JPS1 blue streak 1 We need to wonder how much operating costs are increased due to late trains. In an audit report Train Operations: Better Estimates Needed of the Financial Impacts of Poor On-Time Performance, dated October 14, 2019, Amtrak’s IG found a quantifiable relationship between improved OTP, increased revenue, and decreased costs. The audit team estimated that improving OTP by five percent on all routes would generate a $12.1 million benefit to the company’s operating financials. The benefits would include $8.2 million in reduced costs and $3.9 million in increased revenues. In the long run, if the OTP for the long-distance trains could be improved to 75% and sustained for at least a year, the company could realize an estimated $41.9 million per year in operating cost savings. It would also realize a one-time savings of $336 million by reducing equipment needs. Progress in improving the OTP of the long-distance trains is still wanting. In How Do Long-Distance Trains Performance Financially, reference to the problem of “late” running trains is mentioned 4 times.
blue streak 1 We need to wonder how much operating costs are increased due to late trains.
Very informative!!
In a directly related matter, it appears that the incentives for the freight lines to provide better OTP are lacking or the disincentives for poor OTP are insufficient to dffect a meaningful change.
We need to wonder how much operating costs are increased due to late trains. Imagine if every LD train could be scheduled and operate at the desired 90% on time metric. Then if the end to end times were decreased by 10 % ? Then the recovery times at end of trip that are in present schedules could be eliminated as well.
On board crew costs would go down as well as overtime for station personnel as well as the terminating station employees assigned for cleaning, service, maintenance, with more reliable on time departures for the next assignment of any train set.
That is why a major effort to eliminate as many slow orders / slow sections of tracks as possible now on routes could decrease these total enroute times.
There is soon going to be an accounting of delays to Amtrak trains by the STB(?).Why can't the STB require Amtrak to publish the extra costs of delays for each LD train by each RR ? Then as well SD and NEC trains as well ? Then fine the RRs 3x those amounts with money going to Amtrak which would require legislation.
JPS1 BaltACD All cost accounting when there are multiple sources of costs, both shared and and individual get in the the shakey ground of whom to aportion which part of the shared costs - depending upon the organization that is where the FUZZ gets put in the accounting stream. Without having access to raw data, no one on the outside can make any substansive argument on how those costs are aportioned and have any facts to back it up with. Absent access to Amtrak's books, there is no reason to believe that it is not following acceptable cost accounting standards. The notion that a public company or a government sponsored company that is audited just assigns costs without any support is wrong. Amtrak's labor expense, which accounts for 64.3 percent of operating expenses and 87 percent of revenues is a direct charge. It is not allocated. The information follows the employees; it is taken off the payroll subledgers. Every employee in the company has a payroll card; it is easy to link it to a product or service line. Salaries, wages, and benefits, train operations, fuel and power, and materials add up to 85.2 percent of Amtrak’s operating expenses and 115.3 percent of revenues. With the exception of fuel, which is allocated by a formula that is audited for consistency, they are not allocated. They are direct charges. Until 2017 Amtrak’s Monthly Operating Reports showed the number of operating people assigned to each service line, i.e., long-distance, NEC, etc. In 2016, the last year the information was publicly available, the long-distance trains required 29.1 percent of the operating employees, carried approximately 15 percent of the system passengers, and generated 22.4 percent of the ticket revenues. And therein lies the problem. But don’t take my word for it. You can look it up.
BaltACD All cost accounting when there are multiple sources of costs, both shared and and individual get in the the shakey ground of whom to aportion which part of the shared costs - depending upon the organization that is where the FUZZ gets put in the accounting stream. Without having access to raw data, no one on the outside can make any substansive argument on how those costs are aportioned and have any facts to back it up with.
Absent access to Amtrak's books, there is no reason to believe that it is not following acceptable cost accounting standards. The notion that a public company or a government sponsored company that is audited just assigns costs without any support is wrong.
Amtrak's labor expense, which accounts for 64.3 percent of operating expenses and 87 percent of revenues is a direct charge. It is not allocated. The information follows the employees; it is taken off the payroll subledgers. Every employee in the company has a payroll card; it is easy to link it to a product or service line.
Salaries, wages, and benefits, train operations, fuel and power, and materials add up to 85.2 percent of Amtrak’s operating expenses and 115.3 percent of revenues. With the exception of fuel, which is allocated by a formula that is audited for consistency, they are not allocated. They are direct charges.
Until 2017 Amtrak’s Monthly Operating Reports showed the number of operating people assigned to each service line, i.e., long-distance, NEC, etc. In 2016, the last year the information was publicly available, the long-distance trains required 29.1 percent of the operating employees, carried approximately 15 percent of the system passengers, and generated 22.4 percent of the ticket revenues. And therein lies the problem. But don’t take my word for it. You can look it up.
+1
I'm not an accountant either, but from what I recall from UI, it's clear Mike and Balt and Mr. Johnson are off-base in their criticisms
MidlandMike It seems FASB and EY disagree. You seem to disregard the former without explanation.
JPS1 BaltACD Cost accounting - whenever there is more than a single product line for any reporting entity is always smoke and mirrors and which frog do you want to gig. If you want to know how Amtrak calculates route performance, have a read of the document that I linked to above. I particularly like the footnote on Page 4, where the authors refute some of the assertions made by Bob Johnston, who writes for trains, and apparently knows next to nothing about accounting and/or finance. If you believe that Amtrak's cost accounting processes are flawed, how about some specifics? You talk smoke and mirrors without any support for your point of view.
BaltACD Cost accounting - whenever there is more than a single product line for any reporting entity is always smoke and mirrors and which frog do you want to gig.
If you want to know how Amtrak calculates route performance, have a read of the document that I linked to above.
I particularly like the footnote on Page 4, where the authors refute some of the assertions made by Bob Johnston, who writes for trains, and apparently knows next to nothing about accounting and/or finance.
If you believe that Amtrak's cost accounting processes are flawed, how about some specifics? You talk smoke and mirrors without any support for your point of view.
All cost accounting when there are multiple sources of costs, both shared and and individual get in the the shakey ground of whom to aportion which part of the shared costs - depending upon the organization that is where the FUZZ gets put in the accounting stream. Without having access to raw data, no one on the outside can make any substansive argument on how those costs are aportioned and have any facts to back it up with.
This applies to Amtrak and any other organization. Cost accounting is done with an ageda that is determined by the internal politics of the organization and whatever theory of their operation those in power want displayed. If they want product A hyped - it will be very profitable and low cost item; if they want product W trashed - it will be losing money from both sales in inflated costs, by getting more than its rightful share of the shared costs applied to it.
Cost Accounting is the slipperyiest of slopes in the accounting profession.
Never too old to have a happy childhood!
JPS1 GERALD L MCFARLANE JR Never, ever trust numbers issues by Amtrak(NRPC), even the Federal Accounting Standards Board(as recognized by the SEC) has stated that Amtrak doesn't use GAAP in their accounting methods and they have no idea how the carriers comes up with it's costs. “In accordance with Generally Accepted Accounting Principles (GAAP) requiring capitalization of expenditures for long-lived assets, Amtrak treats amounts incurred for track renewals and other infrastructure replacements on rail lines it owns, including the NEC, as capital expenditures.” This statement can be found on Page 4, How Does Amtrak Calculate Route Financial Performance. I provided a link to the White Paper above. Have a read of it. It is insightful. “In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of National Railroad Passenger Corporation and subsidiaries at September 30, 2019 and 2018, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.” This is EY’s attest statement from its annual audit of Amtrak in 2019. ...
GERALD L MCFARLANE JR Never, ever trust numbers issues by Amtrak(NRPC), even the Federal Accounting Standards Board(as recognized by the SEC) has stated that Amtrak doesn't use GAAP in their accounting methods and they have no idea how the carriers comes up with it's costs.
It seems FASB and EY disagree. You seem to disregard the former without explanation.
GERALD L MCFARLANE JRNever, ever trust numbers issues by Amtrak(NRPC), even the Federal Accounting Standards Board(as recognized by the SEC) has stated that Amtrak doesn't use GAAP in their accounting methods and they have no idea how the carriers comes up with it's costs. Anything that you see published by Amtrak as a cost basis should be taken with a grain of salt.
Cost accounting - whenever there is more than a single product line for any reporting entity is always smoke and mirrors and which frog do you want to gig.
Never, ever trust numbers issues by Amtrak(NRPC), even the Federal Accounting Standards Board(as recognized by the SEC) has stated that Amtrak doesn't use GAAP in their accounting methods and they have no idea how the carriers comes up with it's costs. Anything that you see published by Amtrak as a cost basis should be taken with a grain of salt.
JPS1 Lithonia Operator How profitable would the airlines be if they had to pay for building and operating airports, and running air traffic control? And do the trucking and auto industries build and maintain roads? Those modes, if looked at honestly, are also heavily subsidized. The questions have nothing to do with the financial performance of Amtrak's long-distance trains. Through a variety of direct and indirect taxes, commercial airline passengers pay a proportional share of the airways and airports used by the airlines. The same is true for the buyers of goods shipped by trucks. Contrary to popular belief, general aviation and military aircraft operating in civilian airspace account for more than two thirds of FAA and airport operations. The airlines account for the remainder. By the same token, of the 5,080 public airports in the United States as of 2019, approximately 500 are served by commercial passenger flights. Commercial flights and truckers have the advantage of sharing a common infrastructure with non-commercial users. Amtrak does likewise to a lesser extent. Whether they pay their proportional share of the infrastructure is a legitimate question.
Lithonia Operator How profitable would the airlines be if they had to pay for building and operating airports, and running air traffic control? And do the trucking and auto industries build and maintain roads? Those modes, if looked at honestly, are also heavily subsidized.
And do the trucking and auto industries build and maintain roads?
Those modes, if looked at honestly, are also heavily subsidized.
The questions have nothing to do with the financial performance of Amtrak's long-distance trains.
Through a variety of direct and indirect taxes, commercial airline passengers pay a proportional share of the airways and airports used by the airlines. The same is true for the buyers of goods shipped by trucks.
Contrary to popular belief, general aviation and military aircraft operating in civilian airspace account for more than two thirds of FAA and airport operations. The airlines account for the remainder. By the same token, of the 5,080 public airports in the United States as of 2019, approximately 500 are served by commercial passenger flights.
Commercial flights and truckers have the advantage of sharing a common infrastructure with non-commercial users. Amtrak does likewise to a lesser extent. Whether they pay their proportional share of the infrastructure is a legitimate question.
You left an important bit dangling out, that further supports you:
The FAA budget is derived from a trust fund created out tax and fee revenues paid for by aircraft operators. They don't pull money from other Federal revenue sources because they are actually running a surplus against their expenditures. Unlike other government agencies, the budget request that goes to Congress is approval for how to spend their money, not a request for funds. They are paying their way and then some.
JPS1Amtrak's labor expenses are so out of whack, especially as a percentage of revenues, that they jump off the page ... if a real business were saddled with the same ratio of labor expense as Amtrak, it would either find a way to trim it, or it would go out of business.
I did not bring up the 'Amtrak snow shovel' story to indicate it was a mistake; in fact I saw it as a legitimate (or at least reasonably explained) way to divide fixed expenses -- in precisely the way Amtrak might report its 'labor' numbers as including overhead and "middle" staff expense allocated across all business units proportional to 'above-the-rail revenue'.
Had it been a stand along company, without massive government support, it would have gone the way of People Air Express, etc.
I think the presumption in the early 'Railpax' years was precisely that even as a 'quasi-public' company, Amtrak would suffer the continued decline of the passenger train as a demanded mode, and it would quietly be allowed to expire when its political subsidy support did. It was said in my near-presence that advanced 'customer amenities' for Amfleet cars were relatively unnecessary as long-distance use of that equipment would not be required within a comparatively short time. It is astounding to me that Amtrak has survived with as much of its 'national network' operating as it has -- a little less astounding that politically-savvy and expedient management and labor relations has had a significant 'hand' in producing that survival.
I predicted that the outcome would be 'Balkanization' (a term I adopted from John Kneiling) of corridor service into local provision, with such LD traffic as survived essentially becoming 'cruise trains' in the way the Rocky Mountaineer or CZ were provided. One of the reasons I looked with such interest at the 100mph railbus when it came over here was that it might constitute an alternative to the weather-independent community-to-community 'transportation' service trains such as the Empire Builder are supposed to provide at much more significant cost... I'm glad I never had to show how its shortcomings for that service could be redressed, but they could have been if above-the-rail stop-loss were to become a hard criterion ... as Congress supposedly still maintains must happen by 2022.
MidlandMike Overmod more or less answered your reply. Nevertheless, in your example, if the price of jet fuel went down (as oil sometimes does) then the percentage of labor costs would go up. Despite operating costs going down, by your logic this would be bad because of the apparent rise in labor cost percentage. This is what happens when you separate a simple statistic from the complicated reality.
I have been tracking Amtrak's comparative numbers against benchmarks for more than 10 years. The labor ratios don't change that much.
Amtrak's labor expenses are so out of whack, especially as a percentage of revenues, that they jump off the page. A CEO or CFO new to the company would jump on the problem immediately; they wound not even need to see how the numbers compare to any benchmarks.
If the price of jet fuel (oil) went down for the airlines, presumably it would change for Amtrak as well, although not necessarily to the same degree. The labor ratios as a percent of expenses or even more telling revenues, probably would not move significantly.
BTW, most of the airlines hedge their fuel costs, so they move very little irrespective of changes jin the price of oil. I believe Amtrak also hedges the cost of fuel, although the smoothing impact is unclear.
Labor is Amtrak’s biggest expense; if a real business were saddled with the same ratio of labor expense as Amtrak, it would either find a way to trim it, or it would go out of business.
One statistic can be a point to start looking deeper, but it is not the whole story. When Amtrak's total financials are compared to any benchmark, they come off poorly.
As the Congressional Research Service Report makes clear, Amtrak has lost more than $81 billion since its inception. Had it been a stand along company, without massive government support, it would have gone the way of People Air Express, etc.
In my opinion, this discussion is missing the forest for the trees. It's easy to miss the question by focusing on the irrelevant.
To me the real question about Amtrak is where should limited resources be allocated? Which sector(s)?
IMO, LD services consume an outsisized percentage of Amtrak funding by any metric , especially when one looks at passengers served. A passenger rail service's mission is to serve passengers for basic transportation. Period. With limited resources, there's a lot more bang for the buck in serving folks on journeys under ~500 miles, where rail can be competitive with airlines. This would be the NEC now and other short corridors over time.
In an ideal world with unlimited resources, western LD cruise trains would be nice to have. That's not where we live.
JPS1 MidlandMike The became relevant when you brought up the statistic of labor costs as percent of operating costs for ATK and airlines. A comparison of labor to labor is a categorical comparison. Fuel and maintenance are different categories. The purpose of my post was to show just how much Amtrak’s labor costs are out of whack with viable businesses.
MidlandMike The became relevant when you brought up the statistic of labor costs as percent of operating costs for ATK and airlines.
Overmod more or less answered your reply. Nevertheless, in your example, if the price of jet fuel went down (as oil sometimes does) then the percentage of labor costs would go up. Despite operating costs going down, by your logic this would be bad because of the apparent rise in labor cost percentage. This is what happens when you separate a simple statistic from the complicated reality.
Overmod While it may be a false analogy, in a world where snow-removal costs can be allocated to Florida stations it ought to be possible to allocate 'overhead' labor to all labor in some of these analyses.
Here is a link to an Amtrak White Paper that discusses how the company calcutes (accounts for) route performance:
https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/position-papers/white-paper-amtrak-route-financial-performance-calculation.pdf
Amtrak is a large organization. Every day the accounting group probably processes thousands of accounting entries. Once in a while, hard as it is to believe, they make mistakes. That's probably what happened with the "snow shoveling in Miami" stuff-up.
Most people don't understand accounting, especially corporate accounting! When they see a blip, they tend to conclude the whole system must be rotten. They don’t understand reconciliations and correcting entries.
The most effective solution for the long-distance trains would be to terminate them. And deploy some of the equipment to corridors where it could be used to upgrade existing services or start new services.
Assuming Amtrak cannot get out of the long-distance train business, because of the politics, it could reduce the cost of running them by scrapping the sleeping, dining and baggage cars. Upgrade the menu in the lounge cars, reconfigure one or more cars per train for business class (sleeping pods similar to those found on overseas airlines), and continue to upgrade the existing coaches.
The Texas Eagle, at least before the COVID-19 caused cutbacks, is an example of the labor intensity of the long-distance trains. The normal crew is an engineer, a conductor, an assistant conductor, a sleeping car attendant, a coach car attendant, a lounge car attendant, and two servers in the dining car.
If it were reconfigured as per above, in theory at least, the train could be served by one car attendant and a lounge car attendant. Sleeping pods don’t require a lot of effort to set-up or change out. I have made 28 trips between LAX and Melbourne, Australia. I did not need to have the cabin attendant show me how to work the pod or make it up, since there was nothing to make up. And at meal times the car attendant could help out in the lounge car.
Approximately 85 percent of the people ridding the long-distance trains are in coach. And they travel an average of roughly 450 miles. For those in the sleepers, they travel roughly 900 miles, which means in most instances they are on the train just one night. If one night works for most people on overseas flights, why would it not work for the long-distance trains?
JPS1A comparison of labor to labor is a categorical comparison.
It has certainly been repeatedly demonstrated that operating labor costs are both significant and 'unsustainable' if the measure is above-the-rail profitability. One issue we might take up, though, is how these can be reduced for practical LD trains with present (or conceivable) equipment.
While it may be a false analogy, in a world where snow-removal costs can be allocated to Florida stations it ought to be possible to allocate 'overhead' labor to all labor in some of these analyses. This would increase the absolute numbers for LD trains but would also put the apparent above-the-rail losses for the LD trains in better perspective with corridor and subsidized services. It might get Congress and some of the other agencies better focused on reducing overhead, particularly in areas like the legal department where a great deal of reduction is practical without diminishing perceived service or quality...
JPS1The fuel and maintenance costs of the airlines are not relevant to a discussion of Amtrak's labor expenses.
The became relevant when you brought up the statistic of labor costs as percent of operating costs for ATK and airlines.
JPS1The formation of Amtrak was a political response to save what was left of the American passenger train. It was an effort to push back the tide of consumer preferences, i.e., autos and airplanes. For the most part, with the exception of the NEC and several other high-density corridors, where passenger trains make sense, Amtrak has been a commercial failure.
If Amtrak was set up to save the passenger train, then it was not necessarily set up to be a commercial success. As the incoming president once said, he needed the long distance trains to get 51 senators to keep Amtrak going, as he would not get the votes from someone who "does not have a dog in the fight."
Samuel JohnstonInteresting: what and where was the last horse-drawn commercial stage operation in the US? 1908 for Massachusetts, connecting the RR with the center of Barre.
Interestingly, a number of sources don't mention the operation he's cited. They think actual 'public coaching' (via the "Coaching Club of New York") ceased in 1907... little did they know!
However, the business of that circular model freight railroad is in providing interest on endeavor and dividends of enjoyment so it's actually profitable to you--otherwise you'd take up bowling instead.
I know a guy who does create "finances" for his (proposed) layout since he got interested in that end of the railroad business because that's why railroads are created. Another friend of his says "he creates imaginary holding companies and then bankrupts them to reorganize them". Stuart Daggett's "Railroad Reorganization" is his favorite book and he can quote from it just like fans of Star Wars or the Rocky Horror Picture Show can quote from those.
As for AMTK Long Distance--as long as it keeps the public happy enough that they don't turn on AMTK instead. Recent efforts to chase passengers away, such as cancelling special passenger moves off line, reducing schedules, or the earlier dropping of sleeper service on the Owl or the Boston section of the Lake Shore, ARE going to turn people off to AMTK and lose support.
We should consider ourselves lucky there never was an AmCanal to operate a skeletal canal packet system--except a few states, New York and Ohio, for instance, did that for awhile over a century ago for the freight business. The NY State Barge Canal last carried commercial freight traffic in 1994 supposedly, after having spent 330 million on construction 80 years earlier! Trains itself ran an opinion piece from a reader on the last page back in 1973 about "AmStage", a last-ditch 19th-century Federal effort to save long-distance horse-drawn stages.
Interesting: what and where was the last horse-drawn commercial stage operation in the US? 1908 for Massachusetts, connecting the RR with the center of Barre.
MidlandMike JPS1 Amtrak has more than 20,000 employees. Its salary, wage and benefit expenses in 2019 were 64% of operating expenses and 87% of operating revenue. Comparatively, the same items accounted for 37.6% of Norfolk Southern’s operating expenses and 24.3% of operating revenues. For UP the numbers were 34.1% and 21.8%. For Southwest Airlines the numbers were 42.6% and 37.1%. And for Delta Airlines the numbers were 27.8% and 23.9%
JPS1Amtrak has more than 20,000 employees. Its salary, wage and benefit expenses in 2019 were 64% of operating expenses and 87% of operating revenue. Comparatively, the same items accounted for 37.6% of Norfolk Southern’s operating expenses and 24.3% of operating revenues. For UP the numbers were 34.1% and 21.8%. For Southwest Airlines the numbers were 42.6% and 37.1%. And for Delta Airlines the numbers were 27.8% and 23.9%
Comparing a passenger train costs with large crew, to a freight train with a crew of two hauling a couple of hundred cars is disingenuous. Also, an airline with large fuel costs and intense maintenance.
The peculiar thing to me is that organizational streamlining, perhaps with outsourcing of some key competencies to private entities with 'distinctive competence', seems like an obvious move for political organizations to initiate. That will be particularly true for a House and a Biden administration with great additional opportunity cost issues, and an interest in actually providing better trains to carry people in better perceived ways.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." Ronald Reagan
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