Colonel Gadhafi to Amtrak’s rescue

Posted by Fred Frailey
on Tuesday, March 1, 2011

I enjoy making predictions. When I’m right, I’ll see that you never forget it. When I’m wrong, nah, I never said that. So to start the month of March, three predictions:
1. Amtrak will have a very, very good year. Thank the Libyan dictator for that. And Hosni Mubarak and all the other Middle East tyrants and oil barons who seem to be getting their due. Before the uproar in that region, gasoline prices had topped $3 a gallon in the U.S. and seemed destined to pass $4 by summer. Now some oil industry analysts are saying $5-plus. This will have a galvanizing impact on Amtrak, virtually all of it good.
Never forget: High gasoline prices mean high Amtrak ridership. People will tend to take the train on a trip rather than drive. Meanwhile, airline fares will skyrocket. In the last three months of 2010, fuel accounted for 29 percent of United Continental’s expenses, but less than 8 percent of Amtrak’s. Amtrak’s average load factor is just above 50 percent. So there are lots more seats to sell, especially if Amtrak allocates its equipment where it gets the biggest bang.
Amtrak can leverage the increased ridership by raising ticket prices. It already is. In the last quarter of 2010, sleeping car ridership rose 4.5 percent, but sleeping car revenues 13.3 percent. Acela ridership was up 9.7 percent and ticket revenue 14.8 percent. In all in Q4 2010, on a 6 percent growth in passengers, Amtrak saw ticket sales rise 12 percent. This equates to a $50 million revenue spike over the same three months of 2009 and $20 million over the budget.
This matters because, as you know, the U.S. House of Representatives has voted to cut Amtrak’s capital budget for the remainder of fiscal 2011 (which ends Sept. 30) by $151 million, to $850 million. The cut may not occur; the U.S. Senate and President Barack Obama have a say in this, too. But in the high-stakes political poker being played now in my hometown, at least some of that $151 million cut may occur. Yet let gasoline rise to $4 a gallon by spring and $5 by summer, as Amtrak fills its trains and raises its fares, and some or all of that capital shortfall could be made up at the ticket window. So thank you, Colonel Gadhafi, President Mubarak, and all you other rascals, for improving Amtrak’s near-term fortunes.
2. High-speed rail will get a boost, too. It seems as if everyone, including yours truly, has been kicking high-speed rail in the keister (see my column in the March issue of trains). But high gasoline prices will garner badly needed political support for faster trains, just as it will for Amtrak. As I’ve said before, the president has done a poor job selling the idea of high speed trains to the American public and an even worse job distributing grants in a way that makes sense. Amtrak’s Boston-to-Washington Northeast Corridor, for example, got not a nickel of the $10.5 billion in grant money announced so far.

So if high speed rail in the U.S. gets a second chance in the aftermath of Middle East upheavals and so forth, let’s hope the guys and gals in Washington set it on a more sensible course.
3. This will be fantastic year for intermodal freight. That is, if a spike in fuel prices doesn’t derail the U.S. economy and throw it into another recession. Two things are positioning intermodal freight for a good 2011. First, a growing economy. Last year, international intermodal volume rose 19 percent and all-U.S. intermodal shipments 11 percent. In the first seven weeks of 2011, total U.S. intermodal loadings are up another 9 percent from the year-ago period, versus 7 percent for carload freight. More significant, perhaps, are proposed federal rules governing the hours that long-haul truckers can drive. If those rules take effect later this year, the cost of putting trucks on the road for more than 400 or 500 miles could rise sufficiently to put more of those trailers and containers aboard trains. A limiting factor could be the availability of container chasses and rail container cars. — Fred W. Frailey

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