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     According to Amtrak’s September 2010 Monthly Operating Report, which includes the financial results for FY10, the average cost to carry a passenger in the NEC was $83.78 compared to $58.46 for the State Supported and Other Short Distance Corridor Trains (Corridor) and $263.67 for the long distance trains.  These numbers represent average costs before depreciation, interest, and other expenses.  <o:p></o:p> FY11 segment numbers have not been provided.  Amtrak is re-working its accounting system.  Amongst other things it will be able to allocate depreciation, interest, and other expenses by segment and route.  Why Amtrak ceased segment reporting before the new accounting system is ready for prime time is a mystery. The FY10 average net operating results per passenger, which are a function of revenues minus  costs before depreciation, interest, and other expenses, were $4.96 for the NEC, due in large part to the positive operating results for the Acela offset by losses for the regional and the special trains, compared to a $16.67 loss for the corridor trains and $128.61 loss for the long distance trains. Assuming 80% of the depreciation, interest and other expenses is allocable to the NEC, with 10% being allocable equally to the other two segments, the average loss per passenger after considering these items was $48.67 for the NEC compared to $21.68 for the corridor trains and $144.15 for the long distance trains.  Even if 100% of the depreciation, interest, and other expenses were charged to the NEC, which would be inappropriate accounting, the long distance trains would still lose considerably more money per passenger than the NEC and the corridor trains.  The cost of normal maintenance of any segment of Amtrak’s owned system, including the equipment and infrastructure for the NEC, is included in operating expenses.  If the maintenance is designed to extend the life of the asset, it is capitalized.  Ultimately, depending on the depreciation schedule for the assets, it flows through the income statement as a part of the depreciation expense.  In Amtrak’s case it take decades for some of the capitalized costs to be fully amortized.    The long distance trains accounted for 15.6% of system passengers and 26.0% of system revenues.  But their losses wiped out the NEC operating profit and accounted for 76.2% of the net operating losses before allocation of depreciation, interest, and other expenses.  Sleeping car passengers accounted for 2.3% of system passengers and 15% of long distance passengers.  Sleeping car revenues accounted for 3.7% of long distance revenues.  Amtrak does not disclose the costs attracted by the sleeping cars, but in a 2005 report the Inspector General indicated that the subsidy for sleeping car passengers was greater than the subsidy for coach passengers on the long distance trains. Amtrak claims that it would realize net savings of approximately $300 million per year if the long distance trains were discontinued. I have not been able to obtain a breakdown for these numbers.  Clearly, the savings during the first year or two of discontinuance would not equal the operating and fixed costs associated with the long distance trains because of severance packages, asset sale and salvage lag, and overhead reallocations.  Some of the overheads associated with the long distance trains, e.g. reservation systems, management, maintenance facilities, etc., could not be reduced proportionately with the discontinue of the long distance trains.  Nevertheless, it is hard to believe that Amtrak would not be able to realize savings of more than 52% of the net operating losses by discontinuing the long distance trains.  A for profit private enterprise probably would be able to achieve considerably greater savings.   Even if the saving were only $300 million per year, it adds up.  Assuming that they were invested at the Treasury Department’s weighted average cost of borrowing, the savings would amount to $3.34 billion over 10 years.  That is a significant amount of money and would go a long way toward upgrading the DFW/San Antonio corridor, which is the kind of environment in which passenger trains make sense.
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