Tags

, ,

What They Did Not Teach in Business School and What Peter Drucker* Warned Against: How Amtrak Can and Will Make Service Worse

By M.E. Singer

We want to believe how we have come so far since the bold visions of Railpax were announced in October, 1970; however, what became Amtrak has persistently pursued with a tin ear the wrong direction as a result of its overt politicalization-contrary to and at the expense of its initial intention.

Consequently, advocates and users should loathe the upcoming 47th anniversary of Amtrak on 1 May, as given the accumulation of prior history depicted below, and the current obstinate course of action aggressively pursued in 2018, Amtrak has established without hesitation its course on a tangent track to make its service worse.

As Drucker pointed out, “unless commitment is made, there are only promises and hopes…but no plans.” Frankly, such an explicit accounting of Amtrak’s failures would have closed any privately-capitalized  business concern. However, benefiting from an unknowing Congress, an unaware media, and a marginal footprint in the public mind, has allowed Amtrak to continue, despite dissipating its resources to become a regional infrastructure owner/operator (NEC). From a historical perspective, this undue focus exclusively on the NEC was used as a cudgel for Amtrak to renege on its stated basic mission to operate a viable national system competently serving tourism, personal, leisure and business travel.

In essence, Amtrak has conducted its operation opposite of Drucker’s maxim, “the purpose of a business is to create customers,”by achieving the inevitable result of making its service worse, as evidenced in this assessment:

Operations

Equipment
Lack of sufficient equipment has diminished revenues by impeding the flexibility to serve traveler’s requirements through the ability to adjust consists for seasonal demands.

Despite market success of the Slumbercoach since its initial concept in 1956, Amtrak has offered no designs for an economical sleeper.

Other than for the “Auto Train,” Amtrak failed to respond to the growing market for more bedrooms.

The current notion of using DMUs built for suburban-style service on intercity routes only verifies the lack of interest to competently serve state-supported corridors. Remember Drucker’s warning: “Most discussions of decision making assume that only senior executives make decisions or that only senior executives’ decisions matter. This is a dangerous mistake.”

Despite outrageous fares charged and frequent sell-outs, Amtrak has steadfastly refused to prepare the requisite proformas for Congress to approve funding new Superliners and re-furbishing current fleet. In respect to Drucker, “Knowledge has to be improved, challenged, and increased constantly, or it vanishes.”

Why did Amtrak give-up a ready reserve of Budd-built 480 HEP cars in various configurations? In respect to how such equipment still operates on VIA Rail Canada, Amtrak’s Budd fleet could have provided extra sections during high seasons; opened new routes; equip the highly profitable Charter/Special Train market?

Asset Utilization: 
Unlike the motivation of the private railroads, Amtrak persists in failing to maximize asset utilization by rapidly turning equipment to increase revenues. Premier overnight trains into the 1960s operated on faster schedules with but two consists; allowing for the ability to perform same day turn in New York (“20th Century Limited”; “Broadway Limited”; “The General”), Washington (“Capitol Limited”), New Orleans (“Panama Limited’; “City of New Orleans”) and all in Chicago. As well, fast Midwest daytime corridor runs could turn one consist and return same day (“Twin Cities Zephyrs”; “Abraham Lincoln”; “Blue Bird”; “Green Diamond”; “Land O’Corn”). 

Amtrak has been content to allow extra “Auto Train” equipment to be stored idle in Sanford, FL yard, instead of hustling to introduce summer seasonal concept, e.g., Colorado (running overnight Chicago- Denver, possibly Colorado Springs).

Maintenance:
Where is the accountability of management for the maintenance yards to allow equipment to go out without resolving deficiency write-ups? Where is the plan to repair the broken, rattling partitions on Superliner bedrooms between B-C and D-E that allow sounds and smells to seep in the other bedroom?

Schedules: 
A persistent violation of Drucker’s maxim, “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.”

Excessive padding and deplorable OTP has not been conducive for any travel market-tourism, personal/ leisure, or business.

Gearing eastern/southern long distance departures from Chicago to the arrival of western long distance connecting trains is deplorable, as it has created unfathomable arrivals equivalent to the early twentieth century in Washington, New York, Boston, and New Orleans. The end result- requiring an additional consist, increased labor and food costs. Think how those additional consists could have been deployed to increase frequencies or add new routes.

Inter-connectivity between trains broken, e.g., Northbound “Coast Starlight” (arriving LA 9:00pm) to eastbound “Southwest Chief”(departing LA 6:10pm).

Mentality of Amtrak continues to focus on end point to end point schedules on state-supported corridors, dismissing the increasing need to provide ability for day trips between sub markets en route. Also important, the lack of frequency on most state-supported corridor trains dismisses consideration of rail, particularly for day trips.

Per operating requirements of Class 1 railroads protecting their freight business, Amtrak schedules are grouped in tight windows within two hours preventing any schedule flexibility to broaden appeal of train services, e.g., Chicago-Cleveland (CSX, NS); Chicago-Galesburg (BNSF).

Where are the plans for Chicago to serve as more than a hub-and-spoke center, but rather, as proven in Europe, to facilitate run-thru  schedules for corridor trains operating in Illinois, Missouri, Indiana, Michigan, and Wisconsin? Beyond looking at resolving T&E and possibly signaling issues, Chicago Union Station currently offers two run-thru tracks. This concept was actually successfully utilized in 1972 by the Amtrak team of McClellan/McKinney to operate two daily run thru schedules between Milwaukee-St. Louis via Chicago. (Of course, in those days of vision, those trains operated with dome parlor and coaches, and diner-lounge). Where are the proformas to evidence what is known– how eliminating connections would dramatically boost traffic and revenues? Look at how the numbers bounced with the run thru of the daily “Coast Starlight”; imagine how worse the numbers would be if the NEC still operated only four Boston-Washington trains.

Services
Continued deterioration of dining and lounge services complements the removal of any semblance of first class. Our frustration can best be summed up by Ron Santo, a Chicago Cubs player who once blurted in disgust, “the game is not that hard!” Quite apparently, the new age concept of “Customer Experience” is not in the common parlance of metrics and benchmarks utilized by Amtrak. In respect to Drucker, “Management by objectives works-if you know the objectives. Ninety percent of the time you don’t.”

First Class: 
Beyond the acute focus on serving the 1% crowd on the “Acela,” their is no meaningful vision at Amtrak for creating a first class market on the long distance trains. At a minimum, this is defined by consistent attentive service, a newspaper, separate lounge facility (remember the Pacific Parlour?), and replacement of the apparatus posing as a berth.

Maintaining this consistent tin ear approach to the market explains the lack of daytime F Class on state-supported corridors. Hard to believe when the Amfleet was first introduced, F Class was initially on Chicago Detroit and St. Louis runs; but pulled to the east along with the Amdinette cars.

Business Class:
Recently, Amtrak announced withdrawal of B Class on “The Crescent” and “Auto Train” because customers could not see any difference from a standard coach. No duh! Other than “Acela” and the “Downeaster,” their is no perceived, or, actual differentiation between B and Coach Class. Take a bow, marketing and product development! Unlike on VIA Rail Canada, Amtrak does not offer complimentary  cocktails (or even just beer and wine), let alone a meal; seats are the same as coach. On the “Northeast Regionals,” B Class is a straight coach several cars ahead of the cafe car. No great expectation to seduce a wise consumer to waste their funds.

Food & Beverage:
These issues are the epitome of Drucker’s observation,“Most of what we call management consists of making it difficult for people to get their work done.”

In historical deference to the Penn Central and Southern Pacific, Amtrak wrongly believes it can control its costs by depleting and downgrading its food and beverage services. If it really sought cash and product control, it would have long ago instituted a Point-Of-Service IT program. Contrary to initial intent of Railpax, no F&B services are provided on CHI-MKE “Hiawathas” or NYP-ALB “Empire Service.”

Today, what was commonly acknowledged as a major attraction to rail travel is quickly going by the wayside, as sightseer cafe/lounges are de-staffed and eventually eliminated; diners replaced by Cross Country diners, or, even just Amcafes. I predict this will be “the straw that breaks the back” of even the most ardent advocate or user. Frankly, what happened to the federal law passed in 1981 by Congress for Amtrak to contract out its on-board food and beverage service; how has Amtrak remained so unaccountable?

Dining Cars: storing 17 new CAF Viewliner diners at Hialeah can only mean an internal decision to inappropriately continue the Amcafe concept on the “Silver Star” and “Lake Shore Limited,” as it continues to be contemplated to replace diners on other routes.

For the convenience of the crew, breakfast is cut-off at 0830; last meal on arrival day is a limited “Express Meal” to facilitate counting and boxing inventory (despite commonly known point of great wastage to evade inventory count); no service emphasis by consistently offering pre-meal/post meal drinks.

How is it that with almost twice the size of a Superliner diner, Amtrak cannot efficiently serve coach passengers, as was typically achieved in 48-seat diners on the western long distance trains before 1971? Perhaps one reason is the lack of a coffee shop/grill/lounge for coach passengers to eat more than a muffin or hot dog? Instead, product development is unmotivated towards solving this issue to avoid passengers eating in their coach seats.

Cafe/Lounge Cars: if operating on a business model with the goal of profitability, Amtrak long ago would have recognized the missing links to appreciate why the bar cars on the New Haven were that railroad’s largest profit center. Instead of running “a rolling 7-11” emphasizing the sale of candy, chips, hot dogs, cardboard pizza, and pop, Amtrak would have properly trained LSAs to be competent bartenders; provided full liquor kits, condiments, and mixers; appreciated the regional, racial, and ethnic tastes of customers. A positive lesson from the past would have had the cafe/lounge open for business upon boarding at departure point, rather than closed up to 90 minutes for lifting tickets or setting-up which should have been accomplished in the yard.

Under the Investigative Microscope-Stripping the Varnish Off of How Amtrak Can and Will Make Service Worse Due to a Lack of Accountability and Transparency

Embracing a sub rosa culture preventing transparency and accountability, Amtrak finds itself today on a “glide path” not towards sustainability, but self-destruction, by taking apart the long distance routes without a thought towards the financial impact on the remaining state-supported corridors and the NEC.

Amtrak’s finance department has marched in lockstep with the political demands of its Board of Directors; Amtrak’s own Inspector General (IG) has persistently been ignored, despite identifying the repetition compulsion of inappropriate actions by Amtrak. In acknowledgment of Drucker’s point, “Rank does not confer privilege or give power. It imposes responsibility,” perhaps the only viable approach to prevent Amtrak’s self-immolation is to appoint a Special Counsel within the federal General Accounting Office (GAO), with the issues to be investigated in a “deep dive” include:

Finance:
1 Why has it been tolerated to ignore, and even pervert Generally Acceptable Accounting Principles (GAAP)?
2 How can the NEC be declared “profitable” before subtracting the high infrastructure costs?
3 How have costs been allocated? Why has the NEC’s infrastructure and overhead costs been attributed to the long distance and state-supported routes?
4 Why have the state-supported routes been burdened with a full cost allocation methodology, instead of the appropriate and actual avoidable cost methodology. How has this prevented increasing frequencies and new routes?
5 How does Amtrak account for the revenues derived annually from the state-supported routes (since 2013)?
6 How has it been audited and tested to verify the northeastern commuter lines are being charged for all of their direct/indirect user costs attributable to the NEC; how has it been confirmed that Amtrak is now collecting on these invoices?
7 How frequently, if ever, are the contracts for purchased services (e.g., food, beverages) audited; how are errors identified and at what level of Amtrak is this reported to; is this communicated to the Board; how is it verified that such errors are addressed?
8 Identify if a methodology exists to identify impact of sold-out capacity by determining lost revenues; if this data is utilized by Amtrak at the Board or Executive Management level for planning equipment needs?
9 How are costs and revenues accounted for with PVs, Charter and Special Trains? What is the cost structure imposed; what account are revenues attributed to?

HR:
1 How frequently are all management grade positions analyzed, particularly at HQ, to determine need, effectiveness, duplication?
2  How frequently is the performance rationale for the bonus structure analyzed; what is the check & balance to prevent favoritism; is the Board involved to set bonus levels; is their a process to identify inappropriate bonuses to past executives; what effort at “clawback?”
3 What is the extent of negotiating labor agreements; what efforts directed at opening contracts to re-negotiate?

Why Maintain Amtrak Monopoly vs. Open Access/Franchise Bids?

As the former mayor of New York City said, “I can explain it to you, but I can’t comprehend it for you.” Given the plethora of inexcusable actions by Amtrak with a political stink attached, I think we need to focus our energy on finding a solution to the Amtrak monopoly. Such states as California, have clearly evidenced their capacity to identify new regional routes and compatible schedules, with a minimal role and interference of Amtrak. The only other option is to sit still and watch how Amtrak persists in cutting its service beyond the muscle and bone.

* Peter F. Drucker was known as “the father of management, professor and dean of Drucker Business School at Claremont Graduate University.

Advertisements