By M.E. Singer
The recently proposed FY18 federal budget attack against Amtrak’s 15 long distance routes was inevitable, given Amtrak’s own political gaming, operational, financial, and marketing zombie performance, and executive leadership debacle saddled with questionable political appointees in the years between David Gunn and Wick Moorman. Perhaps as pathetic as Westmoreland’s claim of “a light at the end of the tunnel” in Vietnam (1967) months prior to the NVA Tet offensive (1968) was the ruinous claim of a failed Amtrak CEO espousing his conviction that Amtrak was “on a glide-path towards solvency,” when in reality, it had become a steep slide towards bankruptcy. As well, the past eight years of leadership prior to Mr. Moorman meekly followed a political path to keep heads low and avoid Congress and labor. As the late Jim McClellan commented on an article of mine by personally communicating to me (06/23/15): “Amtrak has largely lived on its ability to work the politics of passenger service, rather than actually running a serious transportation company.” Now, it’s reality time, as the ‘shell game’ played on the Potomac for so long over the long distance services cannot fail from being exposed.
The inventory of these self-inflicted issues includes:
“Throwing Under the Bus”-Willful Machinations Against the Long Distance Passenger Service:
A vivid history of persistent Amtrak corporate philosophy disseminated to promote the fake news of unsustainable losses by the long distance routes by deliberately ignoring the favorable transportation industry metric of revenue passenger miles; the indisputable fact of a lower cost of only user fees to the Class 1s in lieu of full infrastructure costs of the Northeast Corridor (NEC). Whatever happened to projecting the favorable metrics of long distance routes how the seat/compartment turnover an average of 2.5 times en route; passengers travel an average of 800 miles (just like air)? To what extent have the long distance (and state-supported corridors) been sabotaged by dumping into those sectors corporate and NEC overhead costs? The impact of an opaque cost methodology for such full cost allocations against the long distance (and state supported routes) has defied GAAP; to the extent of how hospitals do “balance billing” against patients at the full retail rack rate for the amount not covered by discounts applied to their insurance. As Mark Twain summed up, “figures don’t lie, but liars figure.”
How does Amtrak stand behind the premise given today in the media hype how the long distance routes “have long been inefficient and incurred the vast majority of Amtrak’s operational losses”? Why has Amtrak struggled to clearly define the mission of the long distance services, beyond serving tourism, but to serve the “flyover” states to connect towns to cities for populations now deprived of even scheduled bus service, let alone affordable and convenient short haul flights. Making the long distance route case was never about allowing it to be defined as end point to end point, e.g., “Empire Builder” Chicago-Seattle, but rather serving the en route stops, as well as Glacier National Park. Where was the input of Amtrak when the Class 1s were merging and abandoning duplicative mainline trackage; how redundant were those tracks today when OTP is monetized based upon the enhanced value of the track slots; yet, Amtrak does not have the bank to re-negotiate in deference to a new economic model not envisioned in 1971?
“Unsuccessful in Love”-Failure at Potomac and State Politics:
After the departure of Mr. Gunn and his successors failed in financial predictions and the inept order of Acelas, Amtrak embraced a “Maginot Line” mentality with Congress to merely seek to stabilize current operations, rather than conducting meaningful research to support scaling up to expand growth. (Perhaps such research would have evidenced the false notions implied against long distance services?) The last new long distance service was in 1983, the Auto Train, thanks to the determination of Amtrak’s CEO Graham Claytor pushing his proforma to Congress. Apparently encouraged by its Board of Directors, Amtrak pursued a persistent philosophy of a keen focus looking only eastward from the Potomac; serving its Northeastern congressional patrons who pushed the NEC infrastructure onto Amtrak in 1976, despite lack of budget, but aware of the total control over Amtrak and its dependency on their power going forward. Dutifully, Amtrak re-directed national system budgeted funds to repair NEC infrastructure, with a rifle focus to secure a new Acela fleet. The Northeastern politicos were appeased at the expense of the long distance and state-supported routes. As George Bernard Shaw summarized, “A government that robs Peter to pay Paul can always depend on the support of Paul.”
To quench the insuperable appetite for operational and infrastructure subsidization of the NEC, Amtrak created a political game in 2008 that Belgium would not even conceive playing between its divided Flemish and Walloon citizens, by charging all states for their corridor services under 750 miles, as calculated by Amtrak’s own full cost allocation philosophy. The exception, of course, was for the Northeastern states comprising the NEC, despite that route between Boston-Washington being far less than even 600 miles. Perhaps this explains how NY Governor Cuomo can ignore reality and plan for a $6 Billion expansion of NYC Penn Station using the ex-USPO Farley Building, on top of the projected $8 Billion to build a new Hudson River tunnel and repair an existing one? When it comes to the huge bill for the deferred maintenance of the NEC infrastructure, how can we not reflect back on U.S. Senator Everett McKinley Dirksen (R-IL) who said back in the 1960s, “A billion here, a billion there, pretty soon it adds up to real money.” (Were the politicos of Connecticut, New York, New Jersey, and Maryland led to believe that Trump’s campaign proclamation of a $1 Billion infrastructure investment was meant just for their needs along the NEC?)
Amtrak’s focused politics on the Northeast prevented the building of constructive state relationships to support investment and infrastructure in the long distance routes, to provide competitive schedules and frequencies to increase regional mobility and development. Instead, Amtrak evidenced the chutzpah to introduce a new dimension to stifle the long distance services, by requiring certain states served by the “Southwest Chief” to cough-up funding to preserve, or lose, the current route thru Kansas, Colorado, and New Mexico. When have any Northeastern states been threatened with such a hit? One could argue Pennsylvania (“Pennsylvanian”), but thanks to HR T&I Committee chair, “Fly Me” Shuster, the cost was drastically reduced, and further reduced later. As well, the opaque full allocation cost methodology has been successfully utilized to tamp down any state interest in adding frequencies or expanded regional routes, as rather than identifying the incremental costs, another train simply equals another full train price-tag. This strategy to impede state-supported services has obviously hindered any potential regional feed to the long distance services.
“No Rabbit in the Hat to Promote “We’re Making the Trains Worth Traveling Again”-Irrelevance of Marketing:
Why has the uniqueness of the long distance service been allowed to be treated as but another commodity product, due to the lack of any competitive tools by Marketing? Why did Marketing fail to build a compelling brand and trust in the long distance services? Why did Marketing fail to design a customer experience based for the long distance services based upon what the customer wanted and needed re on-board services, food/beverage catering, schedules, and frequencies? This accumulation of such severe lack of appropriate action explains a refusal to acknowledge the impact of “Chinatown curbside” buses in state corridors, let alone the NEC; in essence, ignoring how (potential) customers have become savvy shoppers. Are the trains so full in the NEC to not pursue any new markets to build traffic on established routes?
Where has been the savvy of Marketing not to improve asset utilization by creating equipment pools (e.g.,The Pullman Company) for seasonal services? Instead of tolerating the needless idle assets of “Auto Train” at Sanford, FL yard during the off-winter season, why has no effort been made to work with, for example, with the State of Colorado to deploy “Auto Train” as a summer seasonal operation between Chicago-Denver possibly even Colorado Springs? These Colorado cities remain the gateway to the western national parks, still quite popular with Midwestern families. In view of the success of the “Winter Park Express” for this ski season, why would Marketing fail to follow-up on this relationship and the initial opportunity developed by a well-functioning P3 (public-private partnership)? Concomitantly why the dearth of Marketing efforts to attract customers for Special Trains, given Amtrak’s routes that serve major sports events, seasonal travel, etc? Is it really that long ago when the Burlington, prior to 1965, aggressively marketed weekend ski and vacation trips between Chicago-Colorado, in addition to running sections of the “Denver Zephyr”?
“Re-Shuffling the Same Cards Still Gives You the Same Hand”-How to Explain the ‘Same Ol,’ Same Ol’ Posture of Operations/Financial Management?
How is it justified to pay the Class 1s a bonus for providing access to the long distance services, when those schedules are pathetically padded, which has inhibited asset utilization, impacted ROA, required more consists and higher labor costs; preventing market-specific long distance schedules, e.g., CHI-NYC, CHI-WAS, CHI-NOL? Why have the Class 1s been tolerated to force Amtrak to operate multi-scheduled long distance services on a route in a close window together to prevent interrupting freight traffic, e.g., CHI-Cleveland? As if adhering to the mentality of the defeated French Army in 1940, why have the Class 1s not been challenged for suspicious cost proformas required to improve infrastructure to increase frequencies, schedule velocity, or expand routes? So much for increasing frequency of long distance daily or worse, tri-weekly schedules, when contentment reigns supreme. Perhaps this laissez faire business model explains the lack of action to improve customer experience and increase revenues by training LSAs in mixology and providing a proper inventory to make cocktails. As well, how does HQ expect to maintain, let alone, build upon a customer base when the connections are severed between the southbound arriving “Coast Starlight” and the departing eastbound “Southwest Chief” at Los Angeles? What is the revenue impact to interrupt such critical connections, as well, as to help to diminish the revenue potential of the “Sunset Limited” with an arrival in Los Angles at 5:35am; arrival in New Orleans at 9:40pm? Is this somehow for the convenience of the yards to service the consists?
Apparently, ‘peace at any price’ is a well worn mantra at HQ, given the willingness for so long not to open and re-negotiate contracts of very highly paid employees working the trains and depots. And yes, we know by heart the excuse of how they are on the road for 6-7 days, receiving very little in tips, etc, etc. But, instead of killing off the last vestige of any acceptable food/beverage service, why not start with the highest cost item-labor? For that matter, for how long has Amtrak been allowed to maintain excessive levels of management for its revenue size, while depleting the ranks of OBS and resources along the line? How was it seriously expected to build repetitive business on the long distance trains by not even controlling what was possible, e.g., food/beverage inventory stock-outs en route; inconsistent on-board services, etc? Today, we are faced with the sad irony of new diners being built as food/beverage services continue deteriorating; baggage cars being built as staffed depots for checked bags disappear. It is curious how such a depleted business model at Amtrak has in the past provided very generous ranges of annual bonus to its management and executive levels.
Interestingly, apparently the only issue that caught the interest of the executive management group in the past was to ensure continuation of their ‘Holy Grail’ by strictly interpreting the PRIIA Act to prevent any competition, whether bids on franchises, open access, or new routes by private operators. Successfully maintaining its monopoly has also made Amtrak unprepared to respond to any potential new entrants who would fundamentally change the entire game.
“The Cows Have Come Home”-Remember Senator Kay Bailey Hutchison:
With remarkable hindsight in 2003, U.S. Senator Kay Bailey Hutchison (R-TX) stated how “The national passenger rail system has been largely neglected, with the exception of the Northeast Corridor.” Rising to meet the power of the Northeastern congressional delegation, Senator Hutchison pushed back, stating: “Either we commit to dramatically improving rail for the entire country or we abandon the pretense of a national system and turn it over to the states and private companies. Our motto for passenger rail is National or Nothing!” This is the mantle that should be picked up, absent the national advocacy groups who have historically acted as shills for Amtrak’s excuses and bias against the long distance services. In respect to Senator Hutchison’s understanding of the raisin d’être for the long distance services: “Americans want an alternative to planes and autos. Amtrak could be that alternative, but we must build it for success, not failure.”
In essence, Amtrak’s new CEO, Wick Moorman, will be confronted with the inevitable decision to acknowledge the necessary shift that transforming Amtrak will only come from the outside in. This should mean no longer fencing Amtrak off from new blood with bold ideas, open, unbiased eyes, as if it was a family tree with no branches. Mr. Moorman should take this opportunity in re-building Amtrak to look outside the company, as in reference to an opinion piece in Crain’s Chicago Business of 11 January 2017, “Are Midwestern CEOs Too Nice?”, this article emphasized: “to hire talent with new perspectives from outside their industry and geography…to break with the tradition of growing local leaders from within.” As well,Tom Pendergast, recently retired CEO of the MTA, voted Railway Age “Railroader of the Year-2016, directly expressed his appreciation for the concept of a fresh pair of eyes and bold ideas: “because if you see the same thing from a different perspective, you may have a fuller picture of it. That’s good because they will ask the question, why? If you matriculate up in the organization, sometimes you don’t ask that question.”
Also, in moving towards the inevitable requisite full paradigm shift towards transparency in costs and revenues, Mr. Moorman should also contemplate the feasibility of outsourcing on-board food and beverage services, as well as labor; the opportunity of outsourcing operation of an equipment pool, like ex-The Pullman Company, to operate seasonal services to maximize asset utilization and revenues; to determine any leverage to negotiate with the Class1s re long distance and state-supported corridors to provide track access at optimal scheduled times and assured dispatching; to increase velocity and convenience of schedules? What will be the status of the FRA’s proposal last year to bid-out three long distance routes; will it still be on the table?
If this government finally succeeds in de-funding the long distance services, based on the heavy fog to cover the facts, we can only look at Amtrak management prior to Mr. Moorman and ask, “et tu?” The only questions than remaining will be: 1) From what “infrastructure fund” will the terminated Amtrak employees be paid their promised six years of severance? 2) Who will inform the political powers of the Northeast that they “won?” When are they informed now they get to pay for all of their commuter lines historically dependent upon the Amtrak NEC from Boston-Washington, as well as the entire NEC infrastructure in each of their own states? Good luck on funding the Gateway project for Hudson tunnels, B&P tunnels in Baltimore, New Jersey Portal bridge, and the other bridges in Maryland and Connecticut. And if Delta Airlines ever gets its wish for its LaGuardia station to fly more distant routes and re-adjusts its slots by saying adios to its puddle-jumpers serving upstate NY and Pennsylvania, their will be no EAS (Essential Air Service program) to fund mobility for that part of the Northeast region.