This Week At Amtrak 2007-12-18
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Volume 4 Number 39
- “Make no little plans; they have no magic to stir men’s blood and probably will themselves not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will not die.” — Daniel Burnham, architect of Washington Union Station, El Paso (Texas) Union Depot and other notable structures
- First, background from a notable Washington Wag about the beginnings of Amtrak and the original intentions of Amtrak’s creators.
The 1970 statute creating Railpax and then the National Railroad Passenger Corporation, eventually known as Amtrak, was more complex than a simple replacement of private passenger trains with Amtrak’s system. Passenger train carriers were allowed to opt out of the NRPC system of running existing trains, but did not have to — as evidenced by the trains the Rio Grande and the Southern continued to operate into the ’80s. As to those trains “surrendered” and placed in Amtrak — and only as to those trains — the previous carrier was relieved of its statutory common carrier obligation.
However, little noticed until repealed in 1997, the Interstate Commerce Act provisions on entry, exit, fare, and common carrier obligation for passenger trains remained on the books; only Amtrak was exempted from them as of 1970. Thus, any non-Amtrak train not covered by the 1970 conveyance of private trains to Amtrak would be subjected to the same straitjacket that had helped cause the exodus in the first place. (Of course, since Amtrak was also given a statutory neo-monopoly in 1970, with a right of first refusal on all intercity service — not just the services surrendered to it in 1970 — any new service would only occur by Amtrak’s permission. The right of first refusal also survived until 1997.)
Without going into the extreme sloppiness that characterized the corporate structuring of Amtrak, it seems clear the 1970 statute was only slightly above back-of-the-envelope coherence of policy, and, in any event, was the product of a policy environment in which Congress still thought it was 1887 (or perhaps 1930) on the railroads, while the rest of the transportation world had already changed dramatically.
There have been allegations the Nixon Administration expected a quick fade-away (which still wouldn’t excuse the quality of the work-product), but the railroads were literally at death’s door, and Congress was still in a time-warp that did not include that reality. And, remember, all of the freight-Amtrak access/compensation provisions of the 1970 act were of a piece with a still- operative freight rail regulatory regime where earning a viable return, or being able to alter prices or services, or abandon lines on less than a decade’s notice, were still virtually unknown concepts.
In short, the 1970 act was the last gasp of the hidebound regulatory regime that nearly killed not only passenger trains, but freight service as well. Some of it still lives on, including the statutory authority for Amtrak to interpose itself in virtually any Class I main line abandonment or facility downgrade; this was just invoked a few days ago regarding the EJ&E transaction and sale of the railroad to Canadian National Railway.
On the freight side, it took Congress — remember it’s “the country’s principal trailing indicator” — several major railroad bankruptcies and over two decades to move the freight regulatory regime out of the 19th century (statutes in 1973, 1976, 1980, 1982, 1986 and 1995). Nothing comes easily or quickly there. There was no parallel modernization of the Amtrak regime prior to 1997 — and the Clinton Administration made sure that reform was sabotaged.
On the contrary, all of the legislative interventions between 1970 and 1997 exacerbated the problems by leaving the increasingly ossified national route network (“basic system”) in place, imposing restrictions antithetical to network flexibility (such as statutory six-year labor protection) and outlawing efficiency (non-food contracting prohibited by law), while adding to Amtrak’s financial burdens the former PennCentral/Conrail Northeast Corridor infrastructure, compounded with statutory embedded subsidies to the NEC commuter outfits.
Until 1997, discontinuing an Amtrak route — although not subject to as absurdly strict a standard as pre-1980 freight rail abandonments — still required a quasi-abandonment proceeding by law. If the current “reform” bills being considered are any indication, Congress is about to embark on some backward time travel.
All of this argues strongly for not compounding or repeating the mistakes of 1970. In fact, in a better world, if a more creative approach had been taken in 1970 regarding passenger service (as was eventually done with freight), and had the funding actually used on Amtrak and the NEC over the intervening years been provided at the same levels as actually occurred, we might well have a rail passenger system today more efficient (not difficult to achieve) and more closely matched with national demographics than the relic we now have in Amtrak.
Whether you agree with this analysis or not, it is an inarguable political reality you will not get increased rail passenger infrastructure by playing a zero-sum game with the freights. Both sides have to gain, or you’re on a fast train to nowhere.
- On that note, let’s take a look at Amtrak today, at the close of calendar year 2007.
Amtrak remains statistically irrelevant as part of America’s transportation network, and nobody is doing anything to change that fact.
Amtrak remains a financially bankrupt corporation, suffering under a corps of non-innovative executives whose personal performance and promotions are based on how much money is saved, rather than how many new passengers are found, how many revenue passenger miles are generated, or how much the national system is grown to accommodate passenger demand.
Even worse, at the end of 2007, Amtrak’s greatest supporters are often ill-informed individuals with no useful understanding of the real potential of Amtrak as an integral part of our domestic transportation network, but rather consider Amtrak an environmental toy available for the amusement of tree-huggers and those with an antipathy for fossil fuel vehicles.
Hardly anybody inside government or private enterprise has a true understanding of the most useful functions of Amtrak and the areas of the company’s greatest potential.
Very few people understand that Amtrak’s value is that is uses proven, passenger-friendly technology, and the overall infrastructure to grow Amtrak’s national system and carry more passengers is relatively inexpensive compared to upgrading or creating new infrastructure in other modes of transportation. Passenger rail is the single most flexible form of transportation beyond the automobile, because trains can be lengthened or shortened to meet market demand. New train frequencies can be added when financially warranted, and, if necessary, new station stops can be created with a strip of asphalt for a platform, a small parking lot, some light poles, and a portable building as a ticket office and shelter.
The only innovation needed in today’s passenger train world in America is a lesson in history, as to what has worked in the past, and what from the past can be viable for expansion in the future. Today’s two level Superliners are just an improved idea on commuter gallery cars first introduced in the middle of the last century, and refined by the Santa Fe Railroad at the same time for use on long distance trains.
Passenger trains may be environmentally friendly, but that is the single worst reason for the promotion of passenger rail. Passenger trains are efficient in many ways, can provide any combination of Spartan-like accommodations to grand luxury. Passengers trains, when properly assembled are rolling cities, with places to eat, be entertained, shop, sit, and sleep. Except for large ships, no other form of transportation offers the wide variety of accommodations and amenities as trains.
Too bad Amtrak keeps refusing to understand these simple concepts.
Instead, Amtrak errantly clings to a concept of itself as a public utility, capable of only providing bare necessities, and willing to do little for the overall comfort of its passengers. Those who believe passenger rail should be glorified transit, or believe it should inherently be a stepchild of government, always reliant on a welfare program for its existence do nothing to insure a future of passenger rail in this country.
A quick check of the Constitution, as outlined by our wise forefathers, does not show any right to, or guarantee of, passenger rail transportation as a byproduct of government. Those who believe there is an entitlement to passenger rail at the expense of others unwittingly want to doom passenger rail in this country to a status of a barely alive entity always at the mercy of others.
The real and true facts are right in front of everybody, found in Amtrak’s own financial statements.
Here’s a sneak peek at some Amtrak financial results for Fiscal Year 2007. A broader analysis will appear soon in another edition of This Week at Amtrak.
The Empire Builder, Amtrak’s long distance route between Chicago and Seattle/Portland is the single best performer in the Amtrak system. This one daily train in each direction generated 390,824,000 revenue passenger miles and $53,177,800 in revenue. It carried 505,000 passengers for an average length of trip of 774 miles, with 207 passengers riding every train mile. The revenue per passenger mile was 13.61 cents, and the load factor was 61%.
Contrast the Empire Builder with one of Amtrak’s best managed short distance corridors, the Capitols, which is overseen by a professional railroader of repute working for the State of California. The Capitols feed passengers in and out of the San Francisco Bay area, east to Sacramento, with connections to Nevada. The Capitol Corridor runs for 168 route miles. The Capitol Corridor fields 16 trains a day in each direction, which generated 96,404,000 revenue passenger miles and $16,723,700 in revenue. The Capitols carried 1,450,100 passengers for an average length of trip of 66.5 miles (the lowest length of trip in the Amtrak system), with 81 passengers riding every train mile. The revenue per passenger mile was 17.35 cents, and the load factor was 26.7%.
To sum up, one long train a day versus 16 corridor trains a day have these comparative results:
The Empire Builder generated 294,420,000 more revenue passenger miles than the Capitols.
The Empire Builder made $36,454,100 more than the Capitols for the fiscal year.
The Empire Builder carried 944,600 fewer passengers than the Capitols.
The Empire Builder’s average length of trip was 707.5 miles longer than the Capitols’.
The Empire Builder carried 126 more passengers per train mile than the Capitols.
The Empire Builder’s revenue per passenger mile was 3.74 cents less than the Capitols’.
The Empire Builder’s load factor was 34.3% better than the Capitols’.
This brings us to the always obvious question: Which is a more useful and productive route, that of the Empire Builder or that of the Capitols?
From a purely economic standpoint the Empire Builder wins this race every time. From a useful transportation output standpoint, the Empire Builder also wins this race continuously. If you were an investment banker, or a public servant charged with spending public money as wisely as possible, which choice would you make for investment for the future, stability, and growth?
California and North Carolina are probably the two most progressive states when it comes to passenger rail. California’s model works well everywhere, and it should be duplicated as often as possible. But, at what cost?
Amtrak continues to pledge its future to corridors like the Capitol Corridor, which has high investment and inarguable low return on investment. The Capitols will always require large public subsidies for both operations and capital improvements. It will be an endless money pit that does not serve even a measurable minority of travelers in California as compared to other modes of transportation.
The Empire Builder, which supports a full infrastructure over a route length of 2,206 miles through vast, empty spaces continuously outperforms corridors from every standpoint. If a second or third daily frequency were added over this same route, the predictable scenario is a lowering of infrastructure costs per train departure, an increase in revenue passenger miles because of a choice of departure times, and an overall healthier route. What will not change is Amtrak’s market share, which nationally is about the same as motorcycles. Still, the Empire Builder has a decent shot at complete viability from a financial standpoint, while the Capitols will forever be mired in the economics of transit and commuter services.
Again, which is the best investment? Californians, which pride themselves on their “green” efforts, are willing to pay for their trains through state subsidies. That’s fine, because it is their choice to do so. However, routes like that of the Empire Builder are much closer to not needing any subsidy at a realistic point in the future. Is Amtrak going about things backwards by promoting corridors which do nothing to help Amtrak’s financial picture? Is Amtrak trying to live off of someone else’s money (the states running corridors), instead of saying, “Gee! I can make a go of this if only I choose to run the right type of trains!”?
- So, again, here we are at the end of 2007. Thanks to the United States Senate, which rarely understands a good candidate for Amtrak’s Board of Directors even when they are delivered on a silver platter, has confirmed a new group of political insiders this year who will do their best to represent all of the failed Amtrak policies of the past. The good candidates for the board — those who actually understood the passenger business and were willing to spend their time on behalf of Amtrak to bring it to heel financially — are gone, thanks to the inaction of the Senate in not confirming the White House’s Amtrak board nominees.
- At the end of the year, we are also seeing a departure of one of Amtrak President and CEO Alex Kummant’s lieutenants who was a key player in Amtrak’s corporate planning department. Most likely, the gentleman ran into the brick wall of Amtrak’s ingrained cadre of executives who are masterful at stonewalling any idea which was “not invented here.”
- At the end of the year, we are also reading news reports from New England of the alleged peril the Downeaster service between Boston and Portland, Maine may soon be in because of a possible lack of funding from the State of Maine to keep the service subsidized financially. The estimated annual cost of the service is $13 million, which requires a subsidy of between $7 and $8 million dollars annually.
The Downeaster’s plight mirrors that of Amtrak continuously; unless someone else’s money is thrown into the pot, the service will disappear. The Downeaster did “okay” in comparison to other short distance routes, but its load factor for last year was only 37%. Again, the question must be raised. How productive is the Downeaster in the overall scheme of things versus the cost?
The answer should be, the Downeaster is a relatively new building block onto which other services can be added, or the Downeaster itself can be enhanced and end up a better financial performer. From a social standpoint, with only a 37% load factor spread over eight trains a day in each direction, carrying 361,600 souls annually who generate 28,809,000 revenue passenger miles for an average length of trip of 80 miles, the train is not successful. Divided evenly over 365 days, the Downeaster transports less than 1,000 people per day. By comparison, the Empire Builder, with just one train a day in each direction, carries 1,383 people per day.
- What to do? The easy answer is to break Amtrak into three financial categories, each with its own set of financial reports. Take the 15 trains of the long distance system (and add a couple of the now-classified short distance trains to the long distance category where they should be, anyway), and run that system separately from a system of state and federally supported corridors. Issue discrete financial reports for each part of the system. Let each part of the system stand on its own merits, with decisions made on that basis, and not a basis of either the whole system or none at all. Add a third financial report, that of headquarters and general overhead (such as the reservations system). No one really knows today how these overhead expenses are allocated to each route. Amtrak would be in a far better position to defend itself financially if its arguing points were made on the financial merits of routes, and not the overall health of the company.
Once a pattern was publicly established which Amtrak’s true revenues and profit potentials are generated, and then the costs of running the company are better known, then rational discussion can take place. Today’s system is broken and nearly beyond repair, and does not allow anyone to make reasonable financial decisions about Amtrak.
- Amtrak needs to acquire a better set of friends. Most of the friends it has today do not act in the best interest of Amtrak or the American taxpayer, but, rather, make silly arguments about “green” issues, untrue statements about transportation utility, and perpetually want Amtrak to be a financial cripple and financial ward of government. Amtrak’s current friends often lack any ability to look at the true potential of Amtrak or passenger rail, and, instead, focus on spending someone else’s money on fantasies which will never be viable under almost any scenario.
- Amtrak has a monopoly on passenger rail in the United States of America. The first impulse of most people is that a monopoly “must” be successful, because it has no competition. The exact opposite is true. Since Amtrak has no competition, and it is constantly suckling at the United States Treasury, it has no sense of urgency, or sense of need to attract and please passengers. Instead, it clings to unreasonable excuses (most of which amount to “the dog ate my homework”), and always expects another meal for another day from the government coffers. Is that any way to run a railroad?
