Where is Amtrak's desire to grow and advance?

Posted by Malcolm Kenton
on Friday, August 29, 2014

In the cover story of this month’s issue of railroad industry trade journal Progressive Railroading, several top Amtrak officials tout the company’s shift towards operating in a more businesslike manner, which the article describes as “taking a hard line on expenses, continually seeking to grow revenue, becoming more financially transparent and accountable, and providing the best possible customer service.” While this all sounds well and good, and many aspects of the changes that CEO Joseph Boardman and his team have introduced are truly laudable, something big is missing.

“We need to move from a siloed, functionally driven organization to a more nimble, customer-focused business,” says Chief of Corporate Research and Strategy Jeff Clements. These are welcome words, as is Chief Marketing Officer Matt Hardison’s assertion that “The goal should be that every passenger that gets off the train says they had a great trip and can’t wait to ride again.” Management rightly realizes that the railroad is finally in a position to move beyond the siege mentality of fighting merely to survive and to defend intercity passenger trains’ very legitimacy. 

A late eastbound Empire Builder meets its on-time westbound counterpart at a siding near Gold Bar, WA on BSNF's Scenic Subdivision on Aug. 8, 2014. Photo by Malcolm Kenton.
Amtrak’s service has never been a hotter commodity. Witness the ridership records that are being broken each year, and the generally high fares, which are in part a consequence of supply and demand — in this case, an abundance of would-be riders, but a limited supply of seats and sleeping car rooms. “Today, Amtrak is in the business of selling a service that is in great demand,” Board Chairman Anthony Coscia rightly assesses the situation. Coscia is also right that Amtrak must demonstrate that it is spending money well if it wants to receive increased public investment.

Amtrak is tasked with operating a nationwide network of passenger trains, including service to small towns and rural areas, and as such it is unreasonable to expect that it will ever make a profit. However, the nation as a whole derives value from having such a network, just as it does from having a national network of Interstate highways, which itself is not profitable and never has been expected to turn a profit. “America’s Railroad” offers reliable, convenient and accessible service to places with few other options and offering mobility to the roughly one-fifth of Americans who cannot or will not drive or fly. Coscia realizes this: “Amtrak’s real value is that it provides a service that supports a national transportation system and can connect cities,” he tells Progressive Railroading in an extended interview. (Free subscription required.)

Passenger train advocates’ longer-term goal is to shift the frame of the entire conversation around transportation funding to the point where the idea of investing in a robust national passenger train network is questioned as little as the idea of maintaining our national road network. But in the meantime, the fact that the national train network isn’t profitable shouldn’t excuse Amtrak management from making a solid case for the company’s growth, and for the greater and more reliable levels of public investment that, combined with private capital leveraged through station-area development and other means, will make it possible.

A bottom line-driven company, especially one with such an advantageous position in the market as Amtrak enjoys, would be finding ways to invest in increasing the supply of its product to meet the demand. But is Amtrak pursuing every possible avenue to acquire the capital needed to make large orders of new equipment and beginning discussions with train-sponsoring states and host railroads towards adding frequencies and perhaps new routes? The company should be taking advantage of its high demand to make a solid case to Congress and state partners for greater investment in the entire national network, demonstrating the higher levels of service that their constituents could enjoy in return. Sadly, the railroad appears set in the opposite direction: cutting costs while seeking to continue to grow ridership (and, consequently, revenue) in order to “keep [its] operating subsidy to a minimum,” according to the article. The company’s 2014-2018 Strategic Plan makes absolutely no mention of growth or expansion.

Where is Amtrak going to put the additional riders it seeks to attract? There just aren’t enough cars and locomotives to accommodate them. To be fair, the company is seeking greater amounts of capital funding from Congress — primarily for much-needed track capacity increases on the Northeast Corridor. But what about the rest of the country? On the operating side, there is a limit to the amount by which revenue can be increased while operating expenses are continuously cut. There are certainly a good deal of opportunities to economize, but at some point, you have to spend money to make money.  

The railroad can’t rely on revenue continuing to grow while not investing in adding capacity nationwide. Maintaining a bare-bones food service operation and cutting amenities like wine and cheese for sleeping car passengers and pillows for coach passengers are also not recipes for growing patronage, especially while trains are chronically behind schedule due mainly to factors beyond Amtrak’s control, but also partly to the age of its equipment. 

Chief Financial Officer Gerald Sokol describes his boss’s philosophy to Progressive Railroading as assuring that “every dollar we spend has to create value for Amtrak.” But if the company is not spending money to grow the supply of seats and rooms to meet demand, or at least on improving the quality of on-board service using the existing fleet to the point where it can reasonably command higher fares, then where is it creating added value?

When top company officials claim that Amtrak’s business interests are best served by simply cutting costs and asking the public to invest a bare minimum in the national network, they shirk their responsibility, both to the company’s self interest in offering a top-quality product to as many customers as possible, and to the public interest in seeing the national passenger rail network grow. Amtrak instead must live up to, and stand up for, its own mission statement: “to move America where it wants to go.”

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