This Week At Amtrak 2004-12-03
Vol. 1, No. 14 - December 03, 2004
- The Manchester (New Hampshire) Union-Leader, known as a daily newspaper with one of the rowdiest and most opinionated editorial pages in the country during political season, has set its sites on Amtrak President and CEO David Gunn, calling for his immediate dismissal, on the grounds that he has allowed Amtrak-owned track in the Northeast to deteriorate, while “spending Amtrak’s money on nonessentials” such as “little-used lines” in the national system.
Do all New Englanders believe that they, and they only, have some sort of God-given right to passenger rail service at the expense of the rest of the country? The arrogance of this editorial is staggering. While Mr. Gunn may be open to criticism on many fronts, no one should ever fault him for keeping alive what little of the national system is left.
On the other side of the coin, Amtrak should be open and honest with the entire country, and identify that much of the free federal money it is requesting will go directly and only to the Northeast, without the usual dramatics by itself and its attendant wholly owned lapdog organizations about having to shut down the entire system if a few bridges in Connecticut are not funded for repair and/or replacement.
- The legacy of the Transit Trio of Downs, Warrington, and Gunn continues. In the best tradition of local transit systems (which is a fine tradition for transit systems), Amtrak is renting out advertising space on locomotives on two routes to Toyota to advertise its Toyota Tundra Double-Cab pickup trucks. Amtrak locomotives on the Texas Eagle and Florida Silver Service routes will be repainted to reflect the Toyota advertising. Toyota is the first auto maker, and only the second company, to use Amtrak locomotives for advertising in this manner. The mind boggles at other advertising possibilities, but one hopes good sense will win the day.
- Two weeks ago, we began a short series featuring the keynote address Minnesota Association of Railroad Passengers President Andrew Selden, who is also the Vice President of Law and Policy for URPA, to the National Railway Historical Society annual meeting last July.
While this final segment of the speech is out of order as originally presented, it addresses this week’s topic of Northeast Corridor operations at Amtrak. To view the speech and accompanying graphs in its entirety, visit the URPA web site at http://www.unitedrail.org.
“Let’s look now at my second radical proposition: Amtrak’s short corridors are the least productive of Amtrak’s routes. I also have a corollary to this: high speed short corridors are worse. There’s even a second corollary: the Northeast Corridor, despite its saturated service levels, relative to its potential is the worst served of all Amtrak markets.
First, consider the Chicago hub markets. Please follow on these graphs. These graphs illustrate the results of operations of three distinct groups of trains that radiate out from the Chicago hub. I invite you to decide which group appears to be the most “successful”, and which should be getting more investment and attention. Here are the three groups, ranked by ridership.
Here are the same three, however, ranked by output.
This graph shows why output matters a lot more than transaction volume: this is where the money is. This is the revenues of the three groups.
Finally, here are the three groups measured by Amtrak’s unique expression of load factor, again illustrating capital efficiency of the three groups.
This slide shows all of this data. Which group do you think is the strongest? If you were CEO of Amtrak, which would you be developing? Group A represents all of the short corridors radiating out from Chicago, the Milwaukee services, St. Louis, Indianapolis and Detroit, and the downstate Illinois trains.
Group B is the same number of routes, but long distance services coming out from Chicago, and Group B-1 represents all of the Chicago-based long distance routes.
These results are not limited to Chicago. Here are national data by segment. Again, please follow on the graphs.
This graph shows the relationship between output and federal subsidy, by segment.
This graph is simple arithmetic: the total annual subsidy divided by output, by segment, showing a federal cost per unit of output in each of Amtrak’s three segments.
This graph shows the same data, but in a different display showing the segment relationships.
This graph, showing load factor by segment, shows where capacity is mismatched to demand: the short corridors as a group achieve about 33% load factors; the Northeast Corridor as a whole has about a 38% load factor, largely on the strength of the Philadelphia - New York local market, but some NEC services have load factors as low as the high 20s; Acela Express achieves a load factor of 49%, again on the strength of New York - Philadelphia traffic. The long distance trains, as a group, achieve load factors of 55 to 70%, and please keep in mind that a long distance train that is about two-thirds full is functionally sold out because of the large number of en route boardings and alightings.
The load factor data alone shows plainly that Amtrak is significantly over-invested in the Northeast Corridor and the other short corridors, and under-invested in long distance markets. That’s not social philosophy or political policy; it’s hard economic data.
In the West, the Coast Starlight usually out grosses all of the Pacific Surfliners combined. Do you think that that one train costs more to operate than all of the frantic activity involved with all of the Pacific Surfliners operations, and all the labor costs?
And the Starlight is generally regarded as one of Amtrak’s strongest long distance trains because it carries a large number of riders. The Starlight carries more passengers, for example, than the Empire Builder, but the Empire Builder consistently produces 20 to 30% more output - revenue passenger miles - and revenue than the Starlight. In fact, the Empire Builder is Amtrak’s highest grossing, highest output, single passenger train.
Data like this shows that across the country, train for train, as the Chicago hub graphs illustrated, the long distance trains outperform all of the short corridors by factors of five to seven times in output and revenue.
That is to say, every federal dollar invested in long distance markets yields five to seven times the transportation output, and revenue, of a federal dollar invested in any short corridor, especially including the Northeast Corridor.
Moreover, the effects of distance appear to be scaled: the longer regional corridors consistently outperform the short ones, as happened in southern California when the San Diegan Corridor was extended north of Los Angeles to Santa Barbara and San Luis Obispo. Amtrak, by the way, was dragged kicking and screaming into operating that extension. It never occurred to Amtrak that anyone would want to travel north of Los Angeles by train.
What Amtrak regards as its “best market,” the Northeast Corridor, is not and cannot be profitable, measured by generally accepted accounting principles universally used elsewhere in American business, including all the airlines. Mr. Gunn said as much last year.
The NEC consumes about a billion dollars a year to achieve the weak load factors, rising net operating loss, and negative ROI that we detailed earlier.
More money is not going to turn that around. The last $21 billion didn’t change anything, in the same passenger markets that bankrupted the New Haven and Pennsylvania Railroads.
I’m reminded of some folk wisdom often mis-attributed to Albert Einstein, that “insanity consists of repeating the same actions and expecting different results.”
Amtrak’s own data on output, load factors and return on investment show clearly that the short corridors as a group represent a highly unproductive use of capital. Per dollar invested, Amtrak’s greatest share of revenue and output, hence its greatest return on investment, comes from the long distance markets, where the load factor data alone show that the long distance trains have the highest efficiency, and the highest unmet latent demand, of any of Amtrak’s markets.”
This concludes the series. The full text (in order) of Mr. Selden’s speech, along with an assortment of accompanying charts and graphs, is available today on the URPA web site, http://www.unitedrail.org.
- The real question is, if Andrew Selden had been selected by the Amtrak Board of Directors instead of George Warrington, when the two of them were the finalist candidates for the Amtrak presidency in the late 1990s, where would Amtrak be today? Would the entire system, including the NEC be more healthy and robust? Would there be more trains to more places, creating more revenue and demanding less free federal money? Would the chronic equipment shortages be gone, replaced with a steady stream of new equipment?
The traditional argument is that the only “qualified” passenger railroad candidates for high office in Amtrak have local transit experience because there are no other American passenger railroads. This fallacy continues to be thought of as truth. The real argument, is that qualified, knowledgeable businessmen have the ability to lead Amtrak to success. President Bush has started the process with his nominees to the Amtrak Board of Directors. It is incumbent on the Amtrak board to take this ball and run with it; replacing failing transit executives with people of vision and strong leadership.
Transit operations are unique in their needs and results, as are long distance passenger train operations. The two are not the same, and must be approached so that each operation has the qualified leadership demanded for success.