Passenger Rail Profitability

[lattasnip9]

This bothers me:

If everyone on the passenger threads on the trains magazine forums believes that passenger rail was never profitable, and that the only profit they had was from freight and express/mail service, how come the railroad's generally spent a fortune streamlining, styling, offering first class service when they could just let their service deteriorate to near nothingness until Amtrak?

 

[henry6]

One, thier charter's required passenger services.  Two, if they had mail contracts, and many did, they had to run the passenger train anyay.  Three, passenger trains were a public relations tool to present prospective shippers with the railroad's best side; it kept them in the public eye. Four, they thought they could beat the airplane (pre jet age). Five,  who'd ever thunk three kids and the dog in the back seat on a two week cross country vacation!??  Six, they were professional railroaders brought up on passenger trains.

[daveklepper]

At the time of cheap labor and cheap fuel, there were railroads that earned profits pulling passengers.  Even interurban trolley lines and short lines.   WWI was probably the turning point, and the growth of paved highways and automobile sales.

[AltonFan]

Another issue was regulation:  early on, state and federal regulatory agencies made it difficult or sometimes impossible to raise fares and freight rates to cover costs.  At the same time, railroads could not discontinue unprofitable service without the approval of the regulators.  Typically, freight rates subsidized passenger service.

Eventually competition narrowed, and in some cases completely destroyed, profit margins.  In order to keep feight rates competitive, passenger service withered.

And keep in mind, this state of affairs lasted through the 1970s.

[SPdave]

Like all business, railroading does not exisat in a static environment. Nor does management have the benefit of hindsight when it makes investment decisions. I once spoke with Gerald Perra, an executive in SP's passenger department, on this topic. His feeling was that if SP management had forseen the direction that passenger buisiness would take, they would not have invested the millions they did in thier postwar streamlined fleet. Remember, in the early '40s (when many orders were placed for streamlined trains only to have delivery delayed by the war), jet air travel was not economically feasible (indeed jet planes were an unproven technology) and what was to become  Esenhower's inspiration for the U.S.  interstate highway system , the German Autobahn, was only just being constructed.

[CNJWestfield]

Passenger service was mildly profitable for most of the first half of the 20th century.  It was mildly unprofitable to wildly unprofitable after WWII.  But, just as foodservice in most hotels is unprofitable (or marginally profitable) the railroads continued passenger service for one important reason; it was a great marketing tool.  When viewed as an amenity (someting provided in order to gain public recognition and acceptance) passenger service was profitable.  It got people acquointed with the lines servicing their community.  So, when they needed to ship freight, they thought of railroad X and not railroad Y. (The old Lackawanna was a case in point - it generated a huge amount of good will with its Phoebe Snow and other trains.)

Also, a whole lot of railroad executives I have known love to ride on trains.  Don't discount that as a reason!  - Marcel Escoffier 

[Rex Beistle]

.. Remember, in the early '40s (when many orders were placed for streamlined trains only to have delivery delayed by the war), jet air travel was not economically feasible (indeed jet planes were an unproven technology) and what was to become  Esenhower's inspiration for the U.S.  interstate highway system , the German Autobahn, was only just being constructed.

 OK, I will ask the obvious. 

What jet planes (the 'unproven technology') were flying in the early '40s? 

 

Rex Beistle

[Kevin C. Smith]

I think that, while passenger service as a whole was not necessarily profitable, many individual trains were. So, while spending money re-equipping secondary, suburban or local services may not have been worth it, keeping long distance or corridor trains supplied with newer equipment may have often been.

[electrifying]

Passenger service was vital in the early days when the daily train was the only reliable way of moving long distances across the country where there were no decent roads.  In the "great days" of the passenger train rail fares were substantially higher in relative terms to today's so the income from a passenger train carrying 200+ people was substantial and the passenger trains actually paid their way.  Rivalry on some routes (NY to Chicago for example) made it necessary for a 20th Centuary Ltd and a Broadway Ltd to run against each other with the advertising value partly outweighing the loss that was now emerging.   Once a fine network of paved highways, and air competition was in place rail was finished at distances of over a couple of hundred miles and even along these short corridors rail passenger service could continue only if an hourly service or better could run.  So OK along the NE Corridor but nothing from NY out to places like Scranton (the use of a ferry or of PATH with a train change killed the chance for a profitable frequent service out to Allentown and the like).  The cities in the Cleveland/Toledo/Detroit/Columbus/Cincinnati areas should be linked by frequent passenger trains but many folk now go to destinations far from a downtown station. 

IDOF, England.

 

[electrifying]

Germany actually had a few jet planes flying in the mid 1940s but the UK's jets were more reliable and got under way just in time to prevent the Germans developing their version properly.  The passenger trains was probably profitable along routes linking major cities until the national highway network was built after World War 2 and the aeroplane became really reliable.  Once that happened all that rail could hope to tackle was the short corridors and in a nation of wide-open spaces suitable corridors are confined to Boston - NY - Washington and possibly around LA/Bay Area or in the Chicago area.   Today the long distance passenger train is at best a useful amenity for the few folk who are not well enough to drive or fly, or have the time to travel slowly across the continent.

Iain Frew.

[CSSHEGEWISCH]

.. Remember, in the early '40s (when many orders were placed for streamlined trains only to have delivery delayed by the war), jet air travel was not economically feasible (indeed jet planes were an unproven technology) and what was to become  Esenhower's inspiration for the U.S.  interstate highway system , the German Autobahn, was only just being constructed.

 OK, I will ask the obvious. 

What jet planes (the 'unproven technology') were flying in the early '40s? 

 

Rex Beistle

In Germany:  Me262, Ar234, others proposed.  In the UK:  Gloster Meteor.  In the USA:  P-59, P-80.  This covers to the end of WW2.

The first jet airliner in commercial service was the De Havilland Comet in 1952,  the Boeing 707 and Douglas DC-8 didn't go into service until 1958.

[wjstix]

Actually some railroad's passenger service was profitable into the 1960's. Northern Pacific's passenger operations made profits for something like 8 of the 10 years of the 1960's.

As for new equipment, before the war railroads were the only game in town and adding speed, styling and other ammenities like air conditioning etc. helped people to choose their railroad. Remember that many routes had several railroads competing for the ticket buyer's money. After the war, most heavyweight cars were 20-30 years old and needed replacement anyway, plus the wartime rail boom lead many in the industry to believe that there would be a lot of people travelling by train after the war. (There actually were a lot of travellers after the war, but not in the numbers anticipated, and numbers dropped steadily as other options became more available.)

The big blow was government ending their 'indirect' subsidy by taking mail off of trains in the sixties. After that, there was a pretty strong rush to request withdrawal of passenger trains throughout the country - many trains that were making a profit or at least breaking even with mail contracts were losing money after the mail was withdrawn.

[henry6]

[ OK, I will ask the obvious. 

What jet planes (the 'unproven technology') were flying in the early '40s? 

 

Rex Beistle

 

Jets developed extensively in the 50's. 

[Redwood Chopper]

I worked in the restoration, research and exhibits divisions of California State Railroad Museum for a number of years. One of the very interesting things we learned when restoring and prepping the AT&SF Super Chief lightweight dining car "Cochiti" for permanent exhibit was that the Santa Fe upper management knew the Super was going to lose money from the moment it was re-equipped as a lightweight. The Super Chief lost money until the eve of Amtrak, but the railway guarded it jealously and fiercely against all odds. As others here have said, the Santa Fe (like other railroads) knew too well that a good train was a great PR tool and a great train was spectacular PR.

That AT&SF's top brass expended so much money and great faith to go with Budd to get a gleaming long-distance train like no other before it (not counting the early CB&Q Zephyrs, all articulated small trains) says quite a lot. That they expended every available cent on the streamlined Super Chief in the closing years of the Great Depression says quite a bit more. The Cochiti's menu and its dining services were a microcosm of extreme public relations. Yes, many of the Super's passengers were the elite and the famous. But may were shippers, and there's nothing like fine food (and fine drinks before and after) that can woo and convince big-bucks customers to keep their business on a given line. It didn't hurt that the train ride-quality and the tracks on which it rolled were silky smooth and that the air conditioning (when new) worked beautifully in all seasons. The Super Chief was, for its entire lifespan, as much an event as it was a vehicle.

When I was called upon to guide occasional special guest tours of Cochiti at CSRM, I always emphasized these facts. Most people today, so familiar with crummy to barely passable airlines' services, were awed. A few in these groups recalled the good old days of passenger railroad services, but most had seldom (if ever) ridden Amtrak. I only (and regularly) wished we could have given the full sensory experience of a fast-paced trip across the country in the entire 1937 Super Chief, complete with meals and libations in the lounge car (which I also still wished we had gotten for the exhibit collection).

 ~Kevin

 

[pookey]

First of all, American passenger railroads were not "doomed to fail," but they did face significant obstacles in doing business (from ICC regulation of rates, to train crew rules) and increasing, government subsidized competition after World War II from the auto and trucking industries, and the real killer, the airlines.  I doubt that any railroad executive around 1950 really saw what was coming or expected to be out of business in just 20 years.  After all, railroads had enjoyed a near monopoly on long distance travel since the 1830s.  A few railroads did earn some profits on passenger service in the early 1950s, but it took tremendous management skills at the top and commitment by their employees.  The New York Central continued to invest in track improvement into the late 1950s, believing that it could compete with air travel, which was still rather primitive until use of jet aircraft became widespread.  The first interstate highway was completed in Kansas in 1956, with much more to come, and quickly.  Americans prefered the comfort and flexibility the auto offered for both short and long trips.  Railroads were an "old" technology, and had nothing new to offer, compared with the airlines.  And the federal government essentially built the interstates (90 per cent of initial costs) and subsidized airport construction, as did the railroads, through taxation.  It's a complicated story, but that's some of it.