24 Oct

Ideating: How to make Amtrak profitable

Actually, you can use the subsidy scope charts from 2008 to make a profitable Amtrak:

Take a look at all the lines, and which ones are profitable. Keep those.

Acela makes $220,200,000 a year.
Northeast Regional makes $146,500,000 a year
Northeast Corridor ‘special trains’ make $3,600,000 a year.
According to the chart you need to deduct $1,300,000 for labor on the NEC corridor.

You’re left with the North East Corridor routes making $369,000,000 in profit a year.

The Government Accountability Office and Subsidy Scope claim that Amtrak’s depreciation, ancillary businesses and overhead costs are $24.29 a customer.

That gives you $265,000,000 (roughly) in overhead. That means the North East Corridor lines mentioned above make $104 million dollars in profit a year. So carve those out as an empire that’s profitable. They serve about 11 million passengers a year. Even the most anti-rail frothing angry face can’t argue that’s all good.

Then you can play with the remaining state and short run lines up to $104 million in loss. You would have to give up on all long run lines. If you look at the charts, they’re all losing a tremendous amount of money (every passenger is a $100 or more loss on those long hauls). And all train vs plane studies show that trains succeed in the under 500 mile range. Planes make more sense going coast to coast, unless you get super super fast rail. We’re not there. So we need to focus on city to city, and not on hooking up the whole network just yet (even in Europe, it’s moving that way, big cities get fast rail, and then the network slowly spreads. Take a look at the map).

Using a spreadsheet, these lines could survive on that $100 million profit that the NorthEast Corridor generates:

Chicago-St.Louis (makes or almost makes profit)
Washington-Newport News (makes or almost makes profit)
Non NEC Special Trains (makes or almost makes profit)
Carolinian (makes or almost makes profit)
Illini/saluki
Adirondack
Heartland Flyer
Ethan Allen Express
Piedmont
Pere Marquette
The Downeaster
Hiawatha
Vermonter
Blue Water
Hoosier State
Illinois Zephyr
Kansas City-St.Louis
Keystone Service
Pennsylvanian
Cascades
Albany-Niagara Falls-Toronto

That does lose you:

San Joaquins
New Haven – Springfield
Capitol corridor
Pacific Surfliner
Wolverine
Empire Service

People there would be pissed (I think the Pacific Surfliner and Wolverine would be good investments with sped up times and are worth a turn around bet). But Amtrak could begin to operate independently, seeking loans and speeding places up, acting like a business.

Those last ones could even be kept with a focus on lowering some costs, and boosting ridership on profitable areas. At the very least, the red would be seriously reduced.

As for the long distance lines, there are some that might be recoverable, but looking at that chart, they look pretty damning. There’s no reason for Amtrak to be covering the entire middle of the country. It’s expensive, it is half the reason it struggles to exist and gets used as a punching bag by anti-rail zealots. Long distance lines eat up most of the money it has to ask for. And until recently, Amtrak had to run those lines because it was legally obligated to (neat trick, obligate them to run those lines, then critique them for needing money to do it, then call rail a failure).

Amtrak is no longer legally required to run those lines, but is ‘strongly encouraged’ by congress, who act as their board.

Conservatives keep talking about wanting to hand over the Acela to a small company. But it might not be a bad idea for Amtrak to be allowed to be it’s own company so that it could kill all those long distance lines, a select number of services, and start without meddling.

On the other hand, a number of politicians strongly support having those long distance lines go through their underserved rural areas. And when Amtrak tries to drop services, often states will step in to try and keep service, because the state will deem it useful. So Amtrak is sort of muddling through here. I mean, if you keep being given money, even if you are being reviled by the people who do it, it allows service to continue to millions of people a year. Amtrak is not a profit-oriented corporation but a service, that’s its mission statement since 1970. It’s only doing what its told to do. So I sympathize.

But I also wonder what it could do if it dropped those long haul routes and focused on the good ones.