Amtrak's FY 2008 Key Performance Numbers

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Amtrak's FY 2008 Key Performance Numbers
Posted by Anonymous on Wednesday, December 24, 2008 9:10 PM

Amtrak's key performance numbers for FY 2008 show many improvements over FY 2007.

Consolidated revenues increased 14.2 per cent.  Passenger related revenues increased 13.1 per cent, whilst commuter revenues increased 10.3 per cent, other revenues increased 12.7 per cent, and state and capital payments increased 1,258 per cent.   

Ticket revenues increased 14.7 per cent for the system, i.e. 14.6 per cent for the NEC, 17.5 per cent for State Supported and Other Short Distance Corridor trains (SS&SD), and 10.3 per cent for Long Distance trains (LD).

The number of passengers - 28.7 million - increased 11.1 per cent.  Passenger miles increased 8.95 per cent and seat miles increased 1.9 per cent.  The load factor increased from 48.9 per cent to 52.3 per cent, an increase of 3.38 percentage points.  This suggests that the system was more efficient in FY 2008.  However, the notion that it was standing room only on Amtrak for most of the year is not supported by the numbers, although there were surely heavy loads during peak travel periods, especially whilst gasoline was approximately $4 per gallon.

The NEC carried 38 per cent of Amtrak's passengers compared to 38.8 per cent in FY 2007.  The SS&SD trains carried 47.5 per cent compared to 46.4 last year, whilst the LD trains hoisted 14.5 per cent of the system passengers compared to 14.8 in FY 2007.

The NEC operating profit increased 43.4 per cent to $369 million before interest and depreciation.  The operating loss for the SS&SD trains decreased 3.6 per cent to $117.5 million, but the LD operating loss increased 9.8 per cent to $481.8 million. 

The LD trains brought in 22.5 per cent of Amtrak's FY 2008 revenues but accounted for 47.5 per cent of Total Attributed Costs before interest and depreciation.  While carrying just 14.5 per cent of Amtrak's passengers, they accounted for 209 per cent of Amtrak's operating loss before interest and depreciation.  How did they do this?  They ate all the operating profit on the NEC ($369 million) and contributed another $112.8 million to the operating loss.    This is the side of the LD train argument that its proponents, including NARP, never mention whilst reporting increases in revenues and number of riders.       

The net system loss from consolidated operations decreased from $1.12 billion in FY 2007 to $1.01 billion, a decrease of 9.6 per cent.  The increase in revenues was offset partially by significant increases in fuel, power, and utilities, casualty and other claims, depreciation, and miscellaneous items.

On a passenger per mile basis, the NEC trains contributed 20.7 cents before interest and depreciation, whilst the SS&SD trains lost 6.6 cents, and the LD trains lost 18.5 cents.  The Acela was the biggest contributor in the NEC at 34.9 cents.  The Hoosier State was the biggest SS&SD loser at 59.4 cents, whilst the Sunset Limited turned in the worst LD performance at 47.5 cents. 

A passenger traveling from Los Angeles to New Orleans on the Sunset Limited in FY 2008 received an average federal subsidy of $947.63 before interest and depreciation.  A business class seat on AirTrans would have cost approximately $539.  Amtrak could have bought the passenger a business class ticket on AirTrans and saved the taxpayers more than $408.63 per LA to NO passenger by discontinuing the train. 

Four regularly scheduled SS&SD trains covered their operating costs compared to five in FY 2007.  Not surprisingly, none of the LD trains even came close to covering their operating costs.   

End point on-time performance improved to 71.2 per cent during FY 2008.  This is up from 68.6 per cent in FY 2007.  The Acela trains were on time 84.5 per cent, down 3.3 per cent from last year.  Other NEC trains, including the Keystone service, had on-time record of 79.7 per cent.  The SS&SD trains had on-time performance of 68.6 per cent, which was a 3.1 per cent improvement over the prior year, whilst the LD trains had an on-time arrival rate of 54.2 per cent compared to 41.6 per cent.

If Amtrak was managed like a business, its executives would concentrate on the business lines that serve the greatest number of passengers with the smallest losses and the best prospects for breaking even.  These are the NEC and SS&SD trains.  They would drop the LD trains because they have no chance of ever covering their operating costs. 

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Posted by cordon on Thursday, December 25, 2008 2:00 AM

Bow

Sam1, thank you very much for that summary.  I especially appreciate the observation that Amtrak could save so much money by buying Airtrans tickets for passengers going from LA to New Orleans.

However, I'm not ready to accept that your last sentence, "They would drop the LD trains because they have no chance of ever covering their operating costs," should be the end of the story.  What the summary reveals is that it is a great challenge to improve the revenue/cost ratio for LD trains.  From all that I've read over the last year in these forums and in Trains magazine it's not clear to me that we (RRs, industry, science/technology, govt at all levels) have worked the issue extensively enough to conclude that sufficient improvement is not possible at reasonable cost.  Especially, I don't see that any of the major players want to improve passenger rail.  Without the desire, or the vision, we get the business-as-usual approach, which inevitably leads to no innovation and no progress.

So Congress repeatedly funds Amtrak with its losses, but where is the funding for research on technology and business practices to reduce operating costs, to improve service, and to increase revenue?  There are literally dozens of dimensions to these areas, and almost every one of them has the potential for improvement.  And many of the potential improvements would spill over to freight railroading, trucking, electric utilities, and maybe even airlines.  Plus, global warming and other environmental issues.

Smile   Smile

 

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Posted by CG9602 on Thursday, December 25, 2008 11:01 AM
I also appreciate the numbers being presented here. I shall point out that comparing Amtrak's Sunset Limited to a point-to-point, two stop aircraft service is the proverbial Apples-to-oranges comparison, in that the air service does not make over two dozen stops on each and every trip as it goes across country. The airplane makes only two stops - one at each end of the route. The numbers are unfavorable as well because of the less than once per day service of certain routes, and the once per day service of other routes. The numbers how that multiple departures per day, while costly, are the way to go towards profitability. Why does the NEC show profit ? In part because there are multiple departures along the Corridor each direction every day. Same with the State supported trains. What Sam's numbers seem to be saying is that the "profits," if there are any to be found, are in the short haul trains. And this seems to contradict the conventional wisdom that the profits are in the long hauls. I also question some of the numbers because it stands to reason that the short distance trains would have a higher capital cost related to operating cost, and it would be more expensive on a per train basis to have only short distance trains serving some geographically limited markets.
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Posted by Anonymous on Thursday, December 25, 2008 6:17 PM

CG9602
I also appreciate the numbers being presented here. I shall point out that comparing Amtrak's Sunset Limited to a point-to-point, two stop aircraft service is the proverbial Apples-to-oranges comparison, in that the air service does not make over two dozen stops on each and every trip as it goes across country. The airplane makes only two stops - one at each end of the route. The numbers are unfavorable as well because of the less than once per day service of certain routes, and the once per day service of other routes. The numbers how that multiple departures per day, while costly, are the way to go towards profitability. Why does the NEC show profit ? In part because there are multiple departures along the Corridor each direction every day. Same with the State supported trains. What Sam's numbers seem to be saying is that the "profits," if there are any to be found, are in the short haul trains. And this seems to contradict the conventional wisdom that the profits are in the long hauls. I also question some of the numbers because it stands to reason that the short distance trains would have a higher capital cost related to operating cost, and it would be more expensive on a per train basis to have only short distance trains serving some geographically limited markets.

 

It would be less expensive to fly people coach class between practically any paired cities along the Sunset route.  The only exception would be between one or two paired communities served by commuter air only.  I showed the business class fare between LA and NO, as an example, to demonstrate the economic dysfunction of the Sunset Limited.  Needless to say, the gap would be even wider if I had used the cost of a coach seat to make the comparison.

Last year I ran three scenarios regarding the allocation of interest, depreciation, and other charges to the long distance trains vs. the short haul trains.  The scenarios assumed that 5, 10, and 15 per cent of these items were assigned to the long distance trains.  No matter how I sliced and diced the numbers, the long haul trains cost more per passenger and seat mile than the short haul trains.  This is true even in the case of the NEC, with its large capital investment, although the cost per passenger mile is much narrower than for other corridors.  However, if one considers that the long haul trains don't pay the full cost of moving them over the hoist railroads, the cost per passenger mile widens.  

Amtrak has been trying to fix the long haul passenger train since 1971.  It has failed.  And it will continue to fail because they long ago outlived their usefulness.  They should be retired, and the resources should be used to enhance existing short haul corridors or establish new ones. 

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Posted by CG9602 on Wednesday, December 31, 2008 11:41 AM
I also welcome Samantha's examination of the NRPC's numbers, it is just that I look at those numbers, passenger loads, revenue passenger miles, and ask where expansion may be made. Others look at the numbers passenger loads, etc., and say, "Forget about trains; give up." Do the numbers that Samantha1 lists indicate any latent demand for expansions of existing service ? if so, where? Also, does it not seem suspicious that the routes with the highest cost and expense-to-passenger-mile rations are the ones that are presented as least expensive ? One would think that it would be the other way around. Would it not make more sense to lengthen certain routes in order to expand the potential market ? While I disagree with the conclusions, I welcome the work and the numbers as they add some "meat: to the discussion of the "Politics Of Passenger Railroading."
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Posted by Paul Milenkovic on Wednesday, December 31, 2008 12:23 PM

I don't think anyone around here is of the opinion "Forget about trains, give up."

The real issue is that there is one camp in the advocacy community that never met a train they didn't like and is of the opinion that there is enough intrinsic goodness in trains of all types that whatever level subsidy it takes is what we should support.  The other camp is that for whatever level of subsidy money is forthcoming politically, there are choices to make -- LD vs corridors, HSR vs 110 MPH vs 79 MPH, expanded network vs increased frequency on existing network.

One litmus test of membership in the camps is when anyone poses a choice, a recent thread by Don Oltmann of "How would you spend the Lautenberg-Lott funding if we ever get it", there were numerous responses, roughly to the effect, that if we have to make choices, rail is underfunded, and shame to those (politicians, lobbyists, taxpayers) whom we can blame for not-enough-money because we ought to fund everything -- HSR, LD trains, LD HSR was proposed and debated on a recent thread, and so on.

Another litmus test is the Sunset Limited.  One camp is that any train discontinuance is a matter of losing ground in the effort to maintain and build up Amtrak; another camp is, maybe if we give up the Sunset Limited there would be money to improve other services. 

I can see some of the reasoning behind "hang on the Sunset Limited" -- do you give up the route so it becomes impossible to establish passenger service, even on corridors within that route, in the future?  Do you really save what you think by axing that train, or would other trains connecting to it see reduced ridership?  If you gave up the Sunset Limited, would you really see that money to spend on other train services, or would it somehow get taken away or otherwise not be available for that purpose?  Is the LD network part of the social contract where people in Kansas are willing to have tax money to to the NEC, and without the LD trains, the NEC is in peril?

On the other hand, there is a faction in the community which "defends ground" and does not even want to hear about giving up the Sunset or any other train.

If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
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Posted by Paul Milenkovic on Wednesday, December 31, 2008 12:52 PM

Do the numbers that Samantha1 lists indicate any latent demand for expansions of existing service ? if so, where? Also, does it not seem suspicious that the routes with the highest cost and expense-to-passenger-mile rations are the ones that are presented as least expensive ?

As to the thin routes being high cost, I don't get what is suspicious about that?  It stands to reason that the sparsest routes are least efficient and hence highest cost per passenger mile.  No, they don't lose that much in absolute terms because they don't serve up that many passenger miles, but they can be still high cost.  It is simple math of taking the ratio of cost over passenger miles to get cost per passenger mile. 

We can quibble about load factors, but when you start getting arline-style high load factors you get airline-style inconvenience of crowded terminals and seats and difficulty of getting bookings.

I am of the opinion that even with Amtrak's timekeeping problems and anecdotal accounts of bad service, ridership is not the problem.  If you are willing to subsidize Amtrak at the required rates to maintain auto and air-competitive fares, I think you could probably fill as many seats as you provide.

The problem is one of cost -- passenger trains are a high-cost means of providing service.  The low-cost means of providing common-carrier service is by air, and the reasons for this had been written up in Trains starting in the early 1960s.  Autos are also high-cost, but many of the costs are up-front or one-time costs of owning the car, and some of them are not accounted for by motorists, if people did that, we would perhaps see even greater usage of airlines, but people value the flexibility of autos an across cultures on this planet, people are willing to pay a lot of money for their convenience when they become wealthy enough to do it.

So if trains are expensive, what do you do?  One way is to see if trains could be operated more economically, and some of this goes under the banner of "Amtrak reform", which has had a checkered history.  Another way is to identify social benefits to trains to justify the subsidy cost, and to interest people among the broader voting public beyond the advocacy community in having trains.

The reason I make a big deal about energy efficiency and stress energy efficiency as a needed Amtrak reform is that if saving on oil is a social benefit that merits subsidy of train service, those trains better save on oil big time, otherwise there are other projects that could use the money.  Energy saving would favor corridor trains, which can be made lighter with more seats per train car.

Fundamentally, if trains require subsidy to operate, whether you have trains or not becomes a political decision, and whether they are politically viable depends on whether people out there even care about trains or have a sense that Amtrak service is providing something people value for their tax dollar.  That is why I bristle at the "shame" argument about Amtrak funding or the lack of HSR -- one is essentially scolding the very people (taxpayers in general) we need to get on our side, and I have never known scolding to be an effective tool of persuasion and making people feel good about something.

If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
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Posted by oltmannd on Thursday, January 01, 2009 8:36 AM

The numbers I would like to see that Amtrak never pubishes are ridership and revenue by OD pair.  That would tell us a lot about how "networky" Amtrak is and whether the small city service arguement holds much water.  But, it would be a rather large report with 500+ stations there would be likely be 10,000+ point pairs. (the theoretical max would be 500 x 500, but many would likely have zero ridership such as Toccoa GA to Florence SC)

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by Anonymous on Thursday, January 01, 2009 9:02 AM

oltmannd

The numbers I would like to see that Amtrak never pubishes are ridership and revenue by OD pair.  That would tell us a lot about how "networky" Amtrak is and whether the small city service arguement holds much water.  But, it would be a rather large report with 500+ stations there would be likely be 10,000+ point pairs. (the theoretical max would be 500 x 500, but many would likely have zero ridership such as Toccoa GA to Florence SC)

I am in the process of asking Amtrak's financial gurus for an explanation of how they allocate interest and depreciation.  I'll throw in a request for segment information.

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Posted by blue streak 1 on Thursday, January 01, 2009 9:38 AM

Sam: It appears to me that the long distance routes suffer from having to allocate a lot to station upkeep, agents, etc. The sunset route comes to mind as allocating these costs to only 6 trains a week really pushes up the costs. Also the New Orleans station also has Greyhound ( what do they pay?) Maybe NARP needs to campaign to either get various citys (like they do airports) to cover these costs or costs be allocated out of a different non operating pie. Samantha: any figures? Does AMTRAK break out these costs?. I think we all need to know the direct operating costs alone for any routes to give an unbiased look at costs. This method probably would show NEC operating profits. Also the additional operating costs due to RR caused delays should also be broken out. (again UP's delays expecially the Sunset.)

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Posted by Phoebe Vet on Thursday, January 01, 2009 2:02 PM

I also stated that maintaining a station for very few trains resulted in high costs per train, but Samantha said my thinking was flawed.

I also would like to see a bar graph, broken by route and sorted in stop order, of origin and destination pair passengers.

Dave

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Posted by Anonymous on Friday, January 02, 2009 8:03 AM

blue streak 1

Sam: It appears to me that the long distance routes suffer from having to allocate a lot to station upkeep, agents, etc. The sunset route comes to mind as allocating these costs to only 6 trains a week really pushes up the costs. Also the New Orleans station also has Greyhound ( what do they pay?) Maybe NARP needs to campaign to either get various citys (like they do airports) to cover these costs or costs be allocated out of a different non operating pie. Samantha: any figures? Does AMTRAK break out these costs?. I think we all need to know the direct operating costs alone for any routes to give an unbiased look at costs. This method probably would show NEC operating profits. Also the additional operating costs due to RR caused delays should also be broken out. (again UP's delays expecially the Sunset.)

Only end point to end point costs for each route are made available to the public by Amtrak. Segment information is not published, but I am sure that Amtrak has it because it would be the basis of the fare structure.

The financial and operating information that Amtrak makes public is more than most companies make available to their shareholders.  I don't know whether Amtrak would make the segment information available to the general public.  It is a quasi governmental agency, so invoking the Freedom of Information Act might turn it loose.  However, having it would not change the key financial data or conclusions that can be drawn from it.  

The NEC covers its operating costs.  The other corridor operations and long distance trains do not.     

Even if segment data, e.g. revenue, direct labor, other direct costs, shared costs, and attributed costs was available to the public, it would produce more data than most people are prepared to digest.  For example, if each station from NO to LA is paired as a segment, there are 231 combinations for the Sunset route alone.  For Amtrak it would be thousands.    

As of July 2007 Amtrak owned 46 of the 525 stations that it served.  In addition, it maintained 181 other stations for which it was paid a fee by the owner.  The costs of the wholly owned station are included in other direct costs.  The costs of the shared stations are embedded in shared costs.  Amtrak does not break these costs out, although I am sure that they have them. 

Many of the stations are owned by cities or transit authorities, and Amtrak pays rent for its portion of the space occupied in them.  For example, it shares the Fort Worth Intermodal Transit Center (ITC) with Greyhound and the local transit authority.  How much rent Amtrak pays compared to the other occupants is probably available through the city of Fort Worth, which owns the property, as would be the case in New Orleans.  Interestingly, the ITC was built with tax free municipal financing, just like most of the nation's airports, which some rail advocates bewail.    

The cost of the stations is fixed.  The cost of staffing them could be variable, but if my observations are accurate, Amtrak staffs many of them so that the costs behave like they are fixed.  To its credit Amtrak has eliminated the staffing at many of the smaller stations that it serves.  For example, of the 22 stations on the Sunset route, only six are staffed. 

Clearly, if a station is only served by one train a day, not to mention six a week, all its costs get dumped on that train.  It is inherently inefficient to support a low volume activity (one train a day) with a facility that was intended for higher volumes of activity (two, three, or more trains a day).  It is one of the reasons why long distance trains will never cover their costs. 

Amtrak's trains were delayed a total of 5,610,000 minutes (93,500 hours) during FY 2008.  Although the causes are not given for the year, the numbers for September show that hoist railroads were responsible for roughly 75 per cent of the delays, whilst Amtrak and thirds parties were responsible for 18 and 7 per cent.  These numbers probably reflect those for the year. 

The cost of the delays is not shown.  Delays on the hoist railroads could actually result in a positive cash flow for Amtrak.  If a hoist railroad fails to get Amtrak's trains across its property according to the terms of the performance contract, it forfeits the on-time performance incentive payment, which is money in Amtrak's pocket.  But if Amtrak has to put passengers in a motel or on alternate modes of transport because of failed connections, it could easily eat up the saved incentive payment plus more.

My observation regarding the Raleigh Amtrak Station was as much about newspaper stories that don't drill very deep as the adequacy of the station.  The story implied that the station was chockers, but the numbers don't support the conclusion.  Building a new Intermodal facility in Raleigh may be a good option, but the story did not make a compelling argument for it.

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Posted by Phoebe Vet on Friday, January 02, 2009 9:52 AM

Sam:

It's obvious by your posts that you are probably a bean counter by trade, and I have never questioned your numbers.

I do, however still stand by the "chicken or the egg" question.  From Charlotte (USAirways largest hub) to Atlanta (Delta hub) USAirways alone has 8 non stop flights each way a day.  Many more if you don't want to go nonstop.  Delta also has flights between the two cities.  Amtrak has ONE train each way, and it goes through Charlotte at 2:30 AM.  How many more people would take the train if there were morning, midday, and evening trains available?  Do you realize how many people heavily medicate before getting on an airplane?  I know several people who are afraid to fly but don't feel they have a choice.  No, I'm not one of them, I am a retired pilot.  I don't fly because I find the paranoid security at the airport offensive.  I do not, however want to go off on that tangent.  It is not the issue I am debating, other than the fact that I bet I am not the only one.

In other words, are there few trains because there are few passengers, or are there few passengers because there are few trains?

I bet if trains were faster and more frequent, many more people would use them.

To use the Crescent as an example:

There is already an adequate number of trains on the northeast corridor.  Perhaps the Crescent only needs to go to DC.  Three trains a day from ATL or CLT to DC might better serve travelers, even if their origin or destination is NYC.

That is why I said I would like to see a bar graph of origins and destinations.  Not revenue or expenses, just passengers carried.

Dave

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Posted by blue streak 1 on Friday, January 02, 2009 8:23 PM

Sam: So if I understand there is no place in AMTRAK's reports that give above the rail costs

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Posted by Anonymous on Saturday, January 03, 2009 4:09 AM

blue streak 1

Sam: So if I understand there is no place in AMTRAK's reports that give above the rail costs

It depends on what you mean by "above the rail costs". 

Amtrak shows Direct Labor and Other Direct Costs to determine Total Avoidable Costs.  This would be the closest number to above the rail costs.  Total Shared Costs are added to Total Avoidable Costs to get Total Attributed Costs, which subtracted from Total Revenue gives the contribution or loss for each train or train route.  This number is before the application of interest, depreciation, and unallocated system costs. 

Direct Labor includes wages, benefits, and supports costs.  These are clearly operating or above the rail costs.

Other Direct Costs include hoist railroad Maintenance of Way, performance incentives, fuel and power, car and locomotive maintenance, turn around, commissions, reservations, call centers, passenger inconvenience, and route station.  Most cost accountants would classify these as operating or above the rail costs, although you could get an argument whether commissions, reservations, call centers and route stations are operating costs.  However, the classification is approved by the company's external auditors, which carries significant weight.

Share costs include shared stations, supervision and training, yard operations, marketing and distribution, insurance, terminal payments, procurement, police, environment, safety, T&E overheads, NTS Infrastructure, and system.  Are these operating costs?  Yes, although again some accountants might differ with this conclusion.  

It appears that Amtrak has a good cost accounting system.  Equally important, they provide enough information for the public to determine whether its trains are covering their costs.

What is not clear is how the interest and depreciation is allocated.  I assign most of it (80 to 90 per cent) to the NEC, since most of it is owned by Amtrak, and it has invested heavily in it.  Nevertheless, some interest and depreciation must be assigned to other operations since the equipment is still being depreciation and, as far as I can tell, it still carries some of the debt service (interest) associated with the purchase of the equipment.   

It is crystal clear that Amtrak does not cover its costs and requires a significant contribution from federal and state governments.  This is not good from a business person's perspective.  On the other hand, for those who argue that trains provide a valuable social service that should be supported irrespective of the large per passenger mile subsidies required by Amtrak, they can bolster their case by pointing out that Amtrak's deficit as a per cent of the federal deficit is so small as to be unworthy of mention.

In the long run all costs are variable and should be attributed to the activity that drives them.  In Amtrak's case the activity is running passenger trains.  If it was a market driven business, it would be required to recover all of its costs, as well turn a profit for the shareholders if it hoped to stay in business.

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Posted by beaulieu on Saturday, January 03, 2009 3:53 PM

 Here are some of the biggest problems I have with the numbers that you have posted, Most of the LD equipment is 20+ years old now, so should be fully depreciated. Two, Amtrak does not own most of its small stations, it pays small amounts of rent and for heat, lights, snow removal, etc. At large stations like Chicago eliminating the LD trains would allow you to eliminate the costs for checked baggage, but the fixed overhead would remain and your corridor traffic would now have to cover it, increasing their loss making. If by eliminating the LD trains Amtrak could eliminate its Resevation system and simplify its ticketing system to something like a commuter operation uses they could gain, but without this the remaining system will just see the fixed overhead numbers grow since the LD trains will no longer share the costs.

The NEC (and the Michigan Corridor) is probably closer to 95 percent of the depreciation expense since things like subgrade and electrification equipment have very long depreciation periods. I wonder what Amtrak's expenses are for maintaining the Safe Harbor Dam on the Susquehanna River.?

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Posted by Anonymous on Saturday, January 03, 2009 10:08 PM

beaulieu

 Here are some of the biggest problems I have with the numbers that you have posted, Most of the LD equipment is 20+ years old now, so should be fully depreciated. Two, Amtrak does not own most of its small stations, it pays small amounts of rent and for heat, lights, snow removal, etc. At large stations like Chicago eliminating the LD trains would allow you to eliminate the costs for checked baggage, but the fixed overhead would remain and your corridor traffic would now have to cover it, increasing their loss making. If by eliminating the LD trains Amtrak could eliminate its Resevation system and simplify its ticketing system to something like a commuter operation uses they could gain, but without this the remaining system will just see the fixed overhead numbers grow since the LD trains will no longer share the costs.

The NEC (and the Michigan Corridor) is probably closer to 95 percent of the depreciation expense since things like subgrade and electrification equipment have very long depreciation periods. I wonder what Amtrak's expenses are for maintaining the Safe Harbor Dam on the Susquehanna River.?

Amtrak depreciates locomotives, cars, and other rolling stock over 40 years.  Accordingly, most of the locomotives, all of the Acela equipment, as well as the newer Superliner cars, etc. are still wearing some depreciation.  The amount is not available in the public reports, but the total depreciation for FY 2008 was $504.9 million.

Right of way and other property exclusive of land is depreciation over 105 years.  Interest costs associated with capital projects, including the purchase of locomotives, cars, and other rolling stock, is capitalized and depreciated over the useful life of the asset.

Of the long distance trains only the Auto Train covers its avoidable costs.  By contrast the NEC trains, as well as a majority of the State Supported and Other Short Distance Corridor trains, cover their avoidable costs.  Of the 30 other corridor trains, 22 cover their avoidable costs.

The NEC covers its shared costs.  Four of the other corridor trains cover their shared costs.  And another five lose less than one million dollars per year.  The problem is the long distance trains.

Eliminating the long distance trains would save Amtrak $635.2 million of avoidable costs and reduce the operating deficit by $180.7 million.  Furthermore, it would eliminate shared costs of $301.1 million, thereby eliminating $481.8 million of Amtrak's deficit.  Included in the shared costs would be the incremental costs incurred by Chicago's Union Station, as well as all other support activities, to support the long distance trains.   

If the long distance trains were eliminated, Amtrak would have an operating profit of $822 million before accounting for shared costs, interest, depreciation, etc.  After shared costs it would have a profit of $251.5 million.  However, after depreciation, interest, and other charges, it would have a loss, which would be a function the percentage of these items chargeable to the NEC and other corridors.  This information is not available in the public reports.

Passenger rail, indeed all commercial transport, should at least cover its avoidable costs.  Clearly, with the exception of the Auto Train, the long distance trains don't have a prayer of doing so.  This is why they should be eliminated, at least in their present form.  The NEC and other corridors, for the most part, cover their avoidable costs.  In fact, with proper management, they could cover all the shared costs, as well as a sizeable portion of the other charges including interest and depreciation.  

These are not my numbers.  They are drawn from Amtrak's monthly operating reports, annual reports, and other management documents.

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Posted by Dakguy201 on Sunday, January 04, 2009 4:57 AM

In considering Sam's data, I wondered why it is the Auto Train is unique in meeting its avoidable costs.  It didn't take long to realize that without intermediate stops you don't have the personnel and facility expense of low usage depots. Is it possible that other long distance trains could meet their avoidable costs by eliminating manned stations at all but their largest cities?   

I dispute that commercial transportation must in all cases cover its avoidable costs; but if that is to be a goal, is this a way to help reach it?

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Posted by beaulieu on Sunday, January 04, 2009 1:33 PM

Sam1

Amtrak depreciates locomotives, cars, and other rolling stock over 40 years.  Accordingly, most of the locomotives, all of the Acela equipment, as well as the newer Superliner cars, etc. are still wearing some depreciation.  The amount is not available in the public reports, but the total depreciation for FY 2008 was $504.9 million.

Right of way and other property exclusive of land is depreciation over 105 years.  Interest costs associated with capital projects, including the purchase of locomotives, cars, and other rolling stock, is capitalized and depreciated over the useful life of the asset.

I sincerely hope that the facts you have stated above are simplified for general distribution. If Amtrak uses a straight line depreciation formula for its equipment (Locomotives, and Rolling Stock) then the value of those assets are badly overstated. Using more than 20 years for a locomotive is deceptive. Yes for a freight railroad using 15 years might be a little bit for tax purposes, but by 18 to 20 years a heavy rebuild is necessary and it is reasonable to capitalize those costs. Amtrak's Rolling Stock and Locomotives  with the greater mileage and the wear and tear, and poorer maintenance, won't last that long.

Things like subgrade, tunnels, rails and ballast, heavy electrical equipment like substations and main switching stations have nowhere near a 105 year lifespan.


Of the long distance trains only the Auto Train covers its avoidable costs.  By contrast the NEC trains, as well as a majority of the State Supported and Other Short Distance Corridor trains, cover their avoidable costs.  Of the 30 other corridor trains, 22 cover their avoidable costs.

The NEC covers its shared costs.  Four of the other corridor trains cover their shared costs.  And another five lose less than one million dollars per year.  The problem is the long distance trains.

Eliminating the long distance trains would save Amtrak $635.2 million of avoidable costs and reduce the operating deficit by $180.7 million.  Furthermore, it would eliminate shared costs of $301.1 million, thereby eliminating $481.8 million of Amtrak's deficit.  Included in the shared costs would be the incremental costs incurred by Chicago's Union Station, as well as all other support activities, to support the long distance trains.   

If the long distance trains were eliminated, Amtrak would have an operating profit of $822 million before accounting for shared costs, interest, depreciation, etc.  After shared costs it would have a profit of $251.5 million.  However, after depreciation, interest, and other charges, it would have a loss, which would be a function the percentage of these items chargeable to the NEC and other corridors.  This information is not available in the public reports.

Passenger rail, indeed all commercial transport, should at least cover its avoidable costs.  Clearly, with the exception of the Auto Train, the long distance trains don't have a prayer of doing so.  This is why they should be eliminated, at least in their present form.  The NEC and other corridors, for the most part, cover their avoidable costs.  In fact, with proper management, they could cover all the shared costs, as well as a sizeable portion of the other charges including interest and depreciation.  

These are not my numbers.  They are drawn from Amtrak's monthly operating reports, annual reports, and other management documents.

 
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Posted by Anonymous on Sunday, January 04, 2009 9:34 PM

The depreciation schedules for the locomotives, cars, and other rolling stock are a function of the estimated life of the assets, which differ individually, but taken as a whole are assumed to be over 40 years.      

Amtrak uses straight line depreciation for financial reporting purposes.  Therefore, the amount chargeable to income each year is a function of the cost of the equipment, less the estimated salvage value, plus any capitalized repairs and enhancements that extent the estimated life of the asset.  

Amtrak probably treats depreciation like most capital intensive industries.  Instead of depreciating each property unit, i.e. locomotive, cars, or other rolling stock, it lumps the costs into buckets and depreciates the buckets over the estimated average life span of the assets in the bucket.

The accounting estimate of the life of the asset may be different from the on-the-ground experience.  For example, in the electric utility industry, where I worked for most of my life, gas fueled power plants were depreciated over 27 years.  The depreciation was based on sophisticated engineering curves.  Or that is what the engineers told us.  Yet we had many 40 year old plants that were in service.

If Amtrak rebuilds a locomotive, car or other rolling stock, as it has done, and the improvements extend the useful life of the asset, the cost of the improvements is capitalized, along with the interest, and depreciated over the extended life of the asset.  Theoretically, if the equipment was rebuilt and rebuilt continuously, it would attract some depreciation with each rebuild.

The depreciation schedules are approved by KPMG.  They are Amtrak's external auditors.   

For these reasons I believe that the long distance trains are still wearing some depreciation, although the amount is not contained in Amtrak's public reports.  Whether it is five per cent or ten per cent or whatever is an estimate, which is true of some accounting data.  In calculating the loss per passenger mile I have never assigned more than ten per cent of the other charges (interest, depreciation, etc.) to the long distance trains.  In fact, in most of my posts, I state the contribution or loss before interest, depreciation, and unallocated system charges.      

For management accounting purposes, which is used to determine the financial efficacy of a service line, i.e. NEC, other corridor trains, long distance trains, the depreciation is not a key number.  With the exception of the Auto Train, not a one of the long distance trains comes close to covering its avoidable costs let alone the share costs.  In FY 2008 they lost $481.8 million before interest, depreciation, and other system charges.

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Posted by beaulieu on Sunday, January 04, 2009 11:26 PM
Sam can you link to the exact report you are discussing. Also what are Amtrak's expenses for maintaining the NEC per year.
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Posted by beaulieu on Monday, January 05, 2009 8:37 AM

 Sam, I see two more things that concern me, first whether State appropriated money should be treated as revenue or subsidy, from your perspective as a resident of Texas, money spent by the State of Wisconsin to support the Hiawatha service is Revenue, from my perspective as a Wisconsin Resident it is just a subsidy coming out of a different pocket, no different. Second I have serious trouble with the way that Amtrak treats its costs and the way that you characterize them with regard especially to the NEC All of the costs such as replacing Ties, Ballast, Rail, and various components of the electrical system, are avoidable if Amtrak stopped running trains over the Corridor, yet Amtrak's costs charged by the freight railroads for their track maintenance are in the avoidable category as Access Fees. I note in one of the footnotes to the FY 2007 report that there was an extra charge to the depreciation account in that year for $16 million due to Concrete Ties on the NEC failing prematurely, and that there would be several more installments of that in future years. 

 

BTW - How many of those gas-fueled power plants didn't last the 27 years of their depreciable life? Amtrak has so far had  453 bought new locomotives that haven't lasted 40 years ( less a few destroyed in wrecks).

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Posted by Paul Milenkovic on Monday, January 05, 2009 9:45 AM

Second I have serious trouble with the way that Amtrak treats its costs and the way that you characterize them with regard especially to the NEC All of the costs such as replacing Ties, Ballast, Rail, and various components of the electrical system, are avoidable if Amtrak stopped running trains over the Corridor, yet Amtrak's costs charged by the freight railroads for their track maintenance are in the avoidable category as Access Fees. I note in one of the footnotes to the FY 2007 report that there was an extra charge to the depreciation account in that year for $16 million due to Concrete Ties on the NEC failing prematurely, and that there would be several more installments of that in future years.

Yes, serious trouble, serious trouble I tell you.

The impression I get is that the LD trains get track access outside the NEC for cheap and inside the NEC for not that cheap on account of having to maintain and operate the entire railroad.  In exchange for getting the NEC for cheap on the LD trains, Amtrak, I guess, has to treat track costs as a direct cost instead of an indirect cost, the matter that is giving you so much trouble.  Amtrak also has to put up with freight train "interference" delays.  But look at the big picture: it is my understanding if someone waved a magic subsidy wand and said Amtrak LD trains get the tracks for "free" to equalize things with bus companies that seemingly get the roads for free (OK, gas taxes), the LD trains would still be in the hole.

The thing I don't understand is why outside the track access charges, the LD trains don't work like a steel-wheeled bus line.  It is probably a whole lot of little things, but trains seem expensive to operate compared with buses, and they are providing a whole lot more service than buses for that expense (sleepers, dining and lounge cars, on-board attendants, more leg and walking-around room), but the tax dollar is picking up the tab at the rate of hundred of dollars per passenger trip for that added service.

If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
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Posted by CG9602 on Monday, January 05, 2009 7:47 PM
Another issue I pose here would be how one might improve the efficiency of the long distance trains. What if the cost per mile could be improved 15 , or 20, or 25, or 40 percent or more ? Too often there seems to be this theme of "cutting our way to financial well being," where the long distance system as it is right now is so skeletal so as to make any more cuts drive down income as well as create more losses (for some people will not take the train if they can't reach a location by rail).

How do these numbers indicate where one could increase the level of service, or frequency of service, or increase passenger-miles, at a rate that improves the income per passenger mile.

Areas and topics to examine might include:

Host railroads payments / on time bonuses,

Sleeping car utilisation , short turns etc.,

Onboard crew accomodation or land basing,

Long distance , or series of intercity corridors,

Enroute switching,

On board dining / other product sales,

Station maintenance / staffing,

Increased express revenue,

Baggage handling,

State / city participation,

Level of tourisim sought,

Thruway services or cooperation with other modes,

Size of travel market versus present Amtrak route structure.

I would also like to raise the issue that the long distance trains could act as "placeholders" of sorts, where they could keep the infrastructure such as stations and track, that would disappear in numerous cities if they were to be discontinued. Let's continue the debate. What do other members of the fora have to offer ?
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Posted by Anonymous on Monday, January 05, 2009 10:43 PM

beaulieu
Sam can you link to the exact report you are discussing. Also what are Amtrak's expenses for maintaining the NEC per year.

The information regarding Amtrak's operations and financials is drawn from a variety of reports that are available at http://www.amtrak.com/

Click on Inside Amtrak at the bottom of the home page, then Annual Reports and Consolidated Financial Statements for audited numbers and Other Reports for current operating and financial data.  In addition, I draw information from the annual legislative reports, business plans, President's reports to Congress, etc. 

Frankly, one should be interested in numbers crunching to wade through the reports.  Some training in accounting and finance, especially cost accounting, is helpful to draw the proper conclusions from the data presented.

Amtrak's expenses and capital expenditures are broken out by activity as opposed to region.  Therefore, it is difficult to know from the public information how much money is spent maintaining the NEC. 

Having said that, in July 2007 Alex Kummant told the Congress that Amtrak had spent $352 million to enhance or maintain the NEC in 2006.  Moreover, he said that Amtrak had spent $1.36 billion in capital expenditures on the NEC between 2003 and 2006.  

Amtrak probably knows to the dollar how much it spends to maintain the NEC, but it does not make the information available in the reports that it releases through its website. 

Amtrak does not own the whole NEC.  It owns 363 of the 457 miles between Washington and Boston.  Thus, to get the capital expenditures, as well as maintenance expenses, for the NEC, one would have to get the financial statements and operating reports for the minor partners.  

I'll keep looking.

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Posted by oltmannd on Tuesday, January 06, 2009 6:00 AM

beaulieu

Second I have serious trouble with the way that Amtrak treats its costs and the way that you characterize them with regard especially to the NEC All of the costs such as replacing Ties, Ballast, Rail, and various components of the electrical system, are avoidable if Amtrak stopped running trains over the Corridor, yet Amtrak's costs charged by the freight railroads for their track maintenance are in the avoidable category as Access Fees.

I'm not so sure that NEC costs are avoidable even if Amtrak quit running trains.  They are obligated to provide trackage for freight and commuter operations just as the frt RRs are obligated to host Amtrak trains on existing routes. 

BTW, the Access Fees don't cover the host RRs costs. So the true economic picture for the LD trains is even worse than it appears from Amtrak's data if you factor in the hidden host RR subisdy. 

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by Anonymous on Tuesday, January 06, 2009 11:35 AM

oltmannd

beaulieu

Second I have serious trouble with the way that Amtrak treats its costs and the way that you characterize them with regard especially to the NEC All of the costs such as replacing Ties, Ballast, Rail, and various components of the electrical system, are avoidable if Amtrak stopped running trains over the Corridor, yet Amtrak's costs charged by the freight railroads for their track maintenance are in the avoidable category as Access Fees.

I'm not so sure that NEC costs are avoidable even if Amtrak quit running trains.  They are obligated to provide trackage for freight and commuter operations just as the frt RRs are obligated to host Amtrak trains on existing routes. 

BTW, the Access Fees don't cover the host RRs costs. So the true economic picture for the LD trains is even worse than it appears from Amtrak's data if you factor in the hidden host RR subisdy. 

 

All the costs that are driven (linked to) by Amtrak's major activity, which is running passenger trains, are avoidable.  That is to say, they would eventually go away if Amtrak stopped running the trains.

Infrastructure costs associated with the NEC would only be avoidable if Amtrak went out of business and liquidated all of its assets.  Given its obligation to hoist other trains on the NEC, as stated above, it would probably not be able to liquate the asset, although it could sell it to another party.  However, if Amtrak stopped hoisting passenger trains on the NEC, it could probably reduce the fix costs associated with the NEC. 

Under the going concern concept, terminating a segment of the business, e.g. passenger trains on the NEC, does not assume liquidation of the business (Amtrak).  It only assumes the cessation of a segment of the business.  Such a cessation entails some tricky accounting, but it happens all the time.

Although accountants talk about variable costs, avoidable costs, fixed costs, etc., in the long run all costs are variable.

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Posted by Anonymous on Tuesday, January 06, 2009 2:12 PM

beaulieu

 Sam, I see two more things that concern me, first whether State appropriated money should be treated as revenue or subsidy, from your perspective as a resident of Texas, money spent by the State of Wisconsin to support the Hiawatha service is Revenue, from my perspective as a Wisconsin Resident it is just a subsidy coming out of a different pocket, no different. Second I have serious trouble with the way that Amtrak treats its costs and the way that you characterize them with regard especially to the NEC All of the costs such as replacing Ties, Ballast, Rail, and various components of the electrical system, are avoidable if Amtrak stopped running trains over the Corridor, yet Amtrak's costs charged by the freight railroads for their track maintenance are in the avoidable category as Access Fees. I note in one of the footnotes to the FY 2007 report that there was an extra charge to the depreciation account in that year for $16 million due to Concrete Ties on the NEC failing prematurely, and that there would be several more installments of that in future years. 

BTW - How many of those gas-fueled power plants didn't last the 27 years of their depreciable life? Amtrak has so far had  453 bought new locomotives that haven't lasted 40 years ( less a few destroyed in wrecks).

State supported trains generate ticket revenues like any of Amtrak's trains or trains operated by Amtrak under a contract with a state.  State support is also treated as revenue.  It is probably allocated to the state supported trains, but the method of allocation is not set forth in the annual report.

The depreciation of the faulty railway ties was accelerated because of a revised estimate of the lives of the ties.  This is a normal accounting practice.  By the same token, if an asset is retired prematurely, the balance in the asset account is charged to depreciation, less any salvatge, which is closed to expense.  It would have a one time negative impact on net income.  The effect over the long run would be the same as if the asset was not retired prematurely.  It is essentially  timing difference.

I retired two years ago.  At that time the company had 73 generators in 23 power stations.  Every one of our power stations that had reached its 27th year was still in service.  Many of our plants were more than 40 years old.  Only two plants were retired whilst I was with the company.  A lignite plant that had been built in 1927 and subsequently converted to natural gas in the late 30s, because gas turned out to be cheaper than the lignite, was shuttered in the middle 1990s.  Also, the Dallas Steam Electric Station, which went on line in 1917 or thereabouts, was taken out of service and salvaged between 1990 and 2000.  I cannot remember the exact date.  In addition, the company had two stations that had been built in the 1940s that were only used for extreme peaking loads.  I believe that they are still available if the demand calls for them, but it would not be economical to run them unless the Texas Power Grid was desperate for power.

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Posted by HarveyK400 on Tuesday, January 06, 2009 3:33 PM

Here's what gets me about revenue per passenger-mile: if the total revenue stays the same with a lower fare that attracts more passengers and passenger-miles, the revenue per passenger decreases which implies a failure; but is it?  Is this a valid metric? 

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Posted by Anonymous on Sunday, January 11, 2009 9:03 AM

HarveyK400

Here's what gets me about revenue per passenger-mile: if the total revenue stays the same with a lower fare that attracts more passengers and passenger-miles, the revenue per passenger decreases which implies a failure; but is it?  Is this a valid metric? 

The key financial number for Amtrak's management is the contribution (loss) per passenger mile.  It is a measure of the productivity of its trains.  Revenue per passenger mile is not a key Amtrak metric. 

The first step in a pricing model for a business that is not dependent on government subsidies is to determine the total cost of the service.  Amtrak follows the same procedure except it factors in federal and state government subsidies.  Once these numbers are known, management turns to market factors to price the service, i.e. what is the demand for it, how much will people pay for it, when will they use it, etc.?

If passenger revenues remain the same whilst passenger miles increase, the revenue per passenger mile will go down.  Passenger revenues are not likely to stay the same with an increase in passenger miles, unless the ticket prices were lowered to offset the increase in passenger miles, thereby producing the same revenues.  But the point is moot.  It is not included in Amtrak's reported numbers, or if it is I cannot find it. 

If a decreased in ticket prices increased sales volume enough to offset the decrease in sales returns, revenues would increase.  But if lowering the price did not result in enough incremental volume to offset the decline in ticket prices, revenues would decline. 

A train carrying 250 passengers 226 miles for an average ticket price (revenue) of 76 cents per passenger mile would have revenues of $42,940.  The same train carrying 300 passengers (20 per cent increase due to lower ticket prices) at 68.4 cents per passenger mile (10 per cent reduction in ticket prices) would have revenues of $46,375.    

If the operating cost per passenger mile was 50 cents in the first scenario, and the operating costs stayed the same in the second scenario, the cost would be 41.6 cents per passenger mile because of the greater number of passengers.  And the operating profit would be $18,171 as opposed to $14,690. 

If Amtrak had to add capacity to handle the additional passengers, it could turn out badly.  If the operating costs under the reduced ticket pricing scenario only fell to 47.5 cents per passenger mile, because of an increase in operating costs, the operating profit would be $14,170 or $520 less than the first scenario.  In this case lowering the ticket prices would not be a good deal.

This is an over simplification of what happens in the real world.  Amtrak has sophisticated pricing models that help it predict the outcomes for a variety of pricing strategies, i.e. they have years of price and cost point data that can be used to project a range of outcomes using different inputs.  At the end of the day, however, an effective pricing strategy pricing requires a thorough knowledge of the business and an intuitive feel for the market.    

Amtrak uses a yield per seat mile model to determine the appropriate pricing.  The model surveys frequently the reservations for a train, sometimes as frequently as every hour or two, and moves the pricing points based on the anticipated load, i.e. the ticket prices increase as the load factors go up.  However, if the train is not selling well, the prices can actually go down after having gone up to sell the marginal space.

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