieter routes through parts of Birmingham and increased frequency on its most profitable services.
But the announcement by George Osborne that the Bus Service Operators’ Grant is to be slashed by 20 per cent from 2012 will increase uncertainty on some routes.
The £491 million a year grant acts as a rebate for the fuel duty that is paid back to each bus operator in the country.
Mr Osborne said that by reducing the rebate, it would save the Department for Transport as much as £300 million by 2015.
There had been fears that the grant could be scrapped completely and National Express chief executive Dean Finch told members of regional transport body Centro last month that he would have to cut 10 per cent of routes if that was the case.
The Campaign for Better Transport has warned that any changes to the grant will mean an increase in fares for passengers.
A National Express spokesman said: “The Government’s change to Bus Service Operators’ Grant doesn’t come into effect until 2012 and a reduction in the grant is clearly much more favourable than its abolition.
“We will now take some time to study what the Government has proposed.”
National Express said revenues had been boosted by the Pope’s visit to Birmingham.
It ran 1,000 coaches for pilgrims to attend Benedict XVI’s mass at Cofton Park from across the country.
An increase in the cost of National Express West Midlands’ multi-trip travel card from £3.30 to £3.50 and a freeze of its single journey fare improved its passenger per mile revenue by five per cent, said the company.