Why Nickle and Diming Amtrak Won’t Save It Money

I’ve seen this before, and it didn’t go well the other times it was tried. Congress is pressuring Amtrak to “save money” again. This is particularly true on food service and long distance trains. We will likely see Amtrak raising prices and cutting back on food service. We will continue to see Amtrak running shorter trainsets on some trains to “save money”. This didn’t save Amtrak money then, and won’t save money now.

The difference between railroads and other transportation modes; is the railroads usually owns and maintains most or all of its infrastructure. Airlines don’t own airports, trucking companies don’t own roads and shipping lines don’t own harbors. Usually the government takes care of much of their infrastructure which helps subsidizes these transportation modes. The high overhead from owning infrastructure makes running a railroad very expensive compared to other transportation modes. This is why transit buses seem cheaper than rail transit, as long as you don’t carry a lot of people.

In the post World War II era, the railroads worked hard to get rid of as much passenger service as they could. The big issue for the railroads wasn’t the cost of operating the passenger trains or even the money lost running them. Passenger trains throughout history generally never have been very profitable.What the railroads really wanted was to save money on its infrastructure costs.

The problem for the railroads of having passenger trains, was the cost of maintaining the tracks to passenger train standards. By getting rid of passenger service, railroads would save money on track maintenance with only slower freight trains on their tracks. With fewer but much longer freight trains, the railroads had less need for sidings, switches and signalling without passenger trains. Every foot of track, every siding and every railroad building the railroads could tear out, saved money with lower property taxes as well as maintenance costs.

Even today the future of the route of the Southwest Chief is over the cost of track maintenance in parts of New Mexico, Colorado and Kansas. The BNSF runs very few trains on these tracks and didn’t see any reason it should have to pay to maintain them for speeds up to 79 miles per hour (under the Santa Fe it was 90 mph) for the few slow freight trains that run on this line.

While most of the track mileage on Amtrak trains is shared with the freight railroads, over half of its trains run on a railroad owned by Amtrak on the Northeast Corridor. The NEC is an expensive railroad to own and maintain. In the 1970’s the freight railroads didn’t want to own it, so it was given to Amtrak to insure Conrail could be profitable. Besides the NEC, Amtrak also owns major stations as well as maintenance and repair facilities it was given to by the railroads which wanted to get rid of.

Amtrak’s basic problem isn’t that its trains don’t make money. It’s that Amtrak doesn’t have enough enough profitable trains to pay for all of its overhead from the infrastructure it inherited from the railroads.

Amtrak trains are charged a percentage of this overhead by Amtrak. It is the charges to cover the overhead which causes many of Amtrak trains to seem to lose so much money. When Amtrak claims the Acela “makes” money, that is without including the full cost of the NEC it uses being charged to it. Amtrak accounting fails to take into account that expanding service outside of the NEC doesn’t means doubling overhead costs if service is doubled. But Amtrak accounting will charge a second train on a route the same as one train. This is done even if existing stations are used, the same equipment, the same yards and so on are also used. Even when expanding service would make Amtrak more efficient, Amtrak accounting doesn’t take this into account. This makes it very hard to expand service on Amtrak by inflating the assumed cost of new service with Amtrak’s accounting.

An example of the folly of Amtrak’s accounting goes back to the late 1970’s when for political reasons Amtrak cut 5 trains, 4 of them long distance trains to “save money”. The result was no money was saved because noting was done to reduce the overhead at Amtrak. But revenue was reduced without these trains and Amtrak’s deficit increased,

Since then other service cutback have reduced revenues with little cost savings. But when Amtrak has made modest expansion of existing long distance train service done mostly in the 1980’s under Amtrak President Claytor, revenues have gone up faster than its fixed costs.

A rough analogy is to compare Amtrak to an old, rundown shopping center with plenty of vacant store fronts. Forcing stores that are paying rent to close won’t save the shopping center any money, but it will reduce revenues. The obvious answer for the shopping center is to attract more stores to bring in more money. In the case of Amtrak the answer to increasing revenues and becoming more efficient is to run more cars on existing trains which are often sold out. Also needed is to extend existing trains to more markets and run additional trains on existing routes.This will bring in more money and make Amtrak more efficient without major increases to its infrastructure overhead.

This will cost a lot of money for more new equipment to carry more passengers to bring in more money. That isn’t a problem, even when borrowing money if you can deliver a good return on investment.The airlines do this and they get financing to lease planes. To be able to do this will require Amtrak to expand service and increase revenue faster than costs by using its existing infrastructure more efficiently. The point is to expand service using as much of the existing overhead and employees as possible. This means getting more use of existing stations, ticketing, reservations, equipment and maintenance facilities.

This can include additional frequencies on some routes. It can also include adding sections to existing trains to serve more markets. It can also include extending existing trains on longer routes. It also includes just adding more cars to existing long distance trains which are crowded already.

Examples of this would be a second overnight train to and from the Bay Area on the Starlight route extended to Vancouver B.C. with connections to the California Zephyr. Either the City of New Orleans or the Sunset Limited could be extended back on the Gulf Coast to Orlando. The Heartland Flyer could be extended to connect to the Southwest Chief and to Kansas City. Running the Cardinal daily makes more sense and it could have a section to St Louis and Kansas City.

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