To what extent is intercity passenger trains’ ridership and revenue affected by their on-time performance (OTP) and by the cost of their chief competition, driving a private automobile? These are the questions that Mark Feldman, a senior consultant at Steer Davies Gleave in Boston, answered in a study conducted on behalf of Amtrak in late 2015 and presented in a session on intercity passenger rail performance at the Transportation Research Board Annual Meeting in Washington, DC on January 11.
The study was undertaken in response to the expiration of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA). This law established new metrics and standards for Amtrak trains’ performance and imposed new penalties on host railroads for failing to meet those standards. These standards, finalized jointly by the Federal Railroad Administration and Amtrak in May 2010 as required by the law, survived a court challenge early last year.
The Association of American Railroads, representing the host freight railroads, sued in 2010 to block the standards, claiming it was unconstitutional to give such regulatory power to Amtrak, which the suit claimed is a private company. The US Supreme Court temporarily upheld the standards on March 9, 2015 (Department of Transportation v. Association of American Railroads, 575 U.S.), ruling that Amtrak shall be considered a government entity for this purpose, but remanded a final decision to the US Court of Appeals for the District of Columbia Circuit, which has yet to issue a new ruling. The appellate court had previously invalidated the standards in 2013. However, the entire PRIIA statute, written as a five-year bill, expired September 30, 2013.
The Fixing America’s Surface Transportation (FAST) Act, signed into law on Dec. 4, 2015, does not explicitly extend the metrics and standards or call for them to be revised, or for new ones to be written. It does, however, require the US DOT to conduct a study to determine the optimal “operational, institutional and legal structures” that would support more mutually beneficial shared use of railroads between passenger and freight trains. It also includes a provision requiring Amtrak and the state or states supporting a short-distance route to “consider” including performance metrics in their contracts. Feldman’s study does not take its effects into account as there are not yet enough data on which to base a determination.
Feldman’s model takes into account any deviation from the published schedule, a more stringent standard than that Amtrak uses in its official OTP reports, which counts a train as “on time” if it reaches its terminus within 30 minutes to one hour of schedule, depending on the route length. It is not a complicated model in terms of its layers of complexity or its equation. It is an econometric “fixed effects model” with a time dimension, based on logarithms and linear regression. It adjusts in order to weed out fixed and seasonal effects on ridership and revenue, such as the generalized example Feldman gave that New York-Washington trains that are 75% on-time will still get more ridership than Minneapolis-Fargo trains that are 100% on-time.
The study names four factors that affect OTP: actions or practices of the host railroad that is responsible for dispatching, tracks crowded with commuter and freight train traffic, weather and aging infrastructure. It also enumerates the negative consequences of poor OTP: losses in ridership and revenue and increases in operating costs (extra hours on the clock for crews, costs of housing misconnecting passengers and misplaced crew members, additional fuel consumption, increased need for maintenance and cleaning, and the like).
The study comes to the commonsense conclusion that passengers making shorter trips are more sensitive to delays than those making longer trips on the same route, and that the degree of sensitivity increases as the total minutes of delay become greater. Train travelers’ sensitivity to gas prices is higher for medium-distance than for short-distance trips, but is nearly zero for long trips (i.e. passengers taking long trips will probably take the train regardless of the cost of gas). As a consequence of those taking longer trips being more likely to choose sleepers, and of sleeping car passengers generally being more affluent, sleeper passengers were found to be less sensitive to fuel prices than coach passengers. Business Class passengers were also found less affected by gas prices than coach passengers, for the same reasons and because they are less likely to want to drive to begin with.
Among the conclusions to be drawn from the study’s results is that the degree to which a drop in OTP causes a drop in demand is not consistent and depends on what the baseline is. Particularly, demand on a route will rise more sharply if OTP goes from very bad to good than if it goes from good to slightly better. Similar, the elasticity of demand for driving with respect to gas prices is greater (more price-sensitive) when prices are higher to begin with than when they are lower.
Another observation is that demand for train travel on the Northeast Corridor is considerably more sensitive to gas prices than to OTB, but the NEC is a statistical outlier in that it has had few OTP issues in recent years compared to non-NEC trains. Outside the NEC, poor OTP hurt ridership by 2.7% overall, but had greater effect on short-distance routes than long-distance routes. However, it was the long-distance routes whose OTP improved the most when the PRIIA standards were in effect compared to the period prior to their taking effect.
Even though Feldman's report did not show a significant overall effect of lower gas prices on ridership, the Philadelphia Inquirer received a memo to Amtrak employees from CEO Joseph Boardman today warning them that he is ready to impose budget cuts due to lower-than-projected ridership. He blamed this both on very low gas prices luring potential passengers towards using their cars for longer trips, and on the weeklong service disruption caused by the East Coast blizzard in January. Boardman said passengers will not notice any short-term service changes, but that expenses like employee travel would be trimmed and new hiring would be frozen.
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