Soaring fuel prices are driving more of us on to the buses - except in roadworks-bound Edinburgh - the Lothian Buses chief executive Ian Craig said last week.

But it is his younger brother Colin Craig, managing director of the 85-year-old family business West Coast Motors, who is in the front line of the green transport battle in the west of Scotland.

The Argyll-based business has strengthened its base, buying Citybus and now City Sightseeing in Glasgow, grabbing the busy Rothesay and Dunoon (former Western) networks from Stagecoach, and running coaches as far as Inverness and Skye.

Then two months ago, a bus war was sparked in rural Scotland when West Coast Motors refused to sign a new contract with the giant Scottish Citylink to operate its Highland network, ending a partnership which began in 1986. The West Coast coaches disappeared from the northern routes, but immediately resurfaced in spoiling competition with Citylink on the western services to Argyll - home territory for the business founded by Craig's grandfather as a bicycle repair shop in Campbeltown.

Craig told The Herald in May that the contract price had been driven too low which, against the background of fuel price pressures, was "very surprising and very disappointing". He also said that West Coast's rival service, running 10 minutes ahead of Citylink, which is 35% owned by Stagecoach, was attracting local support despite battling against giveaway promotional fares.

This week peace broke out, as the companies announced that a new contract had after all been signed, and West Coast would resume as Citylink's operator from the end of September.

Craig is suitably inscrutable about where the pressure had told. But he insists that the minnow, with a turnover of £8m, 136 vehicles and 275 staff, can continue to hold its own in a market dominated by the giants - Stagecoach now employs 3000 in Scotland and runs 1300 vehicles, and only in May strengthened its grip when it swallowed up Inverness-based Rapsons Coaches with 200 vehicles and a £12m turnover.

Craig says: "It is a question of understanding where you fit in the great scheme of things and where you sit in the market - there are certain areas in which smaller companies like ourselves can deliver."

The requirement since 2006 for new buses to be low-floor has driven up standards and driven out some of the cowboy competitors, Craig says. "For new coaches you are effectively looking at half a million pounds ... it is a big investment, a big risk you are taking."

The 1923 Craig Brothers shop in Campbeltown evolved into the County Garage, for the area's first motor cars, and then West Coast Transport, run as a coaching operator by Craig's father William, still chairman, and his accountant uncle Bob, now chairman of Loch Fyne Oysters and no longer a shareholder.

"I was a cleaner from the age of 12," Craig says. "I spent my entire life in the garage and my ambition was to go into the workshop and serve my apprenticeship." His first job took him away from Argyll, as engineer on a 150-foot superyacht, but in 1996 he went back into the business to work in management alongside his father.

In 1999, West Coast acquired Oban & District Buses and put Craig in charge. "We had a (coach) depot in Oban, and we had made it big enough should an acquisition come along. That allowed us to integrate the coaching and the bus operations, and from there, working in partnership with the council through the tendering process, we have built up the commercial services and put a huge amount of investment into the fleet."

He adds: "That was where I cut my teeth, with the guidance of people keeping an eye on me."

The capture of the Argyll and Bute contract in 2004, after a repeat tender process, saw West Coast taking over depots and fleet from Stagecoach, adding 20% to its business. It also continued to reduce its dependency on the Citylink coaching contract, now 15% of the business, which had started with Campbeltown to Glasgow for the Scottish Bus Group in 1986, and spread across the Highlands. For a company rooted in the Kintyre peninsula, it also brought new opportunities to grow the business with new services in busier areas, notably Dunoon. Craig explains: "You need sufficient volumes of people to make a difference. In small towns you can overcook it, putting on terrific services, but the volume of population is too low."

Meanwhile Hitrans, the cross-boundary Highland regional transport partnership, is helping operators to accelerate investment in low-floor fleet as well as funding road improvements such as bus pull-in bays ("where we are stopping in the middle of the carriageway in some pretty hairy places", Craig explains).

The acquisition in 1998 of Glasgow niche operator Citybus gave West Coast a convenient city depot for its coaches, and now for the City Sightseeing franchise, acquired earlier this year, which brought the Argyll business an office in Queen Street.

On calls for re-regulation of networks, Craig says: "Look at what the industry has delivered on a commercial basis - provided we work in partnership, there is a huge opportunity to build a first-class transport network, and certainly no shortage of willingness from the operators, but we need much greater willingness now from the politicians. For example we need the road space so we can speed up our buses, cut journey times and make them more reliable."

The oil price explosion has hiked fuel costs from 10% to as much as 20% of operating costs, Craig says. "We have had to implement a fares increase, hopefully we will grow our revenue base and look for other savings and efficiencies."

Like other operators West Coast is looking to the Scottish Government to review its decision not to pass on in full a 2p fuel duty rebate (from Westminster) for local services under the national bus service operators grant.

Craig says there is anecdotal evidence of a drop in car use, as the fuel price bites. "But if you are going to attract people out of their cars, you have to give them an attractive alternative ... there are some tough decisions to be made by the politicians, which they tend to shy away from."