Version XXXI-A - This Was The Week That Was - An Amtrak Saga

December 12, 2001

It’s getting closer to Christmas by the moment. Just 10 days from now will be the shortest day of the year. We’re feeling that here in
Jacksonville, Florida. It’s nearly dark by 6 P.M., and today the temperature only crept up into the mid 70s. It was almost enough to make one consider wearing a jacket to work in the morning, but, fortunately good sense took hold and it was easy to realize it was just another shirt sleeve weather day.

1. Just think, one million passengers on Acela. Yes, that’s the latest breathless company line from Amtrak. Sometime very soon, Acela service will have hosted one million passengers.

   A great success, says Amtrak senior management, going beyond all anticipated goals.

   But, wait! What haven’t they told us?

   Oh, yes, many former Metroliner trains were cancelled, and replaced by Acela trains. In other words, if you wanted to travel at a given time, your choices were either Acela, or Acela, or maybe an Acela Regional (nee NortheastDirect) train.

   So, they drove the business automatically to Acela for those who chose to travel by train.

   Another great achievement in the Amtrak firmament. Perhaps next they will breathlessly tell us they invented the Easter Bunny, too.

2. No! I don’t want to do my homework or eat my vegetables! I’m going to hold my breath until you tell me I don’t have to!

   If you guessed that was some child protesting to a parent, you may be right. But, then again, it may have been Amtrak senior management crying to Congress that it didn’t want to have to do a liquidation plan, even though the law said it had to be done.

   So, what did Amtrak senior management do? Why, of course, it got friends in the Senate to insert a provision in the recently passed Defense Appropriations bill that prohibits the use of Amtrak monies to write a liquidation plan.

   There have been reasonable arguments on both sides of this issue. One professional researcher and writer opined that since Congress has said liquidation is not an issue, that writing the plan is a waste of resources and management time, and nothing would be gained by compiling and writing would could be a very difficult and complex document.

   On the other hand, the question, thanks to the track record of Amtrak senior management, is, what are they hiding that they are afraid will come out in such a document?

   Common sense says writing the document would be an exercise in futility, but it’s still hard not to be skeptical of the same folks who have said they needed to be excused so many times before on so many issues because the dog ate their homework.

3. “But, we’ve ALWAYS done it that way.” Your humble correspondent always hates it when this phrase is being used. It’s an automatic cop out excuse for clear thinking or a good vision for the future.

   Regrettably, this is what is happening with many rail fans and advocates around the country when presented with new ideas or new approaches to old ideas.

   The great national debate everyone has been panting for is here and in full swing. Lots of people in lots of places are putting forth new ideas or a different way to do things.

   Many people are promptly shooting down the new ideas and new concepts simply because they refuse to look at them with an open mind.

   Now, granted, this country has just gone through a 40 year period of decline of passenger rail, and many tried and true reasons have been the culprits of the decline.

   So many people have become so anesthetized by these failed ideas that they do an automatic knee jerk reaction to anything that is seen that is different from their old and preconceived notions of what passenger rail should be or do in the future.

   It’s time to clear away those cobwebs and get a new life. Old ideas from old and stagnant organizations are only going to create future misery. It’s time to rise up and shake off the chains of bondage created by rusty concepts. People that have been in charge prior to now, either as hired help or in elected positions in many organizations either need to get with a new program or go down in flames.

   When the New Amtrak takes life in just a matter of weeks, many are not going to have the ability to appreciate what it will be or what it will do. Many will only measure it against tired old ideas and concepts that have futilely been held near and dear for too long.

   Join in the debate and let the scales fall from your eyes. Think for yourself; don’t base your opinions on what you’re told to think.

   In the end, you’ll be glad you did.

4. Famous moments in the annuals of waiting:
   • Waiting for Christmas morning to arrive
   • Waiting for water to boil
   • Waiting for that next job promotion
   • Waiting to hear if you got a new job
   • Waiting for the income tax refund check in the mail
   • Waiting for Mario Cuomo to decide to run in the presidential primaries in 1988
   • Waiting for paint to dry
   • Waiting for painkillers to kick in
   • Waiting for voting results on election night
   • Waiting for babies to be born
   • Waiting for General MacArthur to return to the Philippines
   • Waiting for the failed and discredited Amtrak senior management to realize its responsibility to all Americans by leaving the company as soon as possible
5. Guest Commentary Department: This week an impressive resident of Washington offered thoughts about car and equipment leasing at Amtrak. His comments are too good not to repeat and share with everyone.
   

   “Yes, but…I think we’re missing an important point here. Why did Amtrak have to engage in the original lease packages in the early 1990s in the first place? Because capital outlays were not forthcoming from Congress and for once, Amtrak took a gamble in order to reequip its long haul trains. It probably would have worked too if it weren’t for Downs and Mercer and the albatross corridor.

   Let’s address two propositions that are on the table. They are:

   1. Passenger train revenues are insufficient to finance or lease equipment at market rates and
   2. That Amtrak can grow its way to prosperity using only government outlays for rolling stock.

   Let’s deal with these one at a time.

   First of all, the “original” Claytor-era manufacturer’s leasing arrangements on the long haul equipment are not the problem. It is the post 1997 sale/leasebacks on rolling stock owned free and clear and the continuing shrinkage of trains with high revenue potential that torpedoed the company’s cash flow.

   The GE diesels, Superliner II and Viewliner fleets were ordered under Claytor, who was the last Am-Prez who gave a tinker’s dam about the long haul trains.

   The “business plan” of the early 1990s (which saw the last significant expansion of the long haul fleet, the Sunset Limited’s Florida extension, a Desert Wind, Pioneer, “big” Cardinal, a Broadway Limited., Montrealer, lots of Eastern sleeper capacity, etc.) could have easily sustained the lease payments on new equipment.

   After Claytor, however, Amtrak Downs-sized its long haul operations with predictable results. The equipment that was costing the company money was still there, but the revenues intended to support it weren’t.

   The rolling stock that was owned outright and could have been overhauled economically was pulled from service. Superliners were yanked from the West to equip the Capitol Limited and Cardinal, further constraining western train capacity.

   The supreme failure of Tom Downs was not to capitalize on the infusion of long haul equipment bequeathed to him by Claytor. He put the company on a starvation business plan instead of a prudent growth plan. Again, the leases were predicated on growth and it didn’t happen.

   Let’s stop fixating on the cost side of the equation, an idea which has bedeviled Amtrak since day one. Let’s not on the lease obligation itself, but rather concentrate on the failure to make this investment pay.

   As to the second point, let’s say that Amtrak gets its Holy Grail and the only funding it is presently pushing, the HSRIA, and the states all rush to their recession-depleted treasuries and dutifully cough up the 20% match over the next 10 years.

   Amtrak can then burn through $1.2 billion a year, (just like it did in FY98 and 99 with the TRA slush fund) except now it will be tied to specific projects and there will be lots of folks minding the store.

   While it might be better spent than the TRA funds -an easy objective to be sure- there’s no guarantee of that since the states will want to fund their pet projects.

   Will states calling the shots and setting the agenda for their own parochial purposes be any better for the company’s bottom line?

   The only way it will work to the company’s advantage is to convert “all” of Amtrak’s trains to “cost plus a markup” Heartland-Flyer style operations. Maybe this is what Warrington is secretly holding out for.

   No more pesky glide paths, MBNAs, NGSs, mail, express, cat food in RoadRailers and self-sufficiency mandates. Back to the good old days of NJT-style subsidized service.

   But what of the long hauls, the inter-corridor overnight trains? Twenty percent of the HSRIA can go to “non-designated” corridors.

   That’s meaningless if the states don’t play along. So we’re back to square one: no money for new rolling stock.

   The HSRIA’s structure all but guarantees the money will go to capital-intensive, low revenue yield corridor operations. To trains that require expensive track facilities, run at low load factors and for equipment that sits in the yards all night. In short, it’s the same old, same old. Different wine, same bottle.

   Will all this “investment” be sufficient to grow the company to the point it will cover its corporate overhead and also continue to maintain and upgrade track and other facilities it owns?

   I have severe doubts, since ownership of the NEC will still the Achilles heel of the NRPC, short of drastic reform.

   Under the bill, only $3 billion can go to the NEC, and that’s assuming all the NEC states comply. With only $300 million a year in external funding under the most rosy scenario, the NEC will continue to be a giant sucking chest wound. The NEC will consume resources at an inordinate pace, just as it has in the past, without structural reforms of the type that GW and friends resist at every turn.

   In the final analysis, leasing equipment seems unavoidable to grow the service quickly in order to overcome the unique challenges posed by the economics of the passenger train.

   To get an infusion of cash you must borrow. There really is no way around it. To think otherwise is to behave like the renter who makes $100K a year and complains that he can’t afford a $300K house because he never has $300K in his checking account.

   Absent lavish direct cash outlays (which are not on the table, HSRIA or no) Amtrak or other operators have to get the equipment somehow. If we cannot figure out a way to procure rolling stock without huge government outlays, we might as well pack it up and find another avocation.

   It boils down to three things:

   1. Don’t judge the success of lease arrangements by the miserable financial performance of the NRPC in the Downs/Warrington era;
   2. Leveraging productive capacity is based on the expectation of growth not contraction;
   3. We really don’t have any choice but to pursue leases since no one is going to give us money for long haul equipment.

   (End of Guest Commentary)

That wraps it up for another week. Is your Christmas shopping all finished? Presents all wrapped? There are lots of things about the New Amtrak while you’re finishing up your holiday chores. The New Amtrak is not far away.