A Business Analysis of the San Diego Metroliners January 24th, 2013
By Andrew C. Selden
NOTE: This article appeared as the first article in the first issue of the “RailPAC Quarterly Review,” in September, 1984. What Mr. Selden said then bears close resemblance to the situation facing the Amtrak “experiment” with a morning limited stop train on the same corridor in 2013. Mr. Selden is President of the Minnesota Rail Passenger Association, a frequent contributor to RailPAC publications and has spoken at RailPAC Conferences. Particular note should be taken of his suggestions at the end of the article.
Claytor (Amtrak then President Graham Claytor) probably doesn’t know what the equipment utilization factors are in the Southwest Coast Corridor (now called the LOSSAN Corridor), may not care,and probably didn’t take that into account in planning this service. Two. of his senior marketing and planning officials have recently admitted they do not consider return on investment in planning major investments of Amtrak’s scarce resources. Intercity rail passenger service is not a function of running passenger trains. Rather, it is the business of furnishing a surface transportation system using trains. The distinction is real and important. Amtrak, to judge from its planning and implementation of the San Diego Metroliners, has not grasped it. These trains were foredoomed to fail, and have failed in the marketplace. Private sector rail advocates and local governments predicted this outcome. Amtrak not only failed to foresee these trains’ performance but obstinately refused to acknowledge the factors that inevitably lead to their costly failure. This article explores the history and performance of the San Diego Metroliners, explains why they failed, and concludes with suggestions how to improve the surface passenger transportation system in the Southwest Coast Corridor.
The San Diego Metroliners are the fifth consecutive failure of a limited stop, limited purpose, “express” intercity passenger train in recent American history. The failures of the prior attempts were due to fundamental misstructuring of the services for the markets being served. The New England Metroliner, the unsuccessful predecessor of the San Diego Metroliner, for example, failed because a limited stop, four-hour train serving business traffic is not and never will be competitive with one-hour jet services, or the stop flexibility and demand scheduling of the automobile.
The San Diego Metroliner has failed for similar reasons: it does not respond to the needs of the market it purports to serve. Rather than “substantially” increasing ridership and revenues as Amtrak predicted, the San Diego Metroliners have suffered material and continuing declines in ridership and revenue over the conventional trains they displaced. The Metroliners carry an average of 40 to 50 passengers per trip, less than busload quantities and clearly inadequate for a rail service.
Those who fail to heed the lessons of history are indeed condemned to repeat them. Amtrak’s and its predecessor’s history with limited stop, limited purpose trains has
not been very good, but it has been consistent. Before Amtrak’s creation, Penn Central had attempted several express Metroliners in the New York – Washington
market. These limited stop, premium fare trains were an early attempt to draw from Eastern Airlines’ air shuttle end point business traffic that wouldn’t come near PC’s dilapidated conventional trains. The trains failed. They included a nonstop, two hour thirty minute (2:30) schedule in April, 1969, that was quickly changed to a one-stop 2:30 schedule in July, 1969, then another very brief attempt at a nonstop train in October followed immediately by restoration of at least two stops (2:50 running time) and by May, 1970, three-stop schedules at 2:50. Five-stop trains were scheduled in 2:59. (Today’s 1984 best schedules, after nearly $4 billion in capital investment, are four-stop “expresses” scheduled at 2:49, not noticeably different from comparable schedules of 15 years ago.)
Despite the failure of PC’s limited stop experiments, Amtrak has twice repeated the “don1t-stop-to-pick-up-passengers” trick in the New York – Washington subsector of the NEC, with equally dismal results. In November, 1971, two Metroliners each way were changed to one-stop expresses scheduled for 2 hours, 52 minutes. These trains again went head to head with the Eastern Airlines Shuttle, an hourly, unreserved, guaranteed seat service between La Guardia and Washington National. The Shuttle took an hour gate to gate and under two hours downtown to downtown. Eastern won again.
The express Metroliners were withdrawn in June, 1972. They could not compete for end point business traffic against jet planes, even in 200 mile markets. Predictably,
the trains carried no end point traffic to speak of. A large proportion, perhaps the majority, of ridership on today’s Metroliners is only New York – Philadelphia (90
miles) and Graham Claytor has stated publicly that the Metroliners still carry virtually no end point traffic. No route and market matrix analysis was (or has been) done on the NEC spine and intermediate point markets spanning New York City to test the full potential for rail service in overlapping markets throughout the NEC.
In November, 1971, Amtrak tried a limited stop “express” operation of the Empire Builder between Chicago and Minneapolis. The Builder bypassed six stops to save twenty minutes. Some service to the bypassed cities continued with the Hiawatha.
As with the San Diego Metroliner, Amtrak theory predicted that traffic to and from bypassed cities would simply shift to the other train(s). This experiment also was a flop and was quickly withdrawn. The next timetable, June, 1972, restored two stops
(and ten minutes), and another stop was restored with no additional time the next year. Bypassing intermediate point traffic sources resulted in a sharp drop in revenue without offsetting cost savings, or traffic gains on the Hiawatha. Amtrak still disregards smaller intermediate stops when modelling projected traffic for proposed new services. With the conversion of the Empire Builder schedule, traffic to or from bypassed stops for points east and south of Chicago and west of Minneapolis as well as some intra-route traffic was completely cut off. Amtrak’s displacement theory was proven wrong. Even in tiny absolute numbers, such traffic produced high marginal revenues. Loss of just one “average” round trip long haul passenger each day at just half the bypassed stops, at today’s fares, would forfeit nearly $35,000 in monthly revenue, well over $400,000 per year, virtually free of incremental costs beyond reservations and ticketing.
The limited stop operation had no offsetting gain, because not enough time was saved to impact marketability, crew costs or equipment utilization. No stations were closed
or reduced. Travel opportunities, however, were reduced significantly. Amtrak seems to have had no awareness of route and market matrix implications, or sensitivity to network connections, resulting from limited stop, limited purpose operation.
In the NEC, ten years later, after nearly $4 billion in NECIP and Amtrak capital investments, Amtrak again tried a skip-stop service in October, 1981, with three two-stop Metroliner expresses, timed at 2:59. This quest for end point business traffic failed yet again and for the same (still unlearned) reasons, and was quickly withdrawn. The familiar excuses of rough track, bad dispatching, interference by Conrail commuter trains, etc., willfully disregarded Amtrak Marketing’s gross misperception of rail’s real market function in these areas, serving cities in the matrix not served by frequent, cheap, jet services.
Amtrak next inflicted its costly theories on the New York – Boston end of the NEC. In October, 1982, they introduced the New England Metroliners, two single-purpose daily 231 mile trains each way aimed yet again at end point business traffic between major cities with ample air service. The trains displaced multiple stop conventional schedules, and featured long distance leg rest coaches, free snacks, a full-service diner, and a million dollar, train-specific, adcampaign over and above customary, extensive NEC advertising. For a time, two 3000 h.p. F-40′s were assigned to the (normally) 4-car trains. A hefty premium fare was charged. The trains were 50% more expensive, and took four times longer, than competitive air services, bypassing such obvious sources of business traffic as Iselin, Newark, Stamford and Rye. The New England Metroliners were structured to fail. Their price and schedules were not competitive with air services for end point business traffic. They did not serve or even permit connections from points south of New York, and by bypassing critical suburban stops at Rye and Stamford (and ignoring Iselin and Newark) they turned their back on the vast majority of their potential target business travellers for whom there might not have been a viable air option. Like the New York – Washington expresses, they spurned traffic for which Amtrak has no real competition. Like the New York – Washington expresses and the entire San Diegan schedule, the New England Metroliners terminated at a major downtown metro station and ignored significant potential traffic flows to and from major population areas beyond.
Once again, Amtrak took a bath. Ridership on the Metroliners plummeted by more than 50% from the conventional trains they displaced to less than busload levels. Fewer
than 50 passengers were handled per trip. Despite the fare premium, total revenues fell. Not enough new traffic was captured to pay for so much as the direct costs of advertising and ticketing. The fare premium didn’t recover the direct costs of reservation service, or the on-board amenities or the ad campaign, much less all three. The service consumed two seven million dollar trainsets for just 462 revenue miles per weekday. Both sets sat idle for over five hours during the heart of each business day. An airline marketing officer who scheduled two 727′s to be parked from before noon to after 5:00 p.m. each weekday would be fired instantly.
At the same time the disastrous New England Metroliners were being withdrawn, Amtrak Marketing was planning yet another limited stop, limited purpose, premium fare express train aimed at end point business traffic, this time between San Diego and Los Angeles. To save fifteen scheduled minutes and the time-consuming nuisance of loading paying passengers, the trains bypass four heavily used and rapidly growing intermediate stops, three of which feature major, new regional multi-modal transportation centers. The purported time saving itself is a mirage as these trains actually add to the end point trip times. Amtrak dogma states that five minutes is consumed by a station stop, yet these trains save only fifteen minutes by skipping four stops.
Amtrak has ignored the character of San Diegan traffic. Only 15% is end point business, 35% is end point-intermediate point, and fully 50% never sees either end
point. Amtrak’s alleged “market studies” for this service (if they exist) therefore are essentially irrelevant to this market. End point expresses are even more meaningless in this corridor than in sub-segments of the NEC. Amtrak claimed that Los Angeles-San Diego was the largest single origin and destination pair of stops in this market, disregarding the fact that 85% of this market’s traffic moved between other points. Amtrak’s claim that the two intermediate stops chosen are “suburban” stops, like Metropark,N.J. or Glenview, IL., merely illustrates Amtrak’s ignorance of Southern California’s urban geography.
The two stops the trains do make suffer from poor accessibility, low visibility, stagnant traffic bases and in one case no parking availability. These stations’ principal attractions to potential rail passengers are a race track, a ballpark and Disneyland. The new Metroliners may draw business traffic, but it may not be the kind of business Amtrak had in mind. The Metroliners stop at Del Mar but bypass Oceanside’s new $7.5 million regional transportation center. Traffic at Oceanside in early 1984 was up 23% and climbing, with station revenues up 37% and climbing. Oceanside has over 250 parking places, a heavily used “kiss-and-ride” facility, a regional multi-modal transit center and excellent freeway access. Oceanside’s current population is over 15 times Del Mar’s, and by 2000 will be 21 times Del Mar’s. Del Mar’s station parking lot is already full and has no capacity for expansion, while Oceanside’s parking was just tripled and is soon to be nearly doubled again. Unlike Oceanside, Del Mar has no effective freeway access and cannot service its inland area. Amtrak’s marketers said they picked Del Mar over Oceanside because Del Mar’s population was better able to afford the higher fare, and because the Del Mar to LA fare would be higher than the Oceanside – Los Angeles fare.
The trains also bypass Santa Ana, the Orange County seat and state and federal court center. Santa Ana is the second strongest intermediate source of business traffic on
the line. It has a major new regional transportation center. Fullerton, the strongest intermediate station on the line, is the site of a $5 million station rehabilitation, with a new regional transit mall, just quintupled parking, and freeway access. It serves a major university community and is a natural throat at the end of the Santa Ana canyon tunneling traffic flowing toward downtown LA from the east. It too is bypassed.
The Metroliner scheme, never discussed with local transportation agencies or elected officials, raised a storm of bitter protest, ill will and bad press. Four cities, one
transit district and the Orange County Transportation Commission formally, and in some cases scornfully, protested the scheme. Southern California members of Congress have bitterly attacked Amtrak’s arrogant intransigience, and demanded that Amtrak re-evaluate and justify the decision to implement the Metroliner scheme.
Graham Claytor then contradicted his earlier claims and conceded the trains will produce a loss in ridership. They must, as skipping stops produces an instantaneous and exponential loss of travel opportunities. In the San Diego local market alone, numerous daily local market opportunities were lost, plus hundreds more to the extent that the schedules adversely impact connectivity at Los Angeles to national system trains. In May, 1984 total San Diegan ridership fell 4.6% due to these trains. The 30% premium fare will also drive away business. The South Coast market has proven to be exceptionally price sensitive, with a maximum tolerance limit of about twelve cents per mile. Pricing even a little beyond that drives away traffic, while modest price promotions at the net level of about nine cents per mile have strongly stimulated marginal sales and profits when left in place long enough to reach the consumer’s awareness. The Metroliner fares are well beyond the proven tolerance level and without apparent offsetting amenities. The New England Metroliners had proportionally smaller surcharges, greater amenities, greater frequencies and massive advertising support, and still failed miserably.
The San Diego Metroliners produce no cost savings. Train miles, station hours and staffing, available seat miles, trip cycles, crew hours and other relevant cost factors remain essentially constant. Indeed, the Metroliners achieve some limited cost savings only by ticketing fewer passengers, but that will be offset by substantial new reservation services costs. Amtrak charged Minnesota for the alleged “short term avoidable cost” (what Amtrak believes to be its marginal cost) of reservation services for the NorthStar at a rate equivalent to about $17 per reservation. A $5 fare premium certainly won’t recover that marginal cost on the Metroliner.
The apparent fifteen minute time savings will be ineffective as a marketing device, as many current trains, especially the first two morning northbound trains, which make all stops on a ten-minute longer 2:40 schedule, routinely arrive eight to twelve minutes early after having waited for time along the line. Business travelers to LA know and rely on this phenomenon. They won’t pay extra for a gimmick on a later train. The pronounced Metroliner traffic imbalance that quickly developed (as much as 30% more traffic on the southbound train than the northbound) shows that travelers use the trains based more on their schedule slots than their service amenities.
The Metroliner operation produced an immediate increase in labor costs of $200,000 per anum by causing a fourth crew and $5 to $7 million trainset to stay overnight in San Diego six days a week. Equipment utilization decreased substantially on a system already critically short of rolling stock. Special trainsets, including two Amdinettes, were ferried (deadhead) to Southern California to operate these trains.
Metroliner trainsets get but a single round trip a day on a 128 mile line, and sit idle at LA for six hours in the middle of each business day, consuming expensive track space, or extra switcher costs if yarded. Although Graham Claytor has said that in his view poor equipment utilization is inherent in short distance corridor operations, that is not only not true (no successful corridor or budget airline, bus or truck company operates that way), it reflects a shockingly irresponsible, lazy management attitude. Claytor has a duty to optimize utilization of $5 to $7 million trainsets, not shrug off their controllable misuse as inescapable.
Claytor probably doesn’t know what the equipment utilization factors are in the Southwest Coast Corridor, may not care, and probably didn’t take that into account in planning this service. Two of his senior marketing and planning officials have recently admitted they do not consider return on investment in planning major investments of Amtrak’s scarce resources.
Finally, Amtrak structured the service 180° off the mark. To the extent that the Southwest Coast Corridor represents a funnel to collect and deliver business traffic,
that funnel points south not north. “Los Angeles” is too diffuse a destination and too thinly served west, north and east of downtown, to be an effective target for business traffic on a limited purpose express train. If a business express is to be run, it should run south in the morning with a target San Diego arrival of 7:50 or 8:20 a.m. (depending upon one’s perception of when San Diego business meetings get underway, and on the schedule’s demands for equipment turns), with a northward departure in the late afternoon, say 4:15 or 5:15 p.m. (and with another round trip in between).
In view of these critical flaws in the San Diego Metroliner proposal, Amtrak’s intentions and possible conflict of interest must be questioned. Has Amtrak stonewalled improvements in the Southwest Coast Corridor for years, and now undermined it with the Metroliner concept and other counterproductive decisions, to benefit American High Speed Rail Corporations’s “bullet train” scheme? AHSR’s executives include former senior Amtrak officers who were responsible for San Diegan services during the same time they were planning the competing bullet train for the private benefit of AHSR’s investors, insiders and foreign suppliers and financiers. Amtrak’s senior marketing officer is a protege and confidant of AHSR’s chairman, former Amtrak president and bullet train promoter, Alan Boyd. Amtrak officers recently explicitly told an elected public official from southern California that they had no interest in improving San Diegan conventional services and preferred instead to see the bullet train implemented. The capacity of conventional rail in the Southwest Coast Corridor will be a major factor in the environmental evaluation of the bullet train proposal, and by undermining the San Diegans Amtrak is making a significant contribution to AHSR’s bullet scheme. The tragedy for the Southwest Coast Corridor is that inexpensive and profitable short term solutions are readily available. Amtrak could not be expected to discern these opportunities. They include:
(1) Immediate reduction of scheduled running time on all trains making all stops to 2 hours 30 minutes. This is not only physically possible and frequently achieved now, it would actually unclog the flow of traffic over the line, open better daytime
maintenance of way windows, greatly improve equipment and labor utilization and significantly enhance the competitive position of the train versus the freeway.
(2) Immediate institution of an eighth daily round trip, not under 403(b), to supply the early morning San Diego arrival, permitting for the first time ever use of the service for business traffic into San Diego. A 1974 professional engineering study commissioned by local governments and CalTrans projected 100 to 300 new daily riders for such a train just from the Oceanside metro area. Fullerton, Santa Ana and other on-line cities would add many more. No capital expenditures or new equipment would be required. The line as is can handle at least one more frequency. The new trip will actually bring an immediate savings of $200,000 per year in cash labor costs by cutting San Diego overnight layover crews and trainsets. Equipment utilization will improve. Significant and immediate growth in passenger miles and revenues would be realized with a net reduction in Amtrak’s operating deficit.
(3) Immediate introduction of a pricing and advertising policy aimed at maximizing ridership at compensatory, rather than exploitative, fares, such as a 25% round trip discount. This would reflect a radical departure from Amtrak’s admitted historic policy of gouging the greatest possible yield (i.e., charging the highest price the market will bear) from an extant traffic base, rather than inducing growth with fares equated to marginal costs. The positive lessons of Amtrak’s own “All Aboard” fares should be applied to the Southwest Coast Corridor now. Graham Claytor recently revealed the bankruptcy of Amtrak’s understanding of basic business economics by saying, “[Marginal cost-based pricing] unfortunately leads in the railroad business to an attempt to obtain profitability by generating high volumes of traffic, all priced on a strictly incremental basis.” (Emphasis added.) What Claytor regards as “unfortunate” is widely regarded by economists and successful private sector business executives as optimal.
(4) Immediate extension, not under 403(b), of at least three daily San Diegans to serve the populous San Fernando Valley, Simi Valley, Oxnard and Santa Barbara northern leg of the Southwest Coast Corridor. No additional equipment would be required, and utilization would be further enhanced. Trains could stop in the valleys north of Los Angeles at existing platforms built by CalTrans. No track capital improvements would be necessary beyond one leg of a wye at Santa Barbara. For the first time ever, meaningful, cost-effective service would be provided to the majority of the spine of the Southwest Coast Corridor. Average SWCC ride lengths could double and revenue yields would expand materially. Terminating all SWCC trains at LAUPT makes as little sense as would stopping and turning all NEC trains back to the north at Wilmington, ignoring Baltimore, Washington and Richmond.
(5) If a persuasive case can be made for a major, focused effort to draw discretionary business traffic to the San Diegan, that effort can be accomplished far more effectively and inexpensively by adding a single car to expedited existing trains, either a 60-seat “custom coach” or a parlor/club car for truly first class service. This would support a major advertising campaign to draw consumer attention to the entire San Diegan service, entail virtually no incremental costs and maintain all existing market/demand opportunities within the SWCC market matrix.
Limited purpose, skip-stop intercity trains have failed consistently. New directions are needed. Is anyone listening?