Why not carry express, parcels on US passenger trains?

Historically, American railroads have helped cover the cost of passenger operations by taking advantage of the faster, scheduled nature of passenger trains and their capacity and haulage capability to also carry high-revenue express and parcel shipments, as well as the US Mail (at least until 1967). Many railroads worldwide still load up passenger trains with “head-end” cargo. Given this history, it has perplexed me that Amtrak has been unable to develop a successful, sustainable express and parcel business in spite of its various attempts at doing so. 

While I was in Phoenix two weeks ago for the annual American Public Transportation Association Rail Conference, I sought some insight on this matter from Gregg Baxter. He was a manager in Amtrak’s mail and express unit for ten years, prior to becoming General Manager of the Virginia Railway Express operations and maintenance contract for Keolis Rail Services Virginia. He is now Vice President for Rail at First Transit, a North American division of FirstGroup, a major passenger train operator in Britain and a major bus operator in the US. (First Transit just recently won its first US rail operating contract, with Texas’s Denton County Transit Authority to run its A-train DMU commuter service.)

The concept of Amtrak using parcel and express carriage as a revenue generator is great, Baxter told me, but the company lacked a cohesive strategy. He said that US Mail contracts were a good revenue generator for Amtrak during the brief period in which the company held them. Amtrak carried mostly bulk mail (mostly standard mail on long-distance routes and some first-class mail on shorter distance routes) under a $60 million per year contract with the US Postal Service that started in mid-2000, which Amtrak terminated in October 2004, citing a small profit margin. 

Baxter argued that the railroad should focus on maybe two or three routes on which to invest in developing a sustainable customer base for package shipping services and in the facilities needed to efficiently load and unload shipments at terminals and key stations. Instead, he told me, management decided to spread package service out too much around the national network, diluting its potential and spreading revenue too thinly across units of cost.

Package carriage also presented a host of operational challenges, much of it having to do with the fact that parcel-carrying cars could only go on the back of passenger trains, and the entire train could not fit into many stations. There were also cases where passengers had to wait aboard a train, including upon arriving at terminals like Chicago before they were allowed off the train, while cargo cars were switched on and off. US Mail cars, on the other hand, could be placed anywhere within a consist. If the company had focused on only two or three route segments, these issues could have been resolved, Baxter said. However, the political push to roll it out quickly doomed the experiment. Amtrak at the time defended the decision to end mail and parcel carriage in the name of focusing on moving passengers efficiently. But these did not have to be mutually exclusive goals.

It is commonly maintained that Amtrak’s host freight railroads opposed the passenger carrier’s handling of packages and express because they saw it as competition to their own service. Baxter said “it was only a legal issue” with the freights, but that Amtrak had every right to move less-than-carload-lot shipments. He surmised that, if Amtrak had gone about developing the parcel business the right way, it could even have partnered with a host railroad for the service in some fashion. Amtrak would “have to do it right,” Baxter explained.

I asked Baxter whether independent passenger train operators like First Transit — which are seeking to take over contracts to operate state-supported trains from Amtrak, and may soon bid to take over long-distance routes under a pilot program included in last year’s federal surface transportation law — would consider carrying packages and express, or even mail, on passenger trains they operate. He said that an operator would want to evaluate all potential revenue sources for their operation, and would be wise to incorporate any viable ancillary business so long as the core business of carrying passengers safely and efficiently did not suffer.

Almost two years ago, the US Postal Service’s Inspector General’s office issued a report saying the agency could save money by shifting some mail routes from trucks back to trains. The report primarily looked at contracting with freight railroads that already run fast intermodal trains, including some that carry UPS packages in truck trailers loaded onto flatcars. But if Amtrak were smart and thought a little outside the box (which often seems like a tall order for the company), and perhaps negotiated a deal with one or more host railroads, it might be able to take advantage.

Trains are truly multipurpose vehicles. They are versatile in ways that road vehicles and aircraft are not. Many types of traffic can be carried on one train, which helps reduce the amount of fixed costs per unit of revenue in a business characterized by high fixed costs. Any passenger train operator, including Amtrak, would do well to keep this in mind and be a little imaginative in figuring out the best ways to generate revenue while achieving their public service and safety mandates.