Commentary

Followup Comments re HR5449 regarding Amtrak

NOTE: Below is a commentary on the newly introduced Passenger Rail bill, written by Andrew C. Selden on September 11. The bill was introduced in the Transportation and Infrastructure Committee on the same date. READ THE BILL at http://transportation.house.gov/uploadedfiles/hr5449.pdf

To: Jim Billimoria and Justin Harclerode, U. S. House T & I Committee

Gentlemen: HR5449 (Amtrak) appears to be built on a severe misapprehension of the role and performance of Amtrak’s various train services. Amtrak’s mission is to carry passengers over distance. Thus, the best (if not only) measure of its performance of its mission is the output of passenger miles produced by its trains, not simple transaction volume represented by “ridership.” A static equipment display produces “ridership” but zero transportation output. “Ridership” is meaningless in measuring the performance of any intercity passenger carrier.

Measured by passenger miles, the NEC is Amtrak’s smallest sector; the other regional corridors as a group produce more output (by about 110%) and the long distance interregional trains produce far more (about 155% more) than the NEC. This comes as a surprise to most people, but these are Amtrak’s own numbers, and they show plainly that the NEC is the smallest division that Amtrak operates.

The NEC is also Amtrak’s weakest sector. Its NEC load factor is about 53% overall, so almost half of its NEC seat-miles go unused. Since trains are heavily loaded only in the short quasi-commuter markets between Philadelphia, New York and New Haven, it necessarily follows that elsewhere in the NEC Amtrak’s load factors are VERY low, in the range of 25% or less. These load factor numbers by themselves prove that Amtrak is already heavily OVER-invested in the NEC, since it is able to sell only about 25% of its existing inventory.

The NEC is also Amtrak’s weakest segment because its market share of intercity passenger transport–in the NEC travelshed–is less than 2%. So, despite the “investment” of about a hundred billion federal dollars (in constant 2014 dollars) into the NEC, Amtrak’s market share and social relevance there is trivial (with the possible exception of the short Philadelphia-New York-New Haven market, where SEPTA, NJT and MetroNorth could easily pick up the slack; elsewhere in the NEC, Amtrak could vanish tomorrow without a ripple). Amtrak’s market share in long distance markets varies, but in some cases may be as high as 5%.

By contrast, long distance trains have a load factor of about 63%. On these trains, a LF of 65% is functionally sold out due to the large number of en route on and offs over a 1000-2000 mile itinerary, where average trips are in the range of 650 to as much as 850 miles. Thus, the NEC trains are substantially under-utilized, while the long distance trains are statistically nearly full.

The NEC is also by far Amtrak’s most heavily-subsidized sector, both in gross and per passenger mile. The NEC relies on about three quarters of a billion dollars a year of federal cash. (Amtrak’s rhetoric distinguishing “capital” from “operating” costs is both arbitrary and inconsistent with Generally Accepted Accounting Principles, it is also meaningless. Follow the annual federal cash grant to Amtrak, and you will see that the large majority of it ends up in the NEC (and servicing debt incurred to support the Acela program). The federal grant cash consumed in the long distance network is negligible–in fact Amtrak represented in writing to a US Senator in 2011 that shutting down ALL long distance services would not save any losses or subsidies! Amtrak’s reported “losses” in the long distance network are an artifact of management’s internal cost accounting system, not a statement of its actual cash cost to the treasury.

The NEC is therefore the smallest, weakest, and most heavily subsidized of Amtrak’s services. If the Committee is concerned about Amtrak’s losses and inefficiency, or its persistently awful returns on invested capital, the answers lie in rationalizing the NEC rather than attacking Amtrak’s largest, most commercially successful, and least subsidized segment–the long distance trains.
Respectfully,
Andrew Selden

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