Easy Ways for Amtrak to Make More Money   February 2nd, 2013

Report by Noel T. Braymer

Cutting back on Long Distance Passenger Service has never saved money for Amtrak. It was tried in 1979 and again in 1997 with losses increasing not decreasing. Amtrak’s losses increased 150 million dollars from 1978 to 1981 after the October 1979 service cutbacks of 5 Long Distance Trains. Despite service cutbacks after 1994 which included in 1997 elimination of 2 Long Distance Trains, Amtrak almost ran out of cash for operations by 2002 from the cost of the start up of the Acela Trains.

In 1993 Amtrak had increased its cost recovery over the preceding 11 years from less than 50% to 79%. Then retiring Amtrak President Claytor expected that by 2000 Amtrak could cover its costs of operation. But to do this he was quoted in an interview published in the March 1,1990 issue of Railway Age Magazine saying “We have to have greater capital investment. For this fiscal year Congress authorized $80 million for capital investment, basically for new equipment, and we’ve got to have that kind of appropriated investment every year or the railroad can’t keep going.”

What Mr. Claytor was saying was Amtrak needed more cars to carry more passengers to bring in more money to pay the bills. This fact is show in this quote by Dr. Ronald C. Sheck from the 1980′s from his report, Amtrak 90: A Route to Success  In Amtrak’s case, because of the overall low frequencies of train service, the revenues generated are inadequate to offset these common expenses, which make up an excessively large and disproportionate share of corporate costs. In FY 1980 Amtrak incurred total expenses of $1.1 billion, yet the actual cost of direct operating expenses (moving the trains over the tracks-labor, fuel, expendables, etc.) was only $272 million, or about 25 percent of the total. Indirect expenses (stations, yards, shops, maintenance of locomotives, cars, and the small amount of track owned by the corporation) totaled $644 million, or 56 percent of expenses.”

What this shows is eliminating Long Distance Passenger Service reduces revenue while doing little to reduce the overhead costs of Amtrak. The reverse is true when expanding Long Distance Passenger Service because this improves revenues and reduces losses if overhead costs don’t increase faster than revenue. Service improvements for Long Distance service (more cars and extended services) during the 1980s were followed by reduced losses. To reduce losses the best thing to do is to run more service where there are already existing stations, crew bases and doing so while improving equipment and crew utilization. A good example of how this can be done is to extend the Palmetto from Savannah back to Jacksonville. After extending this train to Jacksonville in 1988 it was cut back again to Savannah in 2004 as a way to “save money”. Returning the Palmetto to Jacksonville will add stations to this train, increase passenger miles , create a third East Coast Train to Florida and won’t require building new stations or additional equipment.

The same could be said for extending the City of New Orleans along the Gulf Coast to Florida. Today this train sits in New Orleans for over 20 hours between runs mostly as an overnight train to and from Chicago. Extending this service during daylight hours to major markets will increase ridership and revenues. The Gulf Coast has stations and tracks that are back up to passenger standards after the Sunset service was suspended because of Hurricane Katrina in 2005. With one additional trainset service could be extended to Orlando and possibly even Miami. This would open major tourist markets for Amtrak from the Midwest to the Gulf Coast and Florida. Again this would improve equipment utilization, require no new construction, it would double the route length of the City of New Orleans train which would greatly increase the passenger miles of this train and increase traffic for other Amtrak trains in the Mid-West to connect to this new service.

Running trains less than daily doesn’t save money for the same reason eliminating trains doesn’t save money. Amtrak in 1995 cut back the Empire Builder to 4 days a week service west of Minneapolis and lost money; 25 million dollars lost from reduced ridership. This train was soon returned to daily service. In the 1960′s the Western Pacific studied cutting daily service on the California Zephyr and found that reduced revenues from lost business would increase losses not save money so the Western Pacific kept the train daily. Just running the Cardinal daily would greatly improve ridership and revenue. The other thing that would help this train would be to create a section and split the Cardinal to extend this train’s route. A logical extension would be to St Louis and on to Kansas City. This would require splitting the train at either Cincinnati or Indianapolis. Between either of these cities to St. Louis there is roughly 300 miles currently without Amtrak service. Any new stations for new service on either route would be best paid for and owned by the local communities to limited increased overhead for Amtrak and allow the local communities to get involved with the service. Between St Louis and Kansas City are existing stations and crew bases. Such an extended service would add two additional major cities with connections to other trains for the Cardinal.

There is interest from the States of Kansas, Oklahoma and Texas to extend service on the Heartland Flyer from Fort Worth and Oklahoma City to Kansas City. While a step in the right direction since this will add major markets and increase passenger miles; more in this case would be better. Service from Houston through Dallas-Fort Worth up to Chicago in this case would be much better. This can be done by extending service to Houston and combining the Heartland Flyer as a section of the Southwest Chief. Improving connections at Kansas City or combing existing service between Kansas City, St Louis, and Chicago would open up new expanded markets for both the Southwest Chief and Heartland Flyer. Why should these States be interested in doing something like this? Starting this year by law Amtrak has to charge the States that subsidize local rail passenger service for the full cost of Amtrak running the service. This could price many States out of supporting local Rail Passenger Service. What makes this very expensive is the States will be paying more for Amtrak’s expensive and underused overhead. Having States combine services and running longer distance trains increases revenues and makes better use of Amtrak’s overhead. Result: better service with a bigger market and lower subsidy.

The fact is short distance trains while often carrying large numbers of people don’t earn much money compared to the cost of running the service. The main factor in revenue are the passenger miles a train carries not the head count. Longer distance trains by their very nature produce more passenger miles because they travel further and serve more stations. Also they are generating revenue all night long as passengers sleep when short distance trains are idle earning nothing. Combing Short Distance Trains into a Long Distance Train will increase revenue and reduce costs. The problem is Amtrak assigns their overhead costs based on route mileage not on how much a train uses the overhead. Because of this people jump to the conclusion that cutting Long Distance Trains will “save” money. But cutting trains only shifts most of this overhead to fewer trains. This is why people think that the Long Distance Trains “lose” over 500 million dollars a year. Yet the reality is most of Amtrak’s overhead would remain if all the Long Distance were eliminated but losses would climb greatly from the loss of revenue.

Another service to add to the Southwest Chief would be to run a section from Trinidad, Colorado up to Denver and beyond to Cheyenne, Wyoming. Most of the population of Colorado lives between Cheyenne, Boulder, Denver, Colorado Springs and Pueblo. A section serving theses towns would greatly increase ridership in Colorado for the Chief and open a connection to the California Zephyr at Denver. It would also increase traffic and support to keep the Southwest Chief on the route between Albuquerque and Newton, Kansas.

Towns and Cities around the country are interested in having or increasing Rail Passenger Service in their communities and region. They are willing to raise funds to build or improve local stations and provide services at them. This is a useful source of help that Amtrak could take advantage of. But more service is needed before these Town and Cities can start building new stations, But this is the type of help in reducing overhead that can save money and allow rail passenger service to make a modest operating profit. Going to Cheyenne also extends service to Wyoming which doesn’t have Amtrak service. Cheyenne is only a small part, but is the most populous part of  Wyoming. Wyoming only has one Representative in Congress but has two Senators.The more involved States and Towns are in their Rail Passenger Service, the more political support and funding will be available to continue expanding service.

Another project that should be done is creating a section on the Crescent at Meridian to head to Dallas and Fort Worth. This simple step adds several major cities to the Crescent route that already have stations for the Texas Eagle. Sections are almost like getting two trains for the cost of one. If this is done at about the same time as the Heartland Flyer would be combined with the Southwest Chief then even more potential connections to other trains and cities are possible.

What is needed most right now to increase revenue are more Long Distance Passenger Rail Cars. Simply adding one or two cars on every Long Distance Train would greatly boost Amtrak’s revenue. As things stand now the Long Distance Trains are often sold out and can’t carry more passenger to meet current demand. Even adding one car to each train requires up to 5 or 6 cars since a train can have up to 6 trainsets in rotation on the road and being serviced. For Amtrak’s 15 Long Distance Trains up to 70 new cars could be needed for adding just one car on all trains. Clearly an even bigger order will be needed to add more cars and expand service much beyond what has been suggested in this post. But this is what was meant when in 1990 Mr Claytor said “We have to have greater capital investment. For this fiscal year Congress authorized $80 million for capital investment, basically for new equipment, and we’ve got to have that kind of appropriated investment every year or the railroad can’t keep going.” (emphasis added ) Amtrak today has  fewer passenger cars for Long Distance Trains than when Mr. Claytor spoke those words in 1990. Money spent on more cars pay for themselves in added revenues.

This entry was posted on Saturday, February 2nd, 2013 at 8:33 AM and is filed under Editorials.