The Sunset Limited: Extend or Cancel?

The Antiplanner recently had the privilege of meeting Amtrak’s new president, Wick Moorman. He is a charming guy who has impressive managerial skills that allowed him to rise to be CEO of Norfolk Southern, one of America’s largest railroads. Those are probably the talents that Amtrak needs right now.

Since we both love trains, we have a lot in common so we agreed to simply ignore our disagreements on the future of passenger trains. I did tell him that, if he were an efficient manager, he would kill Amtrak’s worst-performing train, the Los Angeles-New Orleans Sunset Limited, but I knew he couldn’t do it for political reasons. So I was chagrinned to read that, not only is he not proposing to cut it, he wants to extend it to Orlando, Florida.

The Sunset Limited was originally a Southern Pacific train and starting in 1894 it went all the way from San Francisco to New Orleans. Passengers could take a steamship from New Orleans to New York and arrive just about as quickly as taking a train. In 1930 the train was cut to Los Angeles-New Orleans, and San Francisco passengers would have to change trains in L.A., which probably wasn’t a huge inconvenience.

When Amtrak took over in 1971, it kept running the train, and in 1993 it extended it from New Orleans to Miami. That proved to be a little bit of a stretch as there wasn’t time to service the train in Miami so it was changed to be a Los Angeles-Orlando train, which from a Disney viewpoint was probably poetic.

Hurricane Katrina damaged the tracks the train used in 2005, so it “temporarily” returned to a Los Angeles-New Orleans train. The work needed to restore service is still incomplete, so all Moorman was doing was reaffirming Amtrak’s intention to run the train when and if that work is done.

My first thought was that this would be a big loser, so I looked at the data in Amtrak’s 2004 and 2006 performance reports–in other words, the last full year before and first full year after Katrina. (The monthly reports for September provide the year-end results for Amtrak’s fiscal year.)
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In 2004, when the train went all the way to Orlando, it carried 96,426 passengers, earned $12.0 million in revenues, and cost $39.1 million for a net loss of $27.2 million. That’s pretty horrendous. But in 2006, when the train only went as far as New Orleans, it carried just 51,660 passengers, earned $6.5 million, and cost $33.7 million for a net loss of $27.2 million–exactly the same as before. This suggests that the New Orleans-Orlando portion of the trip earned enough revenues to cover its costs. (These costs don’t include depreciation, but that would be small since the only assets used are rail cars and locomotives that would just sit around if they weren’t being used.)

There are several reasons why these numbers may be flawed. For one thing, Amtrak changed its method of reporting losses between 2004 and 2006, and it’s hard to tell if this represents an actual change in how the numbers are calculated or if it is just cosmetic. More important, in 2006 New Orleans was still putting itself back together after the hurricane, so tourism was down. By 2011, ridership had exceeded the 2004 level even though the train still only went as far as New Orleans. Despite the additional ridership, the train’s losses had grown to $31.4 million, but it might have grown even more if the Orlando extension was still operating.

The Sunset Limited today has the lowest ridership of any long-distance train: about 100,000 riders a year, while most of Amtrak’s long-distance trains carry more than 300,000 riders and a few carry more than 400,000. In 2011, the Seattle-Chicago Empire Builder carried more than 550,000. The Sunset‘s low ridership is responsible for its heavy losses: where most long-distance trains require a subsidy of $100 to $150 per rider, the Sunset Limited‘s 2016 subsidy was nearly $350 per rider (even more after including depreciation).

Low ridership is partly due to the fact that this train is one of just two Amtrak trains that operates only three times a week. Increasing to seven days a week would at least double ridership, and since some of the costs are fixed, those costs would be less per rider. Amtrak would probably like to go daily, but lacks the necessary passenger cars to do so.

Most people think that Amtrak’s Northeast Corridor makes money while the rest of its trains are subsidized. There’s a persistent myth in the railfan community, however, that the long-distance trains really make money but Amtrak shifts some of the Northeast Corridor costs to them to make the corridor appear profitable. The reality is that they all lose money. However, it is remotely possible that Amtrak could actually reduce the Sunset Limited‘s losses, or at least not significantly increase them, by extending it to Orlando, and certainly Amtrak could do worse than make this extension.

On the other hand, one of the reasons why ridership on the Empire Builder, California Zephyr, and Coast Starlight is so much higher than the Sunset is that the former trains pass through beautiful scenery, while the views from the Sunset are pretty bleak. Perhaps what Moorman should do is simply run a daily train from New Orleans to Orlando and cancel the Los Angeles-New Orleans portion of the train.