By Noel T. Braymer
Richard Anderson is the former CEO of Delta Airlines who has agreed to a six month training period to learn how Amtrak is run, before he takes full control as Amtrak’s President next year. The question I have is what in Mr. Anderson’s long experience in the airline industry prepares him to make a major impact at Amtrak? The number one challenge at an airline, or any business is increasing sales, while controlling costs. At the heart of any airline is the desire to fill all the seats on a plane with paying passengers on every plane before it takes off. For airlines an empty seat on a plane when it takes off is money lost. It is akin to a store throwing out perishable goods which is a loss on the balance sheet. Not only do airlines want to fill seats on their planes, but they want to get the most money for their seats that the market will accept. But when seats are unsold, even a dollar for a seat is better than an empty seat to an airline. Amtrak has a lots of empty seats.There are times when trains are crowded. Anyone one who has been on a crowded train will remember that. But there are times on Amtrak when business is also slow.
A good example of this is on the Northeast Corridor. The trains are often crowded there. But most of the crowding is between New York and Philadelphia which is roughly 90 miles. But it is over 400 miles between Washington and Boston. An airline is much more interested in passenger miles than the number of passengers it carries. Since travel is usually charged by the mile, the greater distance a passenger travels, the more money the airlines earns. So someone from an airline is more likely to ask: how can we get more people to travel south of Philadelphia and north of New York to increase passenger miles and revenue?
One way to increase sales is by what is called Yield Management. Anyone who has made reservations online for a flight, a hotel room, a bus, rental car or Disneyland have seen yield management in action. The price for a seat on an airplane can change from day to day for a flight depending on how many seats are available. If the demand is high the price goes up and if there are extra seats the price goes down. This is central for most airlines getting the most money for seats while insuring that seats won’t go empty. This model has been embraced by almost every service industry except American rail passenger service. Most online ticketing for intercity bus service in this country uses yield management.
But there is more to filling planes or trains with just pricing. You have to get people to where and when they want to go. This is why airlines developed hub airports. If an airline flies non-stop between 2 airports it serves 1 market. In other words between points A and B. Now add one more stop which we call C and we are serving 3 markets: AB, AC, BC. Now think about what happens if we just add a fourth point, we get 6 markets AB, AC, AD, BC, BD, CD. This is why airlines depend on connections. From a hub one plane can make connections to several points allowing passengers to transfer to flights to many destinations. There are few if any flights today that don’t have connecting flights. The more markets you have connections to, the more people you will carry. One of the first things Mr Anderson and airline employees he will likely bring with him to Amtrak will be looking at is how well the stations at major cities on the Northeast Corridor are hubs to other trains. It won’t take long to discover that it isn’t very much. But Amtrak trains could carry more people if their trains connected to more trains at Washington, Philadelphia, New York and Boston. More can also be done to connect trains at Chicago and Los Angeles too.
Now these connections don’t all have to be on Amtrak trains or even trains. Airlines have agreements with other airlines to serve markets the other airline flies to and honor each others tickets. Let say you want to fly from point A to C. You get your tickets online (which is basically a bar code) with a connecting flight at point B. Point B is the hub airport where when changing flights you also change airlines. Amtrak could have interline agreements with commuter railroads. In theory Amtrak could sell Long Island Railroad tickets to connect at Penn Station in New York to Amtrak trains anywhere Amtrak goes. This may not be easy to do, at least overnight. Part of the problem would be that Amtrak and the Long Island are at different ends of Penn Station so such transfers today would be difficult. Even getting the bureaucracies of Amtrak and the Long Island to talk about interline ticketing will likely be complicated. One place where we can see this working now is with connecting bus service to Amtrak. Amtrak has been expanding bus connection service to their trains lately because it brings in more passengers on their trains. We should be seeing more connections to Amtrak by bus in the future to places without train service.
One thing Mr Anderson will likely notice if he hasn’t already is that Amtrak doesn’t have too many trains, but not enough to pay for Amtrak’s overhead. Amtrak needs more trains and equipment to carry more paying passengers in order to become solvent. For years the Long Distance Trains often turn away paying customers because the trains are fully booked. A simple fix to this is to add more cars, particularly sleeping cars which bring in the most revenue and demand. Before Amtrak 18 car passenger trains were common. Today Amtrak’s long distance trains rarely carry more than 10 cars. Part of the problem besides Amtrak accounting that assumes costs go up more than revenues the more equipment they run on a train, is Amtrak doesn’t have enough equipment to add more cars on most trains. A major issue Mr. Anderson will have to deal with is getting enough seats and beds to carry enough people to operate at a profit. One thing Mr. Anderson understands from the airlines is they don’t buy airplanes: they lease them. Time will tell, but it is likely that if Mr. Anderson is serious about turning Amtrak around, he will need more and more new, reliable equipment to get the kind of productivity to pump up Amtrak’s revenues. He certainly has experience getting private financing for leasing new equipment.
With more, new equipment Amtrak will be able to run new services. First thing is to run all trains at least daily. Also Amtrak should add more sections to existing trains. These could include an overnight section between Los Angeles and Oakland for the California Zephyr, a section on the Zephyr at Salt Lake City to Seattle, a section to Denver on the Southwest Chief, a section on a daily Cardinal to St Louis and Kansas City, a section on the Crescent from Meridian, Mississippi to Fort Worth, Texas and a section on the Capitol Limited from Pittsburgh to New York and Boston. What could also be done is add a second train with schedules roughly 12 hours apart on the same routes. These additional trains could include the routes for the Empire Builder, Southwest Chief, California Zephyr, Coast Starlight, Sunset Limited, City of New Orleans, Texas Eagle, Crescent, Cardinal, Capitol Limited and Lake Shore Limited. This is not a final list and won’t happen overnight. But with more sections and extensions with these trains connecting with each other will create a network grid of rail passenger service across the country. Adding to this are connecting services by local rail and bus service. With such a network we will be able to create a viable and heavily used rail passenger service in this county.