AVs should in principle liberate public transit from a lot of limitations. Surge capacity should be easier to deploy. Smaller busses on smaller routes should be at less of a cost disadvantage. Pick up and drop off could be more flexible.

I live in a semi-rural area that used to have a trolley line to the next town where one could catch a train into Boston. It's also a challenge to optimize school bus routes in a sparsely populated area, and AVs could help with that.