Tags

,

 

By Noel T. Braymer

An article published by a New Jersey newspaper “The Record ” on June 22, 2017 was based on an interview with Amtrak President Wick Moorman. Most of the emphasis of the article was on the problems to upgrade the infrastructure of the Northeast Corridor, mostly in the areas around New York City and New Jersey.  But the most important information in this interview was the admission by the Amtrak President that reductions in Federal Funding for Amtrak for long distance trains would make it impossible to continue work repairing the Northeast Corridor. This is from this newspaper article “The budget calls for eliminating money-losing long-distance lines on Amtrak’s national network, with funding for that line-item to be cut from $1.2 billion to $525 million. While the budget tells Amtrak to focus its efforts on the Northeast Corridor and other routes around the country that are supported by state transportation departments, eliminating the long-distance routes will increase costs for those routes. That’s because Amtrak allocates costs for shared services such as reservations and the legal department among all its lines, and more of those costs would be shifted onto the Northeast Corridor without riders on the long-distance routes sharing the load, Moorman said.”

This is a major admission by Amtrak that they need the long distance trains. Going back to the late 1970’s Amtrak eliminated 5 trains in a budget exercise to “Save Money”. Four of these trains were long distance trains. All of these trains were cut because of assumed losses operating them based on the “allocated costs” assigned to them. The result of this cutback in service caused the Amtrak’s budget deficit to increase, not to be reduced as assumed by Amtrak’s accounting. Since then Amtrak has made several route reductions over the years in attempts to save money. They too have all failed to save money. Amtrak has attempted as well to increase revenues and ridership with faster service with express trains by skipping stations. In all cases express trains lost ridership and revenues and the express services were cancelled.

Without going into a long discussion of Amtrak’s allocated cost accounting, a major criticism of it is it doesn’t reflects the true cost to Amtrak of a particular train. Instead Amtrak has arbitrarily assigned the share of its total overhead to routes. This includes basing a train route overhead costs on the route’s mileage. Of course this gives long distance trains with longer routes a greater share of the overhead costs compared to short distance trains. This also doesn’t take into account how much a train uses Amtrak overhead, Much of Amtrak’s costs is centered on the Northeast Corridor between Washington, New York and Boston. Amtrak is responsible for maintaining this busy railroad which the majority of traffic isn’t Amtrak’s and  it owns most of the stations which are major costs centers. This not the case outside the Northeast where Amtrak doesn’t own most of the stations and often gets a discount rate using other railroads tracks. There has been criticism that much of the costs of the Northeast Corridor is allocated to the trains outside of the Northeast Corridor. Doing so would inflate the costs of trains outside of the Northeast while hiding the costs of the Northeast Corridor. Amtrak’s accounting has never met what are called Generally Accepted Accounting Principles or G.A.A.P. These are standardized accounting measures used to be able to compare a balance sheet of one company to another. It is also used to prevent tricks to hide problems at a business or agency.

While far short of a confession of wrong doing, this admission by Amtrak that it depends on the revenues of the long distance trains is still groundbreaking. Since the 1970’s Amtrak has played the Northeast Corridor States against the States with mostly long distance Amtrak service. Since rail passenger service is very popular with the communities that have it, any attempt to kill service usually gets a major outcry from local affected communities. This is enough for any elected official to support “their” train to avoid the anger of their constituents. Since 1979 Congress has allowed the Northeast Corridor to be funded and most of the other trains to continue to operate. But this has resulted in few improvements in long distance service since the 1990’s while billions have been spend on the NEC. The last time there has been major improvements in long distance service under Amtrak after its startup in the early 70’s was in the 80’s and early 90’s under then Amtrak President W. Graham Claytor. Under Claytor, Amtrak’s deficit declined as Claytor expanded service mostly on long distance trains. His goal was to increase revenues more than the cost of expanding service. These improvements included extending the Sunset to Orlando along the Gulf Coast and the Palmentto south of Savannah to Jacksonville. Both of these extended services were latter reversed by his successors, who also greatly increased Amtrak’s deficit. One service that Amtrak has kept started by Claytor is the Auto-Train between Virginia and Florida. But after Claytor left, the Desert Wind and Pioneer trains were also removed to “save money”. No new orders for long distance equipment to expand service has been funded since Claytor left in the early 90’s until recently. The current order of Viewliner’s is being delivered years late and will only replace existing old equipment, but not add capacity to any trains. The long distance trains are often fully booked and turn paying passengers away without extra cars that could be added if Amtrak had them to increase revenues.

This might be starting to change. Amtrak is involved with local grass roots groups to extend the City of New Orleans from Chicago to Florida along the Gulf Coast. Amtrak is also looking at extending the Heartland Flyer between Fort Worth and Oklahoma City up to Wichita and Newton, Kansas for connections to the Southwest Chief. There are also plans to extend service to Pueblo, Colorado on the Southwest Chief. Amtrak is also considering creating a section of the Crescent at Meridian, Mississippi to Fort Worth. Recently interim Amtrak President Wick Moorman announced that he had selected his successor fulling his intention to work as Amtrak President for no more than a year. His choice is Richard Anderson who is a retired Chief Executive Officer of Delta Airlines. He is a lawyers with years of experience in the airline industry. He has the reputation of “turning around” Delta and improving its profitability.

Amtrak is long overdue for ridership and passenger mile growth. It will be interesting what Mr. Anderson will propose to change Amtrak. Any growth at Amtrak will require financing for more equipment and other capital improvements. It will also be interesting what Mr. Anderson will do to reduce Amtrak’s overhead costs. He will be getting on the job training from current Amtrak President Moorman starting July 12th. At the end of this year Mr. Moorman will retire as Amtrak President but stay on as a part time consultant. Staring next year Mr Anderson will be fully in charge of Amtrak with the job of increasing sales and raising capital for expansion. No doubt the current lawsuit from Amtrak against Washington Union Station for allowing advertisements for Delta Airlines which Amtrak claimed was competition to it will be settled before long.

Advertisements