By Noel T. Braymer
Andew Selden is a retired Business Attorney and President of the Minnesota Association of Railroad Passengers. He is also an expert on the business of Rail Passenger Service. With that he has followed for years the non GAAP (Generally Accepted Accounting Principles) Amtrak “accounting” practiced almost from the beginning of Amtrak. The direct result of this is according to Amtrak Management the trains on the Northeast Corridor are making money while the Long Distance Trains, poor things have the highest reported “losses” of all Amtrak Trains. If Amtrak were to use GAAP accounting the Long Distance Trains would make a small profit.The fact is under the Presidency of W. Graham Claytor Jr in the 1980’s Amtrak LD trains were and or close to making money. Claytor’s administration was the last time Amtrak invested money on the LD trains. But the NEC trains running on often ancient infrastructure (like the 85 year old Lift bridge next to the Newark Penn Station) and other ancient problem structures are Amtrak’s pride and joy. But if we look at the trains on the NEC, we find the vast majority are not Amtrak trains, but commuter services, primarily New Jersey Transit.
According to Amtrak, the NEC makes a $500 million surplus (the heaviest Amtrak ridership is between New York and Philadelphia which is just under 100 miles on the over 400 mile NEC). As reported by Mr. Andrew Selden the “Interregional” aka Long Distance trains annually lose $500 million dollars according to Amtrak. Mr Selden asks the question “Adding those results together leaves a net deficit of just $100 million. So where does the rest of Amtrak’s $2 billion (i.e. $2,000 million) annual federal subsidy go? The missing $1.9 billion a year is real money, even in Washington D.C.”
Mr. Selden goes on “We have long advocated that Amtrak’s capital should be reallocated, with a far larger share being interregional trains, not for political, geographical, moral or historical reasons, but simply because those are the services where capital can be best used to maximize the returns on investment, measured by the annual amount of revenue and revenue passenger miles produced, per dollar invested.” The best way to make money on passenger service is to generate the greatest number of passenger miles. Even airlines know getting a buck for an otherwise empty seat is better than nothing. This is at the heart of what is wrong with running LD train service 3 days a week. It boils down to if the trains are not running, you are not making money. Daily service outside of special trains such as ski trains is needed to get the most passenger miles (revenue) every day. This is a problem with commuter trains that often layover between rush hours and rarely run into the evening or midday. Daily service for Long Distance trains means income 7 round trips days a week not just for 3 in each direction. Also people are more likely to ride trains with daily service, compared to 3 days a week because of convenience.
Mr. Selden asks the question how the NEC Trains have a $500 million “surplus” while the LD trains “lose” $500 million and the State subsidized trains “lose” $100 million at least according to Amtrak? This is even odder when you consider that Amtrak runs the Long Distance trains with major discounts to use the freight railroads tracks. So even the costs of operating the Long Distance Trains are dumped in large part on the railroads, saving Amtrak money.
Mr. Selden notes “Mr.Flynn’s plan to limit all interregional trains to three days a week previously was a disaster. Tom Downs followed bad advice from Mercer Consulting to cut frequencies in order to cut long distance “losses” (neither Mercer nor Downs understood to begin with that the ‘losses” were fictions of the APT-predecessor “RPS” route costing system, not actual financial results of operations). It didn’t work because Amtrak costs are mostly on the NEC ownership and its bloated fixed costs, not train operations, so when they cut train operations, what went away were revenues far more than costs.”