THE magazine of railroading

SEARCH TRAINSMAG.COM

Enter keywords or a search phrase below:

Is the Northeast Corridor really profitable?

Posted by Fred Frailey
on Friday, May 13, 2011

A recent Washington Post story quotes Amtrak president Joe Boardman as saying the Northeast Corridor, between Boston and Washington, is making its owner money. In fact, Boardman goes on to say, the Acela Express service enjoys a profit margin of 40 percent. You’ll find that story here (the statement is made on page 3).
 
The story ended up on Trainorders.com this week and provoked a firestorm of responses. But all they did was generate a lot of smoke. Nobody sought to check the underlying facts, available to anyone who looks on Amtrak’s website. To see for yourself, go here and call up the “Monthly Performance Report” for September 2010, which has audited financial results for each Amtrak route for fiscal 2010, which ended last Sept. 30.
 
So is Boardman right? Go to page APP-19. It shows Acela Express revenues of $450 million and after all direct and indirect expenses, a profit of $105 million, for a profit margin of 23 percent. Other NEC trains show a loss of $43 million on revenues of $470 million. Well, 23 percent is not the same as 40 percent. But as Boardman says, taken together, the NEC trains covered all their direct and indirect costs, with $61 million left over.
 
The results are better if you call up the March 2011 “Monthly Performance Report,” covering the first seven months of fiscal 2011. The Acela Express enjoys a profit margin of 31 percent, the rest of the NEC breaks even (almost), and the corridor as a whole is $71 million to the good. So while Amtrak’s boss exaggerates the Acela’s profit margin a tad, he’s correct in the larger sense. Give Joe a passing grade of B.
 
But in that Washington Post story, Boardman qualifies his statement in one important respect. To cover the Northeast Corridor’s capital costs, Amtrak still needs a government subsidy, he says. That is correct. How much are capital costs, on average? For the answer to that, go back to that same link and refer to page 4 of the 2009 report titled, “Northeast Corridor State of Good Repair Spend Plan.” There, it estimates the NEC’s annual, normalized capital needs the next 15 years as $368 million for infrastructure and equipment. Last fiscal year’s NEC operating profit of $61 million covers only one-sixth of that capital need.
 
Then the thought occurs to me: Has the NEC in recent times ever covered both its total operating and capital costs from revenues? Amtrak.com today cannot provide the answer. But the Wayback Machine, an internet archive at www.wayback.org, takes you to Amtrak.com as it existed at various points in time years ago. And in the monthly report covering fiscal 2008, which ended just as the economy topped out prior to the Great Recession, I make a remarkable discovery.
 
That year, the Acela Express cleared all its costs with $220 million to spare, and the other NEC trains cleared their costs as well, with $149 million left over. That adds to $369 million, or a million bucks more than the corridor’s normal capital needs. That’s an important fact and worth remembering. In a sparkling business environment, the Northeast Corridor is capable of making a profit, any way you want to state it. Maybe that will be one year in five or 10, but it’s possible. Take heart, folks. — Fred W. Frailey

Comments
To leave a comment you must be a member of our community.
Login to your account now, or register for an account to start participating.
No one has commented yet.

Join our Community!

Our community is FREE to join. To participate you must either login or register for an account.

Trains free email newsletter
NEWS » PHOTOS » VIDEOS » HOT TOPICS & MORE
GET OUR WEEKLY NEWSLETTER DELIVERED TO YOUR INBOX
Connect with us
ON FACEBOOK AND TWITTER

Loading...