Amtrak
Answers |
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New fast trains like
this Acela Express, and the upgraded track for them to run
on, are essential for Amtrak's future success, but require
tens of billions of dollars of investment.
UPDATE : Please also
see my new 28 June Amtrak column
for more on this topic. |
On 7 February the Amtrak Reform
Council submitted a plan that would break Amtrak up and
eventually privatize much of its network, and in congressional
hearings on 15 Feb, described Amtrak as 'obsolete'. Sen McCain
introduced a bill on 19 Feb that had similar provisions, and
which would involve the states in regional funding of the trains
in their areas.
Each year sees Amtrak post a
larger loss than the year before, and some analysts believe that
even Amtrak's 'most successful' project - its Boston - New York
- Washington Northeast Corridor, is losing substantial sums.
With Amtrak projecting as much as a $1.2 billion loss for 2002,
and anticipating less than half this in government funding, it
is threatening to discontinue all long-distance train service if
it doesn't get the money it needs.
Lastly, let's not forget the
law passed in 1997 that requires Amtrak to be profitable by 2003
- next year!
Plainly, rail transportation is
at a critical point in America - a crisis magnified by the
reduced level of confidence and convenience in air travel, and
the growing popularity and success of rail travel elsewhere in
the world.
Amtrak's Troubled History
Trains used to be the
primary and preferred means of transportation in the US. But
they died a long and slow death during the second half of the
twentieth century, first at the hands of the automobile, and
then at the hands of the airline industry. By the 1960s the
railroads had essentially accepted defeat and wanted out of the
passenger side of their business, preferring to concentrate on
freight. However, rather than just witness the complete
abandonment of passenger rail services, the government chose to
step in and create a hybrid part private/part government body,
now popularly known as Amtrak, in 1970.
Unsurprisingly, Amtrak took
over a loss-making organization. But the then Transportation
Secretary confidently predicted 'a new era in rail service' and
said Amtrak would break even in 'about three years'. Amtrak
become a political plaything, with lawmakers seeking increased
services in their home states, while withholding the massive
capital funding that Amtrak consistently said it needed to
revitalize its network.
Amtrak lurched from loss to
loss during the thirty two years since its founding. In 1998, 39
of its 40 routes lost money, and in total from 1971 through
2000, it has soaked up over $23 billion in federal subsidies. In
2000, it lost $944 million, its largest loss in its entire
history, but in 2001, it set a new record with a $1.1 billion
loss, and now says it will need $1.2 billion to cover its costs
in 2002. To misuse a popular expression, for Amtrak 'the light
at the end of the tunnel is an oncoming passenger train'!
Amtrak's Problems
Amtrak suffers from some
severe limitations that would appear to make it impossible to
make a profit in its present form.
In Britain and Europe, over
90% of the routes feature more than five trains a day. With
Amtrak, this figure is only 5%, and almost three quarters of its
routes offer only a single train each day (inevitably, it seems,
at an inconvenient hour of the day or night!). It is impossible
to build up a strong route system and strong passenger numbers
with only one train a day. It also means that all the
infrastructure that Amtrak operates - owning and manning train
stations, for example, only gets used once or twice in each day
instead of steadily all the time. That is sinfully inefficient -
imagine if your local airport only had one flight a day!
Amtrak's problems get worse.
In its present form, it would be very difficult for Amtrak to
appreciably increase its service levels - it has less than one
tenth as many coaches as most other railroads elsewhere in the
world (expressed in terms of coaches per mile of track).
Amtrak's problems are very
simple. Too little equipment, and too few services, with too
high a mix of fixed costs. The more it cuts back on service, the
more difficult it becomes to reach breakeven with the fewer
remaining services.
The Solution is Obvious
Amtrak seem to regularly
announce reductions in services in an attempt to cut costs. But
this just digs itself a deeper hole, as its financial results
indicate.
The only way for Amtrak to
get to breakeven is to increase, not decrease, its services.
On the few occasions that
Amtrak has experimented with growing, rather than cutting back
services, the results have often been positive. Doubling the
number of trains between Los Angeles and San Diego, some years
back, resulted in more than doubling the passengers on the
route.
Even in its showcase
corridor - the Boston - New York - Washington service, it
provides a disappointing level of service that does not meet the
needs of many business travelers. For example, the last express
train in the evening to depart from Boston to New York and DC is
at 5.15pm. In my own Seattle area, it is common for the Horizon
Airlines shuttle to operate flights between Seattle and Portland
as regularly as every 30 minutes; Amtrak provide a grand total
of three fast and one slow trains per day!
By comparison, trains
between major cities in Britain and Europe commonly depart with
the same frequency that shuttle flights operate here; indeed, in
many parts of Europe, the airlines have given up on short haul
traffic, recognizing the superiority of train service. Trains
must offer the same or better frequency of service to
successfully compete with air travel.
Two Types of Train Service
Amtrak needs to recognize
that it provides two very different types of train service, and
to segment its offerings accordingly.
-
Short distance convenience
service between larger sized cities (usually no more than
about 300 miles apart). In such cases, Amtrak can go head to
head with the airlines - and win - by offering fast,
comfortable, affordable, and frequent services.
-
Long distance 'experiential'
service that it should market primarily to train lovers and
people seeking a relaxing different type of travel/vacation
experience. People seeking a convenient means of travel will
never choose a multi day train when they can fly the journey
in less than a day. Instead, Amtrak needs to copy what has
been successfully done in Australia, where long distance
train services have been changed to an upmarket and
primarily tourist attraction rather than a downmarket and
functional form of transportation.
The Biggest Problem of All -
Money
The budget for this year
allows Amtrak a miserly $521 million in funding. The same budget
sets aside $28.5 billion for highways (55 times more money!),
supplemented by who knows how much more at state, county, and
city levels. The airlines received billions of dollars in
handouts after 11 September. Amtrak received not a single extra
penny.
Amtrak is the poor cousin of
the transportation family. Amtrak is only unprofitable because
it can not invest in its future to create the efficient, high
speed, high frequency rail network that would succeed. Instead,
it has been forced to sell off or mortgage its asset base (eg
Penn Station in New York) merely to cover its operating losses.
So don't blame Amtrak for
losing money every year. Amtrak knows what its problem is, and
continually pleads with Congress for more money so it can invest
its way out of its current 'death spiral'. No business can make
money if it lacks the capital to create the environment in which
it can trade profitably. Congress is being myopically unfair in
demanding that Amtrak become profitable, while denying it the
tools it needs to achieve this goal.
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Originally published
22 Feb 2002, last update
21 Jul 2020
You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.
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