Volume 4 Number 32
- Thanks to all who have inquired about the missing This Week at Amtraks lately. Due to the death of an aunt, a trip to her funeral, the lengthy terminal illness of a dear friend of 40 years who passed away last week and taking care of his many final needs in the last few weeks, and caring for my elderly parents, time has been in demand. This issue should be the resumption of a regular schedule.
- It’s just a couple of weeks beyond a year that Alex Kummant, President and CEO of Amtrak reported to work last September. Here is what Mr. Kummant had to say to Amtrak employees in an internal newsletter on September 18th, six days after the first anniversary of his stewardship of our nation’s passenger rail service.
President and CEO Kummant: Outlook on Amtrak’s Future
Dear Co-workers,
When I joined Amtrak a year ago, everyone told me that time passes quickly here, and it certainly does. It’s hard to believe that this month marks my one-year anniversary — in some ways I feel like it was just yesterday that I walked through the doors at Union Station. I’ve learned a lot this past year, and while we need to continue to address our day-to-day problems, I wanted to share with you a few thoughts about our future together.
First, I want you to know that I am most impressed with the dedication and expertise of our employees. There’s a sense of mission that collectively drives our employees — whether you’re in an office, aboard a train, in the shops or at a work site — and it’s unique to Amtrak. Despite our challenges, there is a great loyalty to our company.
Second, FY ‘07 will go down in the books as another strong year for us, both in ridership and ticket revenue. We have managed — in the face of rising fuel costs, inflation and other factors — to keep our operating loss steady. The credit for these accomplishments belongs not only to the employees who worked hard to deliver quality service this year, but also to those who rebuilt our infrastructure and fleet over the last few years.
Third, I’ve realized that there is a huge reservoir of people out there who support Amtrak. It’s not just the people who simply love trains and train travel; it’s local, state and federal elected officials, community and business leaders, among others. I find that network very encouraging. I’ve met station volunteers, people who memorize our schedules, and others who know virtually every piece of equipment; they also give me a lot of free advice.
Fourth, one of most important lessons I’ve learned over the last 12 months is that we think too much in the moment; we are too worried about surviving and not enough about thriving. Simply getting through another month is too low of a bar for a company with as much talent as Amtrak. Without a doubt, we have to be focused on doing our jobs, operating safely and being good managers, but we have to break through to the other side.
There are very few opportunities in business where the path is as well-lighted as ours. In addition to the growing support for passenger rail, there are factors that make intercity passenger rail extremely relevant in today’s world. Highway and airway congestion, volatile fuel prices, increasing environmental awareness, and a need for transportation links between growing communities, are a few among them. The stage is set for Amtrak to take on a role not just as a contributor to the nation’s transportation network, but as a leader among transportation modes.
Growth is my strategy for the future and it will take shape along three integrated fronts: investing in our workforce, investing in our partnerships with states and freight railroads, and investing in equipment and infrastructure.
You are the face of our product, and all of us combined are its strength. Our industry has changed and we have to change with it; we must invest in our human capital to build a 21st century workforce. Achieving new union agreements is only a part of the strategy; it also has to reflect the large number of expected retirees in the next few years. Accordingly, we need to map out sound hiring strategies to meet the needs of the future. Nonetheless, I reiterate my willingness to join our unions at the negotiating table to achieve fair and fiscally responsible agreements that meet the needs of the company and our deserving agreement-covered employees, as well as to better attract and retain a highly skilled and engaged workforce.
At the risk of sounding like a broken record, the future of our business is in expanding and developing corridor service. We need to strengthen our partnerships with states and host railroads to make that happen. We can take a leadership role in advancing corridor service with bold infrastructure projects that would break apart some of the key bottlenecks across the country. By dedicating some capital and working with our state and freight partners, we could open up segments of routes that would transform rail service.
Imagine what a dedicated line from Chicago to Porter, Ind., would do for the Capitol Limited and Lake Shore Limited services, as well as our Michigan trains. Imagine what an additional line between Richmond and Washington could do to improve and expand service there, or another route developed to link Los Angeles and the Bay area. What I’m suggesting is that we have to be bold.
If we hold out the promise of growth, we have to acquire new equipment. Much of our fleet is old and we run the wheels off our equipment. It’s high time we invest in new equipment and our state partners — and prospective partners — are looking to us to take the initiative on this front.
When I accepted this job, I knew I was joining a cause as much as a business. Amtrak was created at a time when few saw any chance of survival of passenger rail. Now we are seen as one of the solutions to high gas prices, climate change concerns, and congestion. The company has proven itself and now we have to be more than just survivors, we have to be builders. That challenge falls to all of us — I’ll do my part in leading and driving the vision, but every single Amtrak employee can play a real role in taking us to the next level.
Sincerely,
Alex Kummant President and CEO
- Let no one doubt Mr. Kummant is a good communicator. Since his arrival last September, he has moved quickly to establish himself as a credible and professional voice and image for Amtrak, eschewing the histrionics of his predecessors.
In his outlook for the future, he hits some important highlights, such as new union agreements, better partnerships with states and others, thinking for the future, not just the present, and growth for the company. Much of this is long-standing URPA doctrine.
There are two sad highlights, however, in his communique.
One, is his citing of increases in ridership and revenue, which, again, at the risk of sounding like a broken record, are overall meaningless numbers when not reported alongside of revenue passenger miles and expenses. Mr. Kummant alludes to keeping costs under control, but he does not share any goals implied or reached. >From a ridership standpoint, if ridership on the Sunset Limited tripled between Los Angeles and Pomona, California tripled, that would be a nice bump in that figure, but it would be catastrophic for both the route and the company, because the ridership would be for a very short distance (only 32 miles), and travelers on that segment only would block out higher revenue generating passengers who may wish to travel the average length of the route many passengers do travel, which is hundreds of miles. Again, ridership numbers are meaningless, and are only valid in the transit world where a different type of zone fares are used, and revenue passenger miles and load factor are not counted. Every other common carrier, be it buses, airplanes, or steamships, count revenue passenger miles, not ridership as the prime and only important measurement of success or failure.
Amtrak continues to act like its only alternative to any scenario is to continue to lose money on its operations. Again, this is unacceptable; Amtrak does have the ability to make money on many of its trains when actual, real-world accounting is used (including all types of railroad accounting rules which are used by the freight railroads) instead of Amtrak’s current recipe for cooking its books.
The most grotesque statement of Mr. Kummant’s was regarding growth, in which he said, “At the risk of sounding like a broken record, the future of our business is in expanding and developing corridor service.” Someone … anyone, please disclaim this unsavory business strategy which has already been proven by Amtrak for decades to be doomed to failure. Realistic and professional people can only hope that statement is a canard of the worst sort; others cling to it as unholy gospel, hoping to turn a sow’s ear into a silk purse.
How many times does it have to be said? The only hope of a financial future — and, therefore reliable future — for Amtrak is to rely on the cheap to operate, high revenue generating national long distance route system, and not the high expense, low revenue generating corridor route system, which has little, if any, chance of financial success.
It wasn’t the long distance trains that pulled down the private, pre-Amtrak passenger railroads; it was the railroads which operated a high number of commuter and corridor trains which suffered the greatest losses. That fact still remains true, today.
- The Wall Street Journal, in late August ran the ultimate puff piece on Mr. Kummant, never really asking any difficult questions, and somewhat slanting the article in favor of Amtrak. Andrew Selden of URPA had this response to the article, which also correctly outlines many of the faults of Mr. Kummant’s approach to his year at Amtrak.
By Andrew Selden
The Wall Street Journal Amtrak article of August 23, 2007, extolling the wonders of Amtrak’s recent ridership gains in the Northeast Corridor, and almost glibly dismissing the rail network elsewhere in the country, created a terribly misleading mis-impression of Amtrak’s results.
By relying on an almost irrelevant metric, “ridership,” which measures only transaction volume, but omitting load factor and, most importantly, output, measured by passenger miles, one is left with the sense that short urban corridors such as the NEC are the best or most successful market for intercity passenger rail. This is exacerbated by referring to Amtrak’s modal split in the northeast against the trunk airlines as a proxy for market share. This impression is completely backwards and wrong.
It is still the case that most of Amtrak’s output of passenger transportation occurs in its interregional, longer distance markets. The long distance trains have by far the highest load factors, often double the short corridors. Even the vaunted Acelas have no more than 50% load factors, and that largely on the strength of 90-mile New York Philadelphia ridership. Outside that tiny segment, Acela load factors drop into the range of 30% or less. Amtrak’s market share for intercity passenger transportation in the Northeast is less than 2%.
It seems odd the story noted airlines are all too ready to shed their high-cost short routes in favor of high revenue long distance routes, but failed to question why Amtrak pursues the opposite strategy.
The most glaring omission was the failure to report that whatever accomplishments Amtrak has made in the NEC come at an astonishing cost to the taxpayers of a billion dollars a year in free federal subsidy. The Acelas and the other NEC trains have the highest subsidy cost per passenger and per passenger mile of any trains Amtrak operates. The long distance trains produce (depending on the route) five to seven times the revenue and output per dollar of federal support than any NEC train, including the Acela. Their 50 to 70% load factors prove those markets are underserved relative to demand. Corridor and NEC load factors of 30 to 45% prove that they are already overserved.
This variance also explains Amtrak’s chronically dismal, and worsening, financial results of operations: it consistently pours the vast majority of its annual federal subsidy into its services with the lowest returns on invested capital. In fact, measured by GAAP, the $3 billion federal subsidy that created Acela has produced a negative rate of return on investment, not even counting the hundreds of millions of dollars of subsequent annual capital and operating subsidies without which no Acela could turn a wheel.
- To sum up Mr. Kummant’s first year of stewardship, we have to visit the following three points: — Amtrak’s financial results of operations are declining, it’s dependence on public sector welfare, such as new monies from state corridors is increasing, it’s relevance to national mobility measured by market share and by total output are declining, and it has a vision and strategy that have not changed (unlike everything else in America) since the High Speed Ground Transportation Act of 1966. — Mr. Kummant’s direction for the company is nothing new. While he personally has no history of passenger rail to know any better, and is dependent on the staff brain trust for data and vision, the current “new” direction of heavy growth on corridor reliance has been tried repeatedly, and has never succeeded. This is “emerging corridors” redux — 1972 all over again. Acela is the new TurboTrain. — Mr. Kummant fortunately moved swiftly to achieve a much needed cleaning out of Amtrak’s upper levels of its management ranks. Gone were some of Amtrak’s worst executives in its history, and they were replaced by some excellent (but not all excellent) choices.
- On a positive note, we do have the upcoming experiment with GrandLuxe Journeys premier sleeping and dining car service coming in the late fall. If everyone keeps enough of an open mind, this could be a harbinger of good things to come, based on concepts and revised applications to other services.
We have also seen increases in corridor train services, but, again, only at the cost of state treasuries kicking in more money to Amtrak instead of Amtrak figuring out a way to generate more income from ticket revenues and making better use of current assets.
- The greatest sour note of the year remains the lack of service over the Sunset Limited route between New Orleans and Florida. Amtrak continues to ask everyone to believe the dog ate its homework instead of offering any real reasons why this service has not been resumed.
- Anyone who has had the pleasure of being a VIA Rail Canada passenger knows our Canadian cousins excel at customer service. The following press release from VIA explains why.
VIA Rail Cites Customer Focus as Strategic Business Advantage
WEBWIRE — Wednesday, September 26, 2007
Brockville, Ontario - VIA Rail Canada’s President and Chief Executive Officer, Paul Côté, today emphasized that customer service is the foundation for the company’s success. VIA has chosen to focus on providing excellent customer service as its core business strategy, citing this as a strategic business advantage.
Addressing a group of business people at a luncheon organized jointly by the Brockville Chamber of Commerce and Rotary Club, Côté showcased the VIA experience as one-of-a-kind..
“A recent survey indicated a 98 per cent customer satisfaction rating for VIA, a score that makes us one of the most trusted and admired transportation companies in Canada” said Mr. Côté. “In a market that has seen little growth over the past five years, there is really only one way to make our business thrive - by increasing the value of that unique experience for our customers. The reason people choose the train is it offers something a little different - a more comfortable, convenient and less stressful way to travel. We call it the more ‘human’ way to travel” he added. “And our success as a business depends on delivering a ‘human’ experience that consistently matches and surpasses expectations”
This strategy has produced tangible results. In the 2006 Commerce-Léger Marketing Survey, respondents ranked VIA as the most admired transportation company and one of the top 30 most admired companies overall. Last year, VIA’s revenues increased, for the third straight year, to close to $300 million. More than four million passengers boarded VIA trains last year; the Quebec City-Windsor corridor alone carried a record 3.5 million passengers.
VIA has an established presence in the City of Brockville - the city that opened the first railway tunnel in Canada, and marked the completion of a new rail service from Montreal more than 150 years ago. That service grew into a network linking Quebec City to Windsor, which now carries some 400 passenger trains per week, and 3.5 million passengers per year. Last year, 63,000 passengers used the Brockville station, placing it among the busiest stations in Canada.
- URPA’s always-pondering-the-world-around-him William Lindley of Arizona has these worthwhile thoughts.
Lessons From Busways and Trains
By William Lindley
Los Angeles in late August inaugurated a prototype 65-foot long bus. The Metropolitan Transportation Authority is testing this bus, which fully loaded, can carry over 130 sitting and standing passengers, to add capacity to its strained Orange Line busway. The problem is, the Orange Line has proven so popular that even as buses leave their first stop, they are already packed. And significantly increasing frequency is not an option because the busway is already handling nearly as many buses per hour as it can. The only solution for now is to operate ever-longer buses — and MTA had to get a waiver because this new bus is technically illegal because of its excessive length.
Even such longer buses are unlikely to add enough capacity to handle current, let alone future, demand. The only long term solution is… a train. A 65-foot bus can carry about as many persons as a single car on the Red Line subway… except a subway train can have four, six, eight, or more cars in one train, all controlled by one motorman. One such train every two minutes, then, carries eight times as many riders as one of these new buses every two minutes.
So what was the point of building a busway instead of extending the Red Line from the outset?
One could reasonably hold that Los Angeles could have worked harder to overcome community opposition to a rail line. Yet, when all you have are forecasts and predictions about ridership, it’s hard to convince politicians, much less the jaded voting public, that even the most well-constructed model will reflect reality. Even though constructing the busway first and then having to replace it with a rail line later will have cost more, there is now unquestionable proof — in packed buses — the riders are there. The case for rail here has become far easier to make. And isn’t it better for the public to have had several years of actual bus service first, instead of bickering for years about rail that might never happen?
In considering commuter and intercity rail, the same lesson applies.
It is better to build something small NOW and prove the demand, than to study and argue for years. The high cost of inaction is in jobs not taken, shopping trips not made, and time wasted sitting behind the wheel of an automobile. And how do you calculate the cost of Grandma sitting at home instead of going to a movie or visiting her family?
The more hidden lesson of the Orange Line, though, is in not starting TOO small. We have lost count of the poorly-conceived and poorly-executed examples of bus and rail service that litter the American countryside. No, a line has to be designed to succeed.
Rolling even the most glamorous commuter train down a poorly-maintained 30-mph branch line twice a day, over the objection of the host railroad, is not a plan for success.
Neither is spending billions on 150-mph speedster trainsets, and then running them on a 90-mph railroad without addressing outdated tunnels, crumbling stations, and poor integration with buses and other trains.
Despite what some rail pundits might say, the MTA did the right thing with the Orange Line busway. Build something that’s useful and usable, and it will be used. That’s the best way to build the popular and political support any publicly-funded project deserves. Plan big, start small, and serve the public.