<PAGE>
                                                                     Exhibit 3.2


                           BY-LAWS OF ATLANTIC EXPRESS
                              TRANSPORTATION CORP.

                               ARTICLE I - OFFICES

      The office of the Corporation shall be located in New York State in the
County designated in the Certificate of Incorporation. The Corporation may have
other offices within or without the State of New York as the Board of Directors
may designate or as the business of the Corporation may require.

                      ARTICLE II - MEETING OF SHAREHOLDERS

      Section 1 - Annual Meetings: The annual meeting of the shareholders of the
Corporation shall be held within five months after the close of the fiscal year
of the Corporation, for the purpose of electing directors, and for the
transaction of such other business as may come before the meeting.

      Section 2 - Special Meetings: Special meetings of the shareholders for any
purpose(s) may be called by the Board of Directors or by the President, and by
the President or the Secretary at the written request of the holders of not less
than ten percent (10%) of all outstanding shares entitled to vote thereat, or as
otherwise required under the provisions of the Business Corporation Law.

      Section 3 - Place of Meetings: All meetings of shareholders shall be held
at the principal office of the Corporation, or at such other places within or
without the State of New York as shall be designated by the Board of Directors,
or by written request of all shareholders entitled to vote at such meeting.

      Section 4 - Notice of Meetings: (a) Written notice of each annual or
special meeting of shareholders stating the place, day and hour of the meeting
shall be given, personally or by mail, not less than ten (10) nor more than
fifty (50) days before the date of the meeting, to each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose(s) for which the meeting is called, and shall indicate by whom
the meeting was called. If, at any meeting, action is proposed to be taken that
would entitle shareholders to receive payment for their shares pursuant to the
Business Corporation Law, the notice of such meeting shall include a statement
of that purpose. If mailed, such notice shall be directed to each such
shareholder at his address, as it appears on the records of the shareholders of
the Corporation, unless he has previously filed with the Secretary of the
Corporation a written request that notices intended for him be mailed to some
other address, in which case, it shall be mailed to the requested address.

      (b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of notice and prior to the meeting, or
to any shareholder who attends the meeting, in person or by proxy, or to any
shareholder who, in person or by 
<PAGE>

proxy submits a signed waiver of notice before or after the meeting. Notice of
an adjourned meeting need not be given, unless otherwise required by statute.

      Section 5 - Quorum: Except as otherwise provided herein, or by statute, or
in the Certificate of Incorporation or amendments thereto (hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the outstanding shares of the Corporation entitled to vote shall constitute a
quorum for the transaction of any business. The withdrawal of any shareholder
after the commencement of a meeting shall have no effect on the existence of a
quorum, after a quorum has been established at such meeting. If less than a
majority of the outstanding shares are represented at a meeting, a majority of
the shares so represented may adjourn the meeting. At an adjourned meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed.

      Section 6 - Voting: (a) Except as otherwise provided by statute or by the
Certificate of Incorporation, any corporate action, other than the election of
directors, to be taken by vote of the shareholders shall be authorized by a
majority of votes cast at a meeting of shareholders by the holders of shares
entitled to vote thereon.

      (b) Except as otherwise provided by statute or by the Certificate of
Incorporation, each outstanding share entitled to vote shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders.

      (c) Each shareholder entitled to vote or to express consent or dissent
without a meeting may do so by proxy executed in writing by the shareholder or
by his duly authorized attorney in fact. No proxy shall be valid after the
expiration of eleven months from the date of its execution, unless the person
executing it shall have specified therein the length of time it is to continue
in force. Such instrument shall be filed with the Secretary at the meeting and
included with the records of the Corporation.

      (d) Any resolution in writing, signed by all of the shareholders entitled
to vote thereon, shall constitute action by such shareholders as therein
expressed, with the same force and effect as if the resolution had been passed
by unanimous vote at a called meeting of shareholders and such resolution shall
be inserted in the Minute Book of the Corporation under its proper date.

                             ARTICLE III - DIRECTORS

      Section 1 - Number, Election and Term of Office: (a) The number of the
directors of the Corporation shall not be less than three.

      (b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares entitled to vote in the
election.


                                      2
<PAGE>

      (c) Each director shall hold office until the next annual meeting of the
shareholders, and until his successor is elected and qualified, or until his
prior death, resignation or removal.

      Section 2 - Duties and Powers: The Board of Directors shall be responsible
for the management of the business affairs of the Corporation, and may exercise
all powers of the Corporation, except those powers expressly conferred upon or
reserved to the shareholders by the Certificate of Incorporation or by statute.

      Section 3 - Annual and Regular Meetings: Notice: (a) A regular annual
meeting of the Board of Directors shall be held immediately following the annual
meeting of shareholders, at the place of such annual meeting of shareholders.

      (b) The Board of Directors may provide by resolution for the holding of
other regular meetings of the Board of Directors, and may fix the time and place
thereof.

      (c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.

      Section 4 - Special Meetings; Notice: (a) Special meetings of the Board of
Directors shall be held whenever called by the President or by one of the
directors, at such time and place as may be specified in the respective notices
or waivers of notice thereof.

      (b) Notice of special meetings shall be delivered by mail, telegram, radio
or cable to each director at his residence or business address at least two (2)
days before the day on which the meeting is to be held, or shall be delivered to
him personally or given to him orally, not later than the day before the day on
which the meeting is to be held. A notice, or waiver of notice, except as
required by these By-Laws need not specify the purpose of the meeting.

      (c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting for the express purpose of protesting the
lack of notice to him, or who submits a signed waiver of notice, whether before
or after the meeting. Notice of any adjourned meeting shall not be required to
be given.

      Section 5 - Chairman: The Chairman of the Board shall preside at all
meetings of the Board of Directors. If there is no Chairman, or if he is absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall Preside.

      Section 6 - Quorum and Adjournments: (a) At all meetings of the Board of
Directors, the presence of a majority of the entire Board shall be necessary to
constitute a quorum for the transaction of business. Participation of any one or
more members of the Board by means of a conference telephone or similar
communications equipment, allowing all persons participating


                                        3
<PAGE>

in the meeting to hear each other at the same time, shall constitute presence in
person at any such meeting.

      (b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the meeting
without notice, until a quorum shall be present.

      Section 7 - Manner of Acting: (a) At all meetings of the Board of
Directors, each director present shall have one vote, irrespective of the number
of shares of stock, if any, which he may hold.

      (b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the Corporation shall be
the act of the Board of Directors with the same effect as if the action had been
passed by unanimous vote at a meeting of the Board.

      Section 8 - Vacancies: Any vacancy in the Board of Directors (unless a
vacancy created by the removal of a director by the shareholders, which shall be
filled by the shareholders at the meeting at which the removal was effected)
shall be filled by a majority vote of the remaining directors, though less than
a quorum, at any regular meeting or special meeting of the Board of Directors
called for that purpose. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office.

      Section 9 - Resignation: Any director may resign at any time by giving
written notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.

      Section 10 - Removal: A director may be removed with or without cause at
any time by the shareholders, at a special meeting of the shareholders called
for that purpose. A director, elected by vote of the holders of shares of any
class or series, or holders of bonds voting as a class entitled to elect one or
more directors may be removed only by applicable vote of said holders of shares
or bonds.

      Section 11 - Salary: No stated salary shall be paid to directors for their
services, but, by resolution of the Board of Directors, a fixed sum and expenses
of attendance may be allowed for attendance at each regular or special meeting
of the Board. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.

      Section 12 - Contracts: (a) No contract or other transaction between this
Corporation and any other corporation shall be impaired, affected or invalidated
nor shall any director be liable in any way by reason of the fact that any one
or more of the directors of this Corporation is or


                                        4
<PAGE>

are interested in, or is a director or officer of such other corporation,
provided that such facts are disclosed or made known to the Board of Directors:

      (b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact or
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law applicable thereto.

                              ARTICLE IV - OFFICERS

      Section 1 - Number, Qualifications, Election and Term of Office: (a) The
officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such other officers including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may deem
advisable. Any officer other than the Chairman of the Board of Directors may be,
but is not required to be, a director of the Corporation. Any two or more
offices may be held by the same person, except the offices of President and
Secretary, unless all the shares of stock of the Corporation are owned by one
person.

      (b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.

      (c) Each officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election or as provided for in such officer's
contract with the Corporation, and until his successor shall have been elected
and qualified, or until his death, resignation or removal.

      Section 2 - Resignation: An officer may resign at any time by giving
written notice of resignation to the Board of Directors, or to the President or
the Secretary of the Corporation. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt thereof by the Board of
Directors or by such officer, and the acceptance of the resignation shall not be
necessary to make it effective.

      Section 3 - Removal: An officer elected or appointed by the Board may be
removed, either with or without cause, and a successor elected by the Board at
any time.

      Section 4 - Vacancies: A vacancy in an office by any reason may at any
time be filled for the unexpired term by the Board of Directors.

      Section 5 - Duties of Officers: Officers of the Corporation shall, unless
otherwise provided by the Board of Directors, each have such powers and duties
as generally pertain to 


                                        5
<PAGE>

their respective offices as well as such powers and duties as may be set forth
in these By-Laws. The President shall be the chief executive officer of the
Corporation.

      Section 6 - Sureties and Bonds: In case the Board of Directors shall so
require, any officer (except officers who own 5% or more of the outstanding
equity securities of the Corporation), employee or agent of the Corporation
shall execute to the Corporation a bond in such sum, and with such surety or
sureties as the Board of Directors may direct, conditioned upon the faithful
performance of his duties to the Corporation, including responsibility for
negligence and for the accounting for all property, funds or securities of the
Corporation which may come into his hands.

      Section 7 - Shares of Other Corporations: Whenever the Corporation is the
holder of shares of any other corporation, any right or power of the Corporation
as such shareholder (including the attendance, acting and voting at
shareholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Corporation by the President, any
Vice President, or such other person as the Board of Directors may authorize.

                           ARTICLE V - SHARES OF STOCK

      Section 1 - Certificate of Stock: (a) The certificates representing shares
of the Corporation shall be in such form as shall be adopted by the Board of
Directors, and shall be numbered and registered in the order issued. They shall
bear the holder's name and the number of shares, and shall be signed by (1) the
Chairman or Vice Chairman of the Board or by the President or a Vice President,
and (2) the Secretary or Treasurer, or any Assistant Secretary or Assistant
Treasurer, and may bear the corporate seal.

      (b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.

      (c) The Board of Directors may authorize the issuance of fractions of
shares represented by a certificate or uncertificated, which shall entitle the
holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it may
authorize the payment in cash of the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined; or in
lieu of fractional shares it may authorize the issuance, as permitted by law, of
scrip exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a shareholder, except as therein provided.

      Section 2 - Lost or Destroyed Certificates: The holder of any certificate
representing shares of the Corporation shall immediately notify the Corporation
of any loss or destruction of the certificate representing the same. The
Corporation may issue a new certificate in the place of any certificate
previously issued by it, alleged to have been lost or destroyed. On production
of such evidence of loss or destruction as the Board of Directors may require,
the Board of Directors may require the owner of the lost or destroyed
certificate, or his legal representatives, to give the Corporation a bond in
such sum as the Board may direct, and with such surety or 


                                        6
<PAGE>

sureties as may be satisfactory to the Board, to indemnify the Corporation
against any claims, loss, liability or damage it may suffer on account of the
issuance of the new certificate. A new certificate may be issued without
requiring any such evidence or bond when, in the judgment of the Board of
Directors, it is proper so to do.

      Section 3 - Transfers of Shares: (a) Transfers of shares of the
Corporation shall be made on the share records of the Corporation only by the
holder of record, or by his duly authorized attorney, upon surrender for
cancellation of the certificate(s) representing such shares, with an assignment
of power of transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature and of authority to
transfer and of payment of transfer taxes as the Corporation or its agents may
require.

      (b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any claim to, or interest in, such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by law.

      Section 4 - Record Date: In lieu of closing the share records of the
Corporation, the Board of Directors may fix, in advance, a date not exceeding
fifty days nor less than ten days before the date of a meeting, as the record
date for the determination of shareholders entitled to receive notice of, or to
vote at, any meeting of shareholders, or to consent to any proposal without a
meeting, or for the purpose of determining shareholders entitled to receive
payment of any dividends, or allotment of any rights, or for the purpose of any
other action.

                             ARTICLE VI - DIVIDENDS

      Subject to applicable law, dividends may be declared and paid out of
surplus funds available therefor, as often, in such amounts, and at such time as
the Board may determine.

                            ARTICLE VII - FISCAL YEAR

      The fiscal year of the Corporation shall be fixed by the Board of
Directors, subject to applicable law.

                          ARTICLE VIII - CORPORATE SEAL

      The corporate seal shall be in such form as shall be approved by the Board
of Directors.

                             ARTICLE IX - AMENDMENTS

      Section 1 - By Shareholders: All By-Laws of the Corporation may be
amended, repealed, or adopted by a two-thirds vote of the shareholders entitled
to vote therefor

      Section 2 - By Directors: By a two-thirds vote, the Board of Directors
shall have power to amend, repeal, and adopt By-Laws of the Corporation;
provided, however, that the shareholders entitled to vote with respect thereto
as in this Article IX above-provided may alter, 


                                        7
<PAGE>

amend or repeal By-Laws made by the Board of Directors. The Board of Directors
shall have no power to change the quorum for meetings of shareholders or of the
Board of Directors, or to change any provisions of the By-Laws with respect to
the removal of directors or the filling of vacancies in the Board resulting from
the removal by the shareholders. If any By-Law regulating an impending election
of directors is adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of shareholders for the
election of directors, the By-Law so adopted, amended or repealed, together with
a concise statement of the changes made.

      THE UNDERSIGNED certifies that the Corporation has adopted the foregoing
By-Laws as the Restated By-Laws of the Corporation, in accordance with the
requirements of the Business Corporation Law of New York.

Dated:

                                          ______________________________________
                                          [Name]
                                          [Title]


                                        8