Amtrak Breaks Even in 2022

[Anonymous]

In your dreams!  Maybe not!

Absent the long distance trains, Amtrak could cover its operating costs on the NEC and short distance corridor (corridor) trains by raising its average remaining system ticket prices 60 cents. However, if the price adjustment were restricted to the corridor trains, the average increase would be $13.20. To cover its operating and capital costs, Amtrak would have to raise its average system fares $24.25. Raising ticket prices; however, it is not the only option. 

Amtrak or a replacement organization(s) could reduce costs and mitigate any ticket price increases by making these changes.

• Reorganize Amtrak or replacement so that its role is restricted to coordinating intercity passenger rail services, managing contractors, and providing technical advisory services

• Sell Amtrak’s capital assets to a third party with a high tax shield and leaseback space, right-of-way access and equipment. 

• Outsource operating and maintenance by route to lowest effective cost supplier for five years, with automatic renewal for another five years if performance standards are met. 

• Outsource back office operations, i.e. reservations and ticketing, payroll, benefits, accounting, finance, IT, purchasing, public relations, etc.

• Offer coach and business class only with Wi-Fi, TV, movies, etc. at each seat. Passengers cover the cost of TV, movies, etc.

• Outsource food service to lowest effective cost supplier. Passengers pay full cost of food service. 

• Sell 80 per cent of tickets on-line. Charge a fee for those who buy from reservations clerk.

• Ring fence stations so that only ticketed passengers can access platforms via a ticket verification system similar to BART.  Minimize station facilities and personnel. 

• Configure trains to be operated by two people, i.e. engineer and conductor, similar to BART. Install cameras, voice interfaces, etc. to respond to passenger information needs.    

• Dropping the long distance trains could save more than $500 million per year.  Keeping them means breaking even is a nonstarter. 

• Use stranded equipment to expand existing corridors or develop new ones, i.e. Charlotte to Atlanta, Oklahoma City to San Antonio, Houston to San Antonio, etc. 

With modern organizational and management practices, Amtrak could breakeven; it might even turn a profit.  But it would take a major mindset change!  The biggest barriers to change would be politicians and Amtrak’s careerists.   

 

[schlimm]

Some interesting ideas, which perhaps in combination could make a viable passenger rail net.  In another post I have a different view of the platform access issue.

[jrbernier]

  Your plan may just work.  The problems are:

• Outsourcing - You wind up at the mercy of the bidders.  If you ask for a performance standard, you will also have to give a performance bonus for meeting/exceeding the standard.  
• On-Line  tickets - This is not a commuter operation, and Amtrak already has on-line ticketing.  Doing an 'airline' penalty for buying tickets elsewhere just irritates the customers.
• Rope off the plaforms access - Does the NEC not have controlled access to the platforms at this point?
• Two employees operating the train - I hope there are not more than two cars in the train, the conductor will be very busy.

• Try to get rid of the long distance trains(not a political reality)
• The NEC electrical infrastructure - That needs to be completely replaced - and the saved money is not even close to paying for it.  I do not think Amtrak has a real good price on what this is going to cost.

  I have a soft spot for the Empire Builder, and when riding it across North Dakota & Montana, one can see/feel the closeness of the small towns to the train.   But the reality is that it will never pay it's way.

Jim

[Anonymous]

jrbernier

  Your plan may just work.  The problems are:

• Outsourcing - You wind up at the mercy of the bidders.  If you ask for a performance standard, you will also have to give a performance bonus for meeting/exceeding the standard.  
• On-Line  tickets - This is not a commuter operation, and Amtrak already has on-line ticketing.  Doing an 'airline' penalty for buying tickets elsewhere just irritates the customers.
• Rope off the plaforms access - Does the NEC not have controlled access to the platforms at this point?
• Two employees operating the train - I hope there are not more than two cars in the train, the conductor will be very busy.

• Try to get rid of the long distance trains(not a political reality)
• The NEC electrical infrastructure - That needs to be completely replaced - and the saved money is not even close to paying for it.  I do not think Amtrak has a real good price on what this is going to cost.

  I have a soft spot for the Empire Builder, and when riding it across North Dakota & Montana, one can see/feel the closeness of the small towns to the train.   But the reality is that it will never pay it's way.

Jim 

You have raised some good points.

Frankly, I don't expect Amtrak will be much different in 2022 from what it is today unless the United States has a major financial crisis. I have an additional thought on two of the points that you raised.

BART runs from the San Francisco Airport to the Oakland Airport, for example, as well as longer end point to end point distances. The distance is not as great as the New York to Washington segment of the NEC, but the concept is the same.  Moving people by rail. BART does it with six to eight car trains. They have a driver and a conductor. Tickets are validated automatically when a wannabe passengers enters the station platform, which is secured, and they are validated again at the destination. There is no ticket taking on the train. There is no reason, other than tradition, why tickets have to lifted on a New York to Washington train.

Do corridors need to be capable of supporting 160 mph speeds?  Or could they get by with less?  And if so would that mean lower capital costs?  Maybe the answer is not top speeds to rival those of the Europeans, Japanese, etc., but rather higher sustained speeds, say 125 mph, over a greater percentage of the route.  

Some folks say that we have to emulate overseas systems. I disagree. We need a system that we can afford and will offer a reasonably competitive service over 200 to 300 miles.  We have that now in the NEC.   

[oltmannd]

Contracting out the things that are not your "core" is a great idea.  The devil is in the details.  You can structure the deal as "command and control" with carefully crafted performance metrics with penalties and bonuses.  You will have to decide to what measure, so be pretty careful what you design!  Or, you can go the "laisse-faire" route and just let the contractor run that portion of the business, keeping the revenue.  (winning bidder is the one who needs the lowest, flat subsidy)

As for ticketing and fare collection, you can do "on board" or do barrier style entry-exit.  I've seen and used both.  The open platform system In the light rail transit world, - this usually is the honor system with random inspection and high fines.  Barrier entry-exit systems work pretty well on commuter rail and heavy rail transit where station platform access is pretty easy to control.

 Personally, I think I prefer open platforms and on board fare collection.  The Germans have this down pat.  I don't understand why Amtrak just didn't buy the whole E-ticketing thing (or contract out) from DB.  

Also, Amtrak needs to get into through ticketing with all connecting commuter rail service in the cities they serve.  You want to go from Marcus Hook, PA to Nantick, MA?  No sweat.  Put in your origin and destination, check the schedules, buy your ticket all in one spot.  How many people now would even know that such a trip is doable much less how to figure out the schedules and ticketing?  (other than us railfans, that is...)

One other step I'd add is to get Amtrak schedules/ticketing into Sabre and try to do a whole lot more code sharing.  So far, the only code sharing Amtrak has is with Continental from Newark to Phila.   Amtrak should be able to find a successful niche in long-haul air, short haul rail, multi-modal trips.  You can make these trips now, but you have to do all the knitting by hand.

Amtrak can do all of these things fairly quickly.  No need to wait for higher speed service - just do things that will drive the demand for the existing service up.  Higher demand = more revenue!

[Anonymous]

oltmannd

Contracting out the things that are not your "core" is a great idea.  The devil is in the details.  You can structure the deal as "command and control" with carefully crafted performance metrics with penalties and bonuses.  You will have to decide to what measure, so be pretty careful what you design!  Or, you can go the "laisse-faire" route and just let the contractor run that portion of the business, keeping the revenue.  (winning bidder is the one who needs the lowest, flat subsidy) 

During the nearly 30 years that I worked for one of the largest electric utilities in North America, we turned the company on its head.  We went from owning everything to leasing a great deal of it.  We factored receivables, set-up demand bank accounts (negative balances), emphasized conservation in lieu of new power plants, and outsourced most of our non-core functions. The old timers thought that we were nuts. 

The key is a well defined albeit not perfect contract managed by strong contract managers.  If you turn it over to the contractors, even the most honest of them will interpret every ambiguity in the contract to their advantage.

I like your notion of more code sharing. As you noted, there are heaps of things Amtrak could do to offer a better service.  

[henry6]

Contracting things out may be good for most bottom lines in the short run, but be careful...nobody works for you more loyally, more consciensously than your own employees; they know how to work the systems with and without everything in order.  Plus your customers feel more comfortable with your people than with a contractor.  "Not owning everything", at least to me, indicates a non involved investor not interested in product, service, or procedure but only profit.  This attitude spills over to employees and customers in a negative way.  

Fare collection and verification is a problem but shouldn't be.  With today's computers, et al, a swipe of a card upon boarding a train or hand held by railroad personnel should't be difficult or expensive.  There are a lot of systems and proclivities to be explored here.

[oltmannd]

henry6

nobody works for you more loyally, more consciensously than your own employees;

Really?  Penn Central charm school anyone?  Comcast customer service?  

Local "contract" bus drivers on my commuter bus are excellent, hard working, polite drivers.

It all depends on how you set up the contract and what incentives you bake in.  If you measure customer service and pay a bonus for improving it,  shouldn't that push the contractor to doing the things you value?

[oltmannd]

...and one more thing....

Sell seat reservations like the airlines and DB.

[Anonymous]

Few if any customers come in contact with non-core activities, most of which are performed behind the scenes. They could not care any less who meets their needs as long as they are met.  

The primary loyalty for many employees is to themselves.  And with the current employment environment, it is difficult to get rid of people who find hundreds of way to avoid work or turn in a marginal performance.  Not so with a contractor.  If they don't perform, get someone else.

Creative management includes experimentation.  If Plan A does not work, go to Plan B.  And if necessary C, D, E, etc.  Keep on keeping on, which is what Amtrak does for the most part, and one thing is certain. It will never be a winner, and it will continue to be a drain on the national treasury. 

[henry6]

oltmannd

henry6

nobody works for you more loyally, more consciensously than your own employees;

Really?  Penn Central charm school anyone?  Comcast customer service?  

Local "contract" bus drivers on my commuter bus are excellent, hard working, polite drivers.

It all depends on how you set up the contract and what incentives you bake in.  If you measure customer service and pay a bonus for improving it,  shouldn't that push the contractor to doing the things you value?

LOL.  It is all in what management/owner is all about.  Investor-bottom line-take all you can owner/operator like Comcast, PC, and several companies I've worked for, they can go (intentionally left blank) themselves and will get no help from the help.  But if the owners are there to make a product or provide a service honestly and with integrity, and the roll up there sleeves and work alongside the help to make a go of it, then, the help will be loyal and do their darndest to work toward making it a success.  American business of all kinds have seen investors come in, fire everyone in sight, automate to save money not to earn money, cheapen products, close factories and abandon towns since the mid 80's.   This results in people jumping from job to job and nobody is really looking into careers or dedication to a job or company.