But the Rail, Tram and Bus Union has dismissed the claim, saying Keolis Downer and the NSW government have not explained how the "expensive, irregular" service would lead to better commuter outcomes.

Keolis Downer - the company that runs Newcastle's buses, ferries and light rail - doubled the footprint of its on-demand bus service from Sunday.

It is now spread over a 56 square-kilometre patch of Lake Macquarie and includes new coverage of parts of Charlestown, Dudley, Whitebridge, Gateshead, Redhead and Warners Bay, among other locations.

The Newcastle Herald reported last month the transport operator planned to reduce the frequency of three routes - 41, 43 and 48 - from hourly to two-hourly on weekends amid growth of the on-demand service.

Keolis Downer says patronage of the on-demand service grew by an average of 12 per cent each month since it began at the beginning of 2018.

CEO David Franks said on Monday, after the expansion was launched, that a 20-seat on-demand bus could cover routes that regular services could not.

He said 68 per cent of trips on the on-demand service were journeys that could not be completed by a regular bus route.

"These flexible, non-regular routes encourage the use of public transport by providing mobility options for all, in areas where daily demand is variable," Mr Franks said.

"Most customers have less than [a] 150 metre walk to reach the pick-up point for their personalised bus service and customers are able to travel to areas when they want, thanks to this new flexible service."

But the RTBU's tram and bus division president Daniel Jaggers dismissed the claim on Tuesday.

"When bus routes are being cut, the public deserves to know why, and both the NSW government and Keolis Downer have failed to explain why this expensive, irregular on-demand service will lead to better outcomes for commuters," he said.

"These new premium buses are smaller, cheaper to operate and more expensive for commuters, as they are available only on-demand and unlike the regular Opal fare structure, do not allow journey continuation.

"It seems clear to me that the government only wants the major trunk routes offering a service, as this is where money can be made."

The Newcastle Herald understands routes 41, 43 and 48 have had an average of four passengers per trip during off-peak times while the on-demand service was operating.

"The expansion of the on-demand service is about giving more customers access to a personalised public transport service that provides travel options that regular route services are unable to provide," a Keolis Downer spokesperson said on Tuesday afternoon.

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