Amtrak’s Real Problem

Amtrak’s dream of restoring passenger service between New Orleans and Jacksonville — service disrupted by Hurricane Katrina — died, at least for the foreseeable future, when the governors of Alabama and Mississippi refused to provide funds to subsidize this train. Meanwhile, Amtrak CEO Richard Anderson incurred the wrath of his predecessors last week when he tried to explain to state legislators why Amtrak should end the Southwest Chief service between Newton, Kansas and Gallup, New Mexico.

“This is the first time that a management team has ever come out against continuing services Amtrak currently provides,” worried former Amtrak president David Gunn, as reported by Trains magazine (paywall). “It’s dishonorable and dishonest,” chided Joseph Boardman, another former Amtrak president.

Actually, Anderson was being perfectly honest. His presentation noted that only about 175 people a day ride that segment of the Chicago-Los Angeles train, which gets most of its ridership in the Chicago-Kansas City segment followed by the segment between Los Angeles and Albuquerque. Because BNSF, which owns the tracks, no longer runs freight trains on this route, it is the only private rail route in the country that sees only Amtrak trains, making all capital and maintenance costs the sole responsibility of Amtrak.

Anderson noted that the train loses $56 million a year not counting capital or maintenance costs. This averages $154 per passenger. Anderson estimated it would cost up to $50 million to get tracks into a state of good repair on the segment where Amtrak is the sole operator plus $3 million in annual maintenance costs. That doesn’t include the cost of positive train control, a system that is demanded by Congress but would be pretty superfluous on a line that only sees one train a day each way.

Oddly, Anderson’s presentation never mentioned the obvious solution of rerouting the train through Amarillo, Texas, which is where BNSF sends its freights. That’s probably because the legislators Anderson was speaking to represented Colorado, Kansas, and New Mexico communities — including Albuquerque — that would lose service with that reroute. Instead, he suggested running trains from Chicago to Dodge City, Kansas and Albuquerque to Los Angeles, with bus service providing a bridge between them.

All of this comes as Amtrak supporters remain in an uproar over Anderson’s cuts to dining car and other services. Among other things, he cut back the New York-Washington-Chicago Cardinal to Washington-Chicago even though many if not most of its passengers ride from somewhere north of Washington to points in Virginia and West Virginia. This cut forces them to take an earlier train to Washington and change trains there, adding at least an hour to their trip.

Amtrak also reduced the number of coaches on the Southwest Chief, reasoning that one coach runs nearly empty west of Kansas City, even though the coaches are sometimes sold out between Kansas City and Chicago. This moved saved money at the expense of losing customers.

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This reveals the real weakness of government trying to operate what should be a for-profit service. When the goal is to earn profits, managers are encouraged to increase revenues so long as they don’t increase costs by more and they are encouraged to cut costs so long as they don’t cut revenues by even more. When the goal is to capture tax dollars, managers have to somehow please the legislators who provide them with — in Amtrak’s case — half their budgets.

Republican members of Congress probably inspired this shift when they made a big deal about Amtrak losing money on food services. In this case, there was some justification for losing money: when passenger trains were private, the railroads considered their dining and lounge car services to be loss leaders aimed at attracting people to ride the trains. While some Republicans saw the losses (some of which were due to theft) to be a symptom of a larger problem, instead of treating it like a symptom they passed a law that unrealistically required that Amtrak make money on its food services.

While a more creative Amtrak president might have found a way around this law, Anderson saw it as a signal that Amtrak needed to change direction from enhancing revenues to cutting costs. The truth is that neither revenue enhancement nor cost cutting is the right goal; the right goal is profit maximization. The only way to achieve that goal is to privatize Amtrak.

Amtrak’s problems with long-distance trains were compounded when a tunnel collapsed on Union Pacific’s line between Eugene and Klamath Falls, which is the route of the Seattle-Los Angeles Coast Starlight, a train that is considerably more popular than the Southwest Chief. After busing passengers from Eugene to Klamath Falls for a few weeks, Amtrak gave up and simply cancelled the train. Until Union Pacific reopens the tunnel — which it hoped to do a day or two ago but, as far as I know, didn’t — you can take the Starlight from Seattle to Eugene or Klamath Falls to Los Angeles but not the segment between. While this isn’t Amtrak’s fault, it illustrates the dangers of relying on an obsolete, infrastructure-heavy technology. While buses can find alternative roads and airlines can use alternative airports, when a rail line goes down, there are often no alternative lines to use.

Another indication that passenger rail infrastructure is just too costly can be found in Illinois and Michigan. After the states spent billions of dollars upgrading tracks between Chicago and St. Louis and between Chicago and Detroit so that Amtrak can run trains at 110 miles per hour, trains on these routes are still going at top speeds of 79 miles per hour. The problem in this case is positive train control: the systems installed by the railroads are incompatible with the trains purchased for Amtrak service. The states hope to get trains up to 90 miles per hour sometime this year, but have no idea when or if they might get trains going at 110 miles per hour.

This comes back to the problem of goals. No one ever expected that the billions spent on so-called high-speed trains would ever pay off, so they never bothered to figure out if they were worthwhile at all. They weren’t and they aren’t, and the only good news is that, at least for now, Congress has lost interest in funding more high-speed spending boondoggles in other parts of the country.