Mexican conglomerate Grupo Mexico is acquiring Florida East Coast Railway for $2.1 billion. This raises questions about the future of Brightline, FEC’s planned moderate-speed rail line that was previously called All Aboard Florida. Brightline is scheduled to begin operating between West Palm Beach and Ft. Lauderdale in July, and extending to Miami in August.
Phase two of Brightline is to be an extension to Orlando, which would require construction of about 40 miles of new rail line that would be used almost exclusively for passengers. FEC estimates this will cost more than $1.0 billion.
Brightline claims its trains will operate at 80 to 125 miles per hour. But it is promising to deliver people the 65 rail miles from Miami to West Palm Beach in 60 minutes. That’s an average speed of–let me see–65 miles in 60 minutes (counts on fingers) works out to just 65 miles per hour. That’s certainly faster than existing commuter trains, which require about 100 minutes for the same trip (making many more intermediate stops). But it’s not significantly faster than driving, which Google says takes about 70 minutes.
Taking a tip from transit agencies, Brightline is also a real estate venture, since the company hopes that running passenger trains will enhance the value of land that it owns near stations in Miami, Ft. Lauderdale, and West Palm Beach (but not Orlando). FEC’s previous owner, Fortress Investment Group–which itself was recently purchased by Japanese telcom Softbank–split it into two companies: a railroad and a real-estate company (known as FEC Industries). Grupo Mexico only bought the railroad, while Softbank is keeping the real-estate company, which includes Brightline. Although Grupo Mexico will own the tracks, Brightline retains the right to run its trains on those tracks.
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Brightline has faced opposition from some local residents who have safety concerns about running fast trains on a route that has more than 300 grade crossings. They are also concerned about the impact on boat traffic, as the route crosses several bridges over rivers. The bridges are normally kept open except when one of the dozen or so trains a day pass through, but Brightline will increase this to more than 50 trains a day. That will require that bridges be closed, and a barrier to river traffic, for 9 to 12 hours a day.
Grupo Mexico owns Ferromex, the largest railroad in Mexico with lines all over the country. It also has rights to run trains from the Mexican border to Ft. Worth under the name of Texas Pacifico. The only passenger trains it runs are two tourist lines, the Chihuahua Pacific and Tequila Express.
In buying FEC, Grupo Mexico is probably betting that a lot of the larger ships going through the newly expanded Panama Canal will stop in South Florida to transfer their goods to trains. This may be a bad bet, as containers destined for, say, New York City will only take a little longer to get their by ship and keeping them on the ship will avoid the costs of a transfer from ship to rails. On the other hand, if Grupo Mexico manages to step up freight traffic, those trains might conflict with Brightline’s planned 32 trains per day.
Operating rights are not the same as ownership, so while Japan’s Softbank may be more sympathetic to semi-fast trains than Grupo Mexico, Brightline will have to stay in Grupo Mexico’s good graces for its operation to succeed. If the passenger trains conflict with FEC freights, FEC could impose unanticipated costs on Brightline, such as train delays and freight train interference with its operations. Brightline is confident that it will begin earning operating profits by 2018. It better meet that target or FEC’s new owner will likely put up even more obstacles to its plans to expand to Orlando.
If they’re paying for the rail line out of private capital who cares. When it fails, and it will fail….Grupo or whatever it renames itself will restructure and appeal for federal guaranteed subsidies. It’s the voters job to make sure that doesn’t happen.