RAILforum: a private market for passenger trains

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Posted by Michael Christiansen (Member # 3604) on :

I just sat down to compose a letter to my Congresswoman about my trip on Amtrak and the NYT article today about the upcoming budget cuts. I was struck with an important question midway through, why Amtrak? Is there a market for a long haul passenger train run by a private company? What would prevent this? Costs? Tracks? Does Amtrak have a legislated monopoly, similar to the post office? If Amtrak was to be abolished, surely there would be a travel vacuum created. Are there companies that can currently fill this void? The other day I was reading an article in a train magazine about the founding of Amtrak and they mentioned one of the private freight lines (I want to say Southern...) had no problems with there passenger division. Would the big railroad freight companies be able to start up a passenger division again?
Thanks,
Mike

Posted by Rob Dehlinger (Member # 3700) on :

Hi!

There is a market, but it is in the high-end "cruise ship" catagory in operations like the American Orient Express.

The problem with passenger service is cost. Most of the the Class I's did not get out of the business because of lack of passengers, but because of the cost of running the trains was getting too high. Even a train that ran 100% full 100% of the time would still lose money, believe it or not.

As a result, many railroads began a campaign to drive away the passenger. (The SP comes to mind) Even "passenger minded" outfits like the Burlington Route sabotaged their sucessful programs after a change in management in 1964.

The problem w/Amtrak is underfunding, not lack of desire or lack of patronage.

Even most of the airlines in this country, though heavily subsidized in ways that are not as easy to pinpoint as Amtrak's are losing money and for the most part, going broke.

I am a confirmed capitalist and a believer in the free-enterprise system, but in this case, it just is not going to work. It does not work in Europe or Japan either...

Cheers,

Rob

Posted by notelvis (Member # 3071) on :

You are correct in surmising about the issue of access.

The legislation which created Amtrak in 1971 authorizes Amtrak to negotiate agreements to operate intercity passenger service over the freight railroads.

While a private operator could theoretically negotiate to do the same, there is no federal legislation which compels the freight railroad to allow access to any passenger operator other than Amtrak. The railroads which joined Amtrak ARE compelled to allow Amtrak access......the price for being allowed to cease operating their own passenger trains effective May 1, 1971. (Southern Railway eventually joined Amtrak in 1978 and the Rio Grande in 1984.)

Essentially, regularly scheduled long-distance passenger trains making en route stops in the United States, barring significant change to the Railpax legislation, will be operated by Amtrak or they will not be operated at all.

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David Pressley

[This message has been edited by notelvis (edited 02-02-2005).]

Posted by George Harris (Member # 2077) on :

Sorry, in the age of heavily subsidies transportation for all but rail, the economics are just not there. If the freeways became toll roads like in Japan and air fares bore some resemblence to the true cost of providing the service with reasonable return on investment, that would allow an approximate doubling of rail fares which would make the system viable on its own. Otherwise, not a chance. Alternates to Amtrak, also not a chance. Those of us around at the time of the beginning of Amtrak knew that the whole "moviong toward profitability" was phoney, but mostly kept quiet because at the time, it was either that way or no way at all. Quite a few of the railroad companies has expended considerable effort through the 50's at least trying to make passenger service worthwhile and at least break even, if not profitable to no avail, so most of what could be tried had been, except significant tax releive and outright subsidy.

Posted by iowamomofsix (Member # 3695) on :

I'm just learning, but my question is what causes rail travel not to be profitable even when it's booked to capacity? Is the competition provided by alternate forms of travel? Was rail travel unprofitable back when our ancestors could only travel by rail? What changes have occurred over the past century to make it so rail travel is is always and forever losing money?

It's probably a no-brainer, but it just doesn't make sense to me that the oldest mode of travel in our country has always and will always lose money.

I'm excited to be enlightened on this subject.

Debbie

Posted by dilly (Member # 1427) on :

Regardless of how you do it, moving people or merchandise from Point A to Point B is an expensive undertaking. Amtrak certainly doesn't own the franchise.

No mode of transportation -- including Greyhound bus lines, United Airlines, and your family car -- is truly profitable. And that applies even to the much-celebrated Southwest Airlines.

None would function (or even exist) without massive injections of taxpayer dollars, either by forking over direct cash subsidies and bail-outs, or by footing the bill for everything from highway construction, to air traffic controllers, to tax breaks for oil and gasoline conglomerates.

In the corridors of Washington, passenger rail is hardly the only transportation entity that has its hand out. But it receives the smallest slice, by far, of the trillions in government funding that has always artificially propped up all the others.

[This message has been edited by dilly (edited 02-05-2005).]

Posted by Rob Dehlinger (Member # 3700) on :

Hi!

The cost of equipment upkeep and procurement is very high.

The rails (both Amtrak and Freight) have to maintain their own infrasturcture.

Labor costs, while much less on Amtrak than they used to be, are still very high. A well-run passenger train, such as the Empire Builder has a crew of approximately 20-30 at any one time. (Train crews change approx. every 200-400 miles) If you figure that each employee gets paid approx 15-20 per hour, you can already see the costs there. Diesel fuel costs a great deal more than it used to.

Even in the "good old days" the margin of profit was not high. Many railroads shouldered this because the passenger train was considered a "show window."

When the old New York Central re-equipped the 20th Century Limited in 1948, two trainsets cost 1,000,000 a piece. Figure what that would be in today's inflated dollars....(Hint: a superliner costs a bit less than 1,000,000 per car now!)

Throw in taxes and railroad retirement, cost of procuring food for diners and cafes, you can see how much the average train costs to run. The American Orient Express costs approximately 5-6,000 per passenger to ride, and it does not even run 3 days per week on the average!

At 2 bil per year to fund Amtrak (minimum to do it right) It is pretty cheap, considering that a highway cost more than that to build and maintain.

cheers,

Rob

Posted by George Harris (Member # 2077) on :

Rob, you got it right. To run what we have now reliably would cost about the $2 billion you say. To develop something that bore a good resembplance to a truly national service, that is two or more trains per day between all major cities would probably be nearly 10 times as much, but well worth the price. After all, the railroad compaines quoted a passenger service loss of about $700 million in the early 1950's based on ICC accounting standards. What is that in today's dollars? Probably at least $20 billion. It would be quite reasonable for the government to kick in that much, considering what all is done for other modes of transportation.

George

Posted by MOKSRail (Member # 3163) on :

In the ideal world, private enterprise would operate most things. But 'taint gonna happen.

This chart from NARP shows how much money the feds have thrown at air and highways, while cconsistently cutting Amtrak funding.
http://www.narprail.org/default.asp?p=resources%2Ehtm

Purchasing power for federal highway programs more than doubled (increased 113%) from 1982 to 2004.

It also more than doubled (increased 149%) for aviation, but passenger rail decreased 27% -- as a society we get what we pay for, so it's little wonder that passenger rail has not been able to increase its market share among the other modes.

"You can't ride a train that's not there."

Debbie,
The above statement from NARP shows why there isn't at least TWO trains on the Calif. Zephuyr route. Actually, there should be more, with one running through DES MOINES or because of bad track, on the line through AMES through Nebraska and North Platte to Cheyenne and on to Idaho and Seattle.

Amtrak isn't perfect. It's management has made many mistakes. But this government has been bought-off by highway contractors and aviation interests (Amtrak has no big lobby interests).

This NARP page has a lot of good info and resources.
http://www.narprail.org/default.asp?p=resources%2Ehtm

I urge everyone interested in preserving and expanding passenger rail to join NARP, your state organization and get involved.

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Posted by Mr. Toy (Member # 311) on :

Good responses all, but I must commend Dilly for a most concise explanation.

One point not mentioned, is the matter of generating sales. While Amtrak may never be self-suffucient, any more than any other transportation system, Amtrak could move much closer to self sufficiency if it had more trains to generate more sales.

The problem is, both within Amtrak and within the halls of the federal government, trains are thought of as costs to be avoided instead of sources of revenue. So trains get axed to "save money" while fixed costs remain fixed. So every time a train dies, Amtrak's losses increase. This tell me that while Amtrak as a whole may not be profitable, individual trains do make a positive contribution to the bottom line.

So as I see it, expansion is the key. And it is the one thing that has never been tried.

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"Good ideas are not adopted automatically. They must be driven into practice with courageous patience." -- Hyman Rickover
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