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Why Incremental Revenues are Irrelevant to a State Organized Enterprise (SOE) Bent Upon Balkanization

By M.E. Singer

Dumbfounded by the sudden, irrational action on 28 March 2018 by Amtrak electing to park charter trains at the bumping post and store private cars PVs in the yards in lieu of incremental revenues should be seen as nothing less than a series of the “salami tactics” chosen by Amtrak’s CEO Anderson of cutting one slice of Amtrak off at a time throughout 2018. How rail advocates were blindsided, and NARP helpless to react, can be explained by the ancient Chinese warrior, Sun Tzu, whose successful strategy was to “Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.”  Mandating the end of charter trains, whether Amtrak, or combined with PVs, or just PV movements regrettably is the implementation of Anderson’s signature on a wide sweeping business plan that is deliberately being rolled out like the drip, drip, drip of water-boarding advocates and users who will be seen as having no choice in the monopoly world of Amtrak.

Although we have been pushed back on our heels with the initial elimination of the Pacific Parlour Car and Cross Country Diners substitution for full diners, we must recognize how Anderson’s deliberate strategy of incrementalism is to achieve the “balkanization” of Amtrak. Anderson has apparently attained a quick study of Amtrak’s stakeholders (advocates, PV owners, consumers, Congress  states, unions, USDOT, etc) to embrace Sun Tzu’s maxim, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” In essence, advocates have become the frog slowly boiling in water until it’s too late to realize and stop the de-capitation of Amtrak. Just as Sun Tzu predicted,“Supreme excellence consists of breaking the enemy’s resistance without fighting.”

Unfortunately, this is not a new issue for me, but rather, deja vu, when it comes to Amtrak and its double standard approach to charter/special trains. In the fall of 1985, as the Chicago Bears were obviously headed towards the Super Bowl in New Orleans, I privately capitalized support for a non-profit group that intended to cash-in on the opportunity to run a charter train between Chicago-New Orleans for the January, 1986 event. As this group had approximately a $10,000 deficit with local vendors, this train was a god-send to purge their debts. However, as Amtrak maintained an obstinate position to provide a Superliner consist, I conducted a government relations program to secure the unanimous support of the Illinois congressional delegation (senators and congressmen). They all signed a letter to the CEO of Amtrak requesting an unhindered relationship and release of Superliner equipment sitting idle in the 14th Street yard. After multiple meetings attended by Amtrak’s designated senior staff, and Senator Simon’s (D-IL) Chief of Staff, agreement was reached for a Superliner consist of 2 sleepers, 6 coaches, and 1 cafe.

As a pure monopolist licking its wounds meant that Amtrak determined to operate its own charter train in competition, as well as promote additional cars on the “Panama Limited.” (Note-both ventures failed for Amtrak). However, ‘the stab in the back’ was Amtrak’s very last minute change in the special/charter train tariff that was not even printed which obviated the traditional payment mechanism afforded by the ARC ticket stock (Airline Reporting Corporation). In lieu of the ARC, Amtrak instead demanded full payment up front from this non-profit group–$90,000+, believing  such a new, untimely demand would scuttle the train. Fortunately, and to the chagrin of Amtrak, I was able to secure a loan on my own name to operate this train. In a last ditch shake down attempt, Amtrak requested to include a dorm car in the consist for their crew; however, that would have triggered another locomotive at full cost-to me. I attempted to negotiate that if we included a dorm, we should also include another sleeper; without triggering the  additional cost for the locomotive. No deal. Although their was sufficient demand for additional sleepers, given the lack of air lift north-south, Amtrak’s version of mercantilism by excessive protectionism nullified that opportunity.

Enabling this non-profit group to pay off their debts, I believed I could now work with Amtrak in a professional, proprietary capacity and personally capitalized a new company, American LeisuRRail, to primarily offer special/charter train day trips out of Chicago to sports and seasonal events, etc. Wrong! I learned the hard way what is so ever present today re Amtrak’s approach to charter/special trains and PVs: “If it is not our idea, and we are not currently doing it, we do not want anybody else to do it!” In essence, Amtrak preferred to watch its equipment sit idle in the yards than secure incremental revenues through increased asset utilization.

I also investigated and learned how Amtrak regarded charter/special trains and PVs as their own format of “Animal Farm.” For example, Amtrak required a $500 deposit for every single charter/special train movement, even if it was a repeat schedule over the same route.  However, apparently some charters were more equal than others, as the “Reno Fun Train ” was quite open to inform me that they benefited from a rolling $500 deposit for each of their train schedules between Oakland-Reno. In addition to this monopolist action, I also experienced typical anti-trust action by Amtrak requiring a “vertical tying” arrangement.  Despite evidencing dram shop insurance for every state the special trains intended to operate in, Amtrak’s position was if you want to charter a train with our cafe, it must include the LSA, Amtrak selected products at their price, with Amtrak retaining the revenues. I could not staff and operate the cafe/bar car. Given this scenario, after losing significant dollars, I relied upon a business relationship of a managing director of a law firm in Washington who strongly believed we could  contest self-designation of a monopoly by Amtrak in litigation. Although we worked together from 1986-1992, when he sold his firm to a larger NYC-based worldwide firm, they elected not to pursue the matter. Interesting to remember how during this same time period in the mid-1980s Amtrak unilaterally declared its monopoly by deeming itself as the sole source for the evolving interest in high speed rail-to operate even if on its own right-of-way, or as a lessor along the NEC; no matter even if HSR was privately financed.

At this point, how can anybody really be expected to comprehend that Amtrak’s excuse for killing PVs and charter/special trains is how it missed the mark in maximizing its “fully allocated profit potential”?  If so, where was the oversight of Amtrak by its external auditor; its lackluster Board; the IG; the GAO; Congress to identify and correct that supposed issue? Where was the accountability within Amtrak for setting its own hurdle rate for profitability; what metrics were utilized? Supreme Court Justice Louis Brandeis best summed up this issue of non-transparency and loose accountability by stating “sunlight is the best disinfectant.” Indeed, a review of FOIA requests of PV rates and charges in 2009-2010 evidences once again Amtrak’s double standards, as PV owners were given a free ride on rates, charges, parking, etc. when it was to the benefit of Amtrak for National Train Day, celebrating the 100th anniversary of Washington Union Station, etc. So much for the excuse of impacting the operation and profitability. Also, the FOIA requests identified Amtrak’s persistent internal accounting problems to correctly charge PVs, e.g., daily parking rate. So much for external auditing prowess.  Yet, contrary to Amtrak’s strident position, why is it that VIA Rail Canada actively promotes and pursues charter car/train clients; Eurostar, SBB (Swiss), DB (German), and OBB (Austrian) widely embrace charters? Fast forward to SunTzu’s definitive prediction: “All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.”

We now face the inevitable consequence of tolerating Amtrak’s embrace of its definition as a monopolist. As a result, we are confronted with the “Sudetenland” for all passenger rail services. How much more do we give up for Amtrak to make decisions in a smoke-filled room against the interests of the PV owners, traveling public and advocates? Have we not learned from 1990 when CP and Rocky Mountaineer threw VIA Rail “under the bus” by forcing VIA’s “Canadian” from its traditional route thru the Rockies, resulting in cutting its frequency as it no longer served the populated areas; achieving a monopoly for Rocky Mountaineer?  Do we not remember the initial success of the elaborate western national parks and civil war battlefield tours of the private American Orient Express?

Ideally, we could presume from this sudden de-capitation of charter and PVs a simple street shakedown by Amtrak for higher charges; thinking our acceptance ends that issue. Not so, I am afraid, as this is a well-oiled strategy that parallels Sun Tzu’s maxim, “Engage people with what they expect; it is what they are able to discern and confirms their projections. It settles them into predictable patterns of response, occupying their minds while you wait for the extraordinary moment-that which they cannot anticipate.” Amtrak, as a State Organized Enterprise, invoking the purest definition of being a monopolist, as exhibited by the immediate extinction of charter trains and the freedom of PV movements certainly should not be a “black swan” to us, as in light of other deleterious acts this year, it should not have been neither unpredictable nor unforeseen with such detrimental consequences. Just as a leopard does not change its spots, we have now witnessed sufficient actions to compile an understanding how the real “Gateway Project” is the binary choice to unravel the national system, save for the alleged crown jewel, the Northeast Corridor. When we hear Amtrak’s off the wall excuses for gutting dining service, disposing of the ambiance of the Pacific Parlour, lengthening  schedules, I am reminded of President Reagan’s comment in 1980, “there you go again.” Total malarkey!

Despite the common sense acknowledgment that PVs and charter trains contribute directly to local tourism economies, as well as to Amtrak’s bottom line, frankly, this is not the point of an argument based on facts and numbers. Anderson was deliberately brought in to invoke Sun Tzu’s theory “In war, the way is to avoid what is strong, and strike at what is weak.” In essence, Anderson was recruited as a sapper–to clear the mines and make the tough decisions to facilitate Amtrak’s Board appointing one of their long-standing favorites from the executive management staff.  How long will Anderson last until he takes a significant hit (perhaps months?), but no matter, he is running block for Amtrak’s preferred, long term CEO cultivated in the boardroom at HQ.

To appreciate the strategy in his term as CEO, Anderson is expected to:

  • Diminish dining services with Cross Country Diners and minimized menu selection.
    Eliminate any concept of first class services, e.g., Pacific Parlour, “Auto Train” F lounge and diner.
    Reduce redundancy of lounge and diners; cutback to one car.
    Prepare stage for reduction of long distance train frequencies and validate reason to kill off by claiming lack of PTC; hand-off to states to operate as segments but required to pay according to Amtrak’s full cost methodology (no matter number of frequencies).
    Without long distance routes, PVs and charters have fewer opportunities to run; prepare now for this inevitability by cutting PV movements and charters.
    Building, expanding, enhancing new sources or current revenue base is not in the interest of Amtrak outside the NEC.

Caveat-be aware of the coalescing of Amtrak with the USDOT and the Northeastern senators. As Sun Tzu said, “the greatest victory is that which requires no battle.”  Now that the senators from New York, New Jersey, and Connecticut got their piece of the pie in the Omnibus Budget legislation, do we really expect these politicos to protest Amtrak’s plan to inflict economic pain on the the PVs and extinguish the charter trains, as part of the grand strategy to de-capitate the long distance routes? Will they really give a hoot in respect to the proud legacy of American passenger railroading by the careful restoration of engines and private varnish at a high cost to their owners? At best, they will offer but a vapid reaction to the economic impact on local tourism.

Let’s not be fooled to think Amtrak is really focused on building revenues, creating new opportunities and establishing viable corridors to fulfill it’s raisin d’être. Just remember–Amtrak’s Board of Directors have their own priorities and timeline for achieving the will of their puppet masters-the Northeastern politicians and their financial backers–real estate and developer interests. Just watch how quickly Anderson fades from the scene and a favorite long term survivor of the executive management team of Amtrak is anointed the next “Mr. Potato Head” to freely focus on the NEC with the heavy lifting completed by Anderson hitting the PVs, charter/special trains, amenities, and long distance routes. PV owners and advocates have been playing checkers, while Amtrak, with the encouragement of the USDOT, has been playing chess.

 

 

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