This paper deals with the development of a strategic approach for optimizing the operation of public transport system that considers both user's objective and operator's objective. Passengers of public transport are assumed to seek a minimum wait time to conduct the trips, while on the other hand, operators are concerned with the efficient operation such as minimum fleet size. The average minimum wait time is to be achieved by creating an optimal despatching policy for each vehicle from the terminal. As for efficient operation the utilisation of vehicle should be maximised by having a minimum number of vehicles in operation. User's and operator's objectives are optimized within certain operational constraints such as vehicle capacity to maintain acceptable level of service. The i-model is constructed in a bi-level programming form in which the user's objective is minimized by dynamic programming and the operator's objective is minimized by various routing strategies. Furthermore, an algorithm and a contrived example are developed to solve and see the performance of the approach.