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How Amtrak Dismisses the “Hole Doctrine”: When In A Hole, Stop Digging

By M.E. Singer

Just as the nation belatedly learned from its fatal mistake of dismissing the (accurate) warnings of General Billy Mitchell, so we find Amtrak so obstinate in its unrelenting adherence to its failure to avoid perpetuating the “hole doctrine.”  Far too much time has passed since the last competent railroader, Mr. David Gunn, last led Amtrak in 2005. Given the accumulation of business errors by Amtrak contributing to its hole being dug even deeper, such a strident approach towards failure would have shutdown Amtrak in the real marketplace. Indeed, it has become increasingly obvious that for Amtrak to blindly refuse to acknowledge these self-inflicted facts built-up over the past will most certainly cause Amtrak’s eventual failure.

Unreasonable Actions Further Impairing Amtrak’s Legitimacy

We witness in Amtrak’s belligerent  corporate culture an unwillingness to listen, learn, evolve, and grow, despite the turnaround market lessons of McDonald’s and other national firms who have real stockholders, investors, and a keen sensitivity to the marketplace. A selection of current disturbing examples of Amtrak’s arrogant approach to the marketplace includes: parallel to the appointment of two anti-rail members to its Board of Directors, note how Amtrak wielded its “power” to cut the Pacific Parlour Car and now dismantle the dining car services. Politically, we have to question how far Amtrak will push to the edge of the envelope, when it announced the de-staffing of all depots in West Virginia right after its meeting between Senator Manchin’s (D-WVA) and Amtrak’s CEO Anderson over the continued operation of the New River charter train. Despite the senator’s emphasis on the importance of tourism to his state’s economy, was the de-staffing even mentioned during this meeting with that state’s senior senator? Also, was all the PR hoopla over Amtrak working towards connecting rail service between LaJunta and Pueblo just a delaying tactic for Colorado to contribute towards rehabbing the “Southwest Chief” route, given the recent announcement to de-staff the LaJunta depot? How will Amtrak continue to promote its packaged vacations, now that the much vaunted marketing adage, “getting there is half the fun,” was discarded with the dining cars?

Acting as a State-Owned Enterprise Indifferent to the Market, Amtrak Polarizes Tomorrow’s Future Ridership

The relevance of the state-supported corridors, particularly in the Midwest, has been jeopardized by Amtrak eliminating the student discount (and others); yet, concomitantly, how quickly NARP seized the opportunity to promote membership as the only way to maintain that discount. From NARP’s own recent promotion:

As Amtrak Cuts Discounts, RPA’s Continues….
Membership to Rail Passengers has become more valuable as Amtrak has eliminated numerous discounts for students, veterans and AAA members. As it stands now, a membership to Rail Passengers is one of the only discounts that Amtrak continues to recognize. If you have friends or family that travel on Amtrak and previously relied on other criteria for discounts, now is a great time to encourage them to become members of the Rail Passengers Association. 

In my opinion, given the acknowledged economic relationship of Amtrak paying NARP for alleged consumer relations activity, the atmospherics are concerning, as one could construe a vertical tying agreement between the parties that requires students to pay for membership in NARP if they seek to retain their student discount, previously provided at no cost directly by Amtrak.

Terminal Diagnosis of Amtrak as a State-Owned Enterprise: Unfocused and Lack of Market Synergies 

Depicting the issues of Amtrak’s principal sectors below and how they impact each other, we see the inability of Amtrak to capitalize on the obvious synergies between the sectors.  As it will be evidenced, Amtrak has failed to develop the natural growth opportunities, particularly the connectivity between intra-state and interstate regional corridors, as well as long distance services to major vacation sites (e.g., national parks). Given how Amtrak has created such an un-level playing field, these issues continue to self-perpetuate, at the cost of building revenues and offering a value to the public:

Amtrak does not appreciate nor support the long distance sector connecting numerous intra-state and inter-state sub-markets; how this sector has been excessively burdened with the inappropriate allocation of overhead and NEC (Northeast Corridor) infrastructure costs that defy the integrity of GAAP (Generally Acceptable Accounting Principles).The sad reality of Amtrak’s politicized business model that has denied the growth potential and market development of this sector by historically ignoring such potential; willfully failing to secure additional equipment to increase frequencies and revenues. Where else is there such an archaic, dysfunctional economic model that is purely satisfied with barely maintaining the status quo; or, actually believing by cutting product, performance and service will achieve an economic breakeven? What is the true meaning of “breakeven” when the data is manipulated like a “shell game” to the exclusive benefit of the NEC?

Who will shoot “the emperor wears no clothes” to finally decry how the NEC is far from being “profitable,” given the facts that its significant infrastructure costs are not subtracted from revenues; that their is in excess of $450 million in deferred infrastructure costs (the alleged loss of the Long Distance sector claimed by Amtrak). Until mandated by Congress in 2015, the many regional commuter lines were operated throughout the NEC for free since 1976, without paying there share of operational and infrastructure costs. Amtrak controls the message to avoid acknowledging the “elephant in the room,” that despite Acela I and soon Acela II, the majority of travel along the NEC is not end point-to-end point, but rather, limited between Philadelphia-New York City.

Incredibly, Amtrak’s new CEO from Delta Airlines, Richard Anderson, offers naïve proposals not toned down by his management council of lifers, focused on their own job continuity over well conceived products and services to create profits. Otherwise, how could Anderson seriously propose to slice-up long distance routes into elongated daytime corridors up to 700 miles; how would so much of the current traffic between sub-markets be served (contrary to the false statement emphasizing and dismissing end point-to-end point traffic)? To even speak of DMUs evidences a lack of knowledge (as further pointed out by Noel Braymer here). The DMUs referenced are certainly not the type used in Switzerland, offering first, coach, and food/beverage services, but rather, the basic suburban, short haul model. What brings out the true irony in the equipment proposal, given the intended distance and lack of features, is the fact how the airlines have been so quick to eliminate the regional jets from their fleet for any schedule beyond a very short haul and limited traffic, in respect to the passenger comfort level.

Looking up from the hole it has been digging for itself, Amtrak has failed to understand how the state-supported corridors have bifurcated into two distinct sectors. One primarily in the Midwest with those states continuing to simply pay Amtrak its requested tribute to maintain a minimal, costly, and unresponsive service. However, what continues to evidence is how other states have picked-up the mantle from Amtrak to revamp their state-supported routes by acknowledging with a hands-on approach how they could grow and build market share by increasing the connectivity of their inter-regional routes and schedules.

The key issue in this two-part article is to acknowledge those states with the commitment to create viable regional corridors, despite Amtrak’s intransigent, “this is how we always did it,” attitude. In parallel, to explain how the current paralysis of Amtrak has been foisted upon the Midwest corridors; a recommended bold course of action that would invigorate and revive these once vibrant corridors. Such a course of action could serve as a template to eventually cover all state corridors.

Beyond the “Daylights” and “Clockers,” the Midwest corridors were renown, up until the early 1960s, for running speedsters over jointed rail, numerous grade-crossings, and blending with freight traffic to offer parlor, diner, lounge, and coach services (even domes) tying together the villages and towns en route with there end point cities. Until the federal treasury paid for the expansion of the airlines into the short haul markets, a savvy traveler knew they could go anywhere throughout the Midwest on a “400,” “Zephyr,” “Hiawatha,” “Rocket,” “Chief,” “Pere Marquette;” other corridor runs (GM&O, WAB, C&EI, GTW); the regional lines of the IC, and many other long distance runs serving the short haul corridors (NYC, B&O, EL, NKP, PRR), etc.

What the Midwest Corridor Situation Can Learn From These Other States Achieving State and Regional Corridors

Before targeting the egregious foibles of Amtrak in the once vibrant Midwest corridor market, it behooves us to acknowledge, learn from, and embrace the proven and successful points evidenced by these flourishing state corridors. Ideally, the key points of success can be integrated into a revamped Midwest corridor system.

California Joint Powers Authorities (JPAs):
The very best business model at this time, as it has competently evidenced its comprehension and appreciation how traffic increases concomitant to expanding its reach regionally to inter-connect viable corridors that had not previously existed. Responsible for marketing and sales, we can hope that one day these three JPAs can secure similar insurance protection as Amtrak enjoys, and arrange for economically feasible track access and dispatching costs from the Class 1s, in order to bid a long awaited adieu to Amtrak. Certainly, the exorbitant charges to lease antiquated equipment from Amtrak could be resolved with Siemens or Bombardier; given current revenue stream would facilitate leases (the history of the original bi-levels as Amtrak’s “hook” to retain these services is another story.)

What we can learn from California, if we we can still objectively view politics, is to look at what that state has achieved to generate state rail corridor funding from increased gasoline taxes, cap and trade, and SB1, all in support of the objective: the Transit and Intercity Rail Capacity Program. This realistic approach has allowed for the continuing track, bridge, and signal construction to facilitate additional frequencies on already heavily used corridorsA critically contributing factor encouraging the success of these JPA routes is also their understanding of how dedicated bus connections has consistently contributed to the load factors of their trains by extending the reach of the dedicated train routes. The state continues its financial commitment to expand the intra-state regional rail corridors.

North Carolina Department of Transportation NCDOT):
Amazing how the state of North Carolina would successfully identify and develop its own intra-state regional corridor between Charlotte and Raleigh; to brand, market and develop schedules for the “Piedmont” route.  As well, to secure and rehab its own consists and power, with its own lounge car and vending machines. The service runs on the North Carolina Railroad (owned by the state and leased to the NS), with the state investing to rehab the right-of-way, signaling, and eliminating grade crossings to increase train speed. Due to its initial success, the “Piedmont “has been expanded to three round trip frequencies, with a fourth to begin this June when the new Raleigh depot comes on line. The success of the “Piedmonts,” as well, operating “The Carolinian” on this route via Richmond/Washington all the way to NYC, has encouraged NCDOT to eventually extend the “Piedmont” to Asheville and Wilmington. Like California, NCDOT learned to utilize dedicated bus connections to enhance connecting traffic on the “Piedmonts.”

Given how the NEC has already been extended south from Washington to Richmond, with service to Newport News, the state clearly understood the economic feasibility to merely extend current NEC “Northeast Regionals” south of Washington/Richmond to serve Norfolk, Lynchburg, and Roanoke. Even now, further west, Bristol is clamoring to extend the train from Lynchburg/Roanoke. Almost by accident, Amtrak learned what asset utilization actually means.  Of course, proximity to the NEC and its “Northeast Regional”fleet made the expansion program quite feasible. Indeed, in respect to the strong market of two-way traffic between the Northeast and Virginia, it is said that Virginia does not pay for these services to Richmond, Norfolk, Lynchburg/Roanoke, as Amtrak has defined them to be “profitable.” It certainly helps to share a border on the Potomac…

Northern New England Rail Passenger Authority-State of Maine:
Despite the substantial cost by not utilizing Boston’s South Station and yards due to the ex-B&M route using North Station, necessitating a dedicated fleet for the “Downeaster” concept, as well as New Hampshire’s refusal to contribute towards the three stops within the state, Maine put together a coherent corridor concept between Boston-Portland, ME. Recently, the route was extended to include Freeport (think L.L. Bean) and Brunswick.  Unfortunately, Amtrak was unable to complete in time its study to extend limited summer seasonal service to Rockland on Maine’s coast. The five “Downeaster’s” include a functioning business class car with 2+1 leather seating; quite impressive is the fact the state picks the food & beverage provisioning (and I believe also provides the attendant). Talk about product and cash controls! The “Downeaster” route utilizes the friendly tracks of the MBTA commuter line and the short line of Pan Am Railway. This inter-state regional corridor is quite popular for the on-line colleges, leisure travel for shopping, beaches, and coast, as well as business day-trippers. This corridor has flourished as a result of a very hands-on approach by a committed state agency.

As I previously pointed out here in an article, “Nose Under the Tent,” the State of Connecticut contributed significant funds, on top of the federal funding, due to Amtrak not meeting the agreed upon budget or timeline to re-build the New Haven-Hartford-Springfield line (e.g., right-of-way, restoring second track, signaling, grade crossings, depots). The state elected to franchise the frequent service by selecting Transit America and its partners over Amtrak; leaving Amtrak only has the landlord to collect usage fees on the infrastructure. To operate its own trains cutting Amtrak out of the equation is significant as it gives new definition to the PRIIA Act of 2008, by opening a current Amtrak route to franchise in competition to the current Amtrak schedule. This begins to redefine Amtrak in its apparent future role as an infrastructure operator, leaving the train operations in more capable hands. As well, how much Amtrak traffic to NYC will potentially be bled off and diverted to Metro North connections at New Haven? Service has been delayed until early summer as CTrail completes rehabbing old ex-MBTA cars. With high frequencies, fast schedules, and good equipment, this inter-state regional corridor could give Amtrak a run for its money.

MBTA to Cape Cod:
Gone are the days of the New Haven serving this fantastic summer season location of Cape Cod with multiple trains from Boston, New York, and overnight from Washington/New York. Although Amtrak attempted a seasonal schedule from Washington/New York in the mid-1980s, that failed for a variety of reasons. However, in 2013, the much scorned MBTA (Massachusetts Bay Transit Authority) created the“Cape Flyer” from Boston-Hyannis on Fridays, Saturdays, and Sundays during the summer season. This train providing bi-level commuter cars, bar and food service, quickly succeeded, and has only increased its traffic every year since. As the “Flyer” easily connects with the many ferries at Hyannis, the horrific traffic jam on the single roads to/from Boston is avoided. (Imagine the #101 or #405 on Friday rush hour!) I can personally vouch for the value and why The T’s “Flyer” is so successful, when I had to pay $300 round trip per person in 2013 just to fly a “puddle-jumper” between Boston and the Cape.  The Cape to Bostonians is like Montauk to New Yorkers. Too bad Chicagoans cannot reach Galena by rail, nor San Franciscans to Monterey by rail…

Currently, their is activity beyond mere curiosity to re-introduce a regional inter-state service between New York City-the Berkshire Mountains (Pittsfield, Massachusetts), a popular summer destination for Manhattanites. At issue will the extent of cooperation and costs identified by Amtrak and CSX; if Massachusetts will be at the table to contribute  or, to just benefit from the tourism dollars. What will be the fate of the CSX line between Albany-Boston that serves Pittsfield and Worcester?

Florida AAF “Brightline:”
A solid concept to connect an intra-regional market currently unserved by any frequent, high speed train service. Utilizing the right-of-way of its former owner, the Florida East Coast Railway(FEC) between Miami-Cocoa Beach was a terrific opportunity to significantly save on land acquisition costs, currently highly contested by well-financed NIMBYs and their lobbyists. Offering new equipment and updated on-board services, “Brightline” intends to reduce the high volume traffic along parallel I-95, by offering convenient mobility between Miami-Orlando International for tourists, commuters, business and leisure travelers. As well, FEC/AAF is fulfilling the proven concept of creating real estate development at its depots and en route, just as we have historically witnessed in Japan and Hong Kong. In the end, it’s all about politics and who ya know; accordingly, will the anti-train folks, already spending heavy money re horn blowing, grade-crossings, and fencing the right-of-way, have their victory to prevent the planned extension from Cocoa Beach-Orlando International? If that happens, I have previously commented in various Florida papers of that effort could be viewed as the 21st century legacy to the National City Lines case. It should be discovered just who is fronting the lobbyists and stirring up the NIMBYs, as in my opinion, we will find those detesting competition, such as airlines, bus lines, auto rentals, and their supporters from oil, construction, bus, air, and auto manufacturers.

High-Speed Rail-Texas and California:
Certainly, we should consider the proposed Texas central Railway HSR line between Dallas-Houston as a classic intra-regional corridor. The current California HSR under construction is also to be an intra-state regional corridor, connecting with the three JPA routes and various commuter lines. Politics and financing will determine their fate.

Applying the Success Points and Create A New Template for the Faltering Midwest Corridors to Prosper

Despite the current Midwest Corridors burdened with primarily multi-state routes, the successful corridors above have evidenced how to overcome that obstacle. The real issues to change for the Midwest Corridors to become viable are: financial, political; operational; frequency; speed; schedules; on-board services; ownership; routes; enhancing regional inter-connectivity. These points will be covered next week in Part II “State-Supported Corridor Trains: Amtrak’s Last Hurrah.”