V.Payne In the original post two primary errors were made: 1. Amtrak does not state that the reduction in costs are soley or even largely from the removal of the diner. $10+ Million in avoided costs for this action is nonsensical as shown by the back check above. It appears to be a dependent variable error. 2. Previous reports (PRIAA 2011) show that coach passengers make up about half of the diner patrons on the eastern long distance routes, whose preference for a diner is evidenced by the decline in coach revenue representing more than 2/3rds of the revenue decline. We as a nation pay for automobile operating costs, such as the serious medical costs of a drunken driver's accident, sometimes requiring decades of care, costing far and above any fuel taxes ever collected, but fresh toast and an omlet to induce that same person onto a safer train is off limits? We can't have anything nice as all the funds have to be sacrificied to the unquestionable automobility idol after all. The larger story is that the elimination of the Silver Star diner was not mentioned at all as a net revenue improvement in the studies under PRIIA while various activities proposed to increase revenues were not undertaken. It seems that the realistic cost avoidance is pretty close to the revenue drop, aka no apparent net improvement. Have we even talked about the costs of layoffs and bumps? So why are no actions taken to increase revenue or sensibly reduce costs such as by step-off food service staff agreements? Here were the benefits identified 5 YEARS AGO for the Viewliner II order that would improve this train far beyond the sillyness. Page 85 PRIIA 2011 Report "New dining cars on order will allow Amtrak to: o Operate long-distance trains at up to 125 miles per hour (mph) on the Northeast Corridor... o Implement cart-based galley equipment that increases operating and mechanical efficiency in the yard and commissary. o Improve accommodations for disabled customers. New sleeping cars on order will allow Amtrak to: o Increase sleeper capacity on single-level trains, which frequently sells out today, to accommodate demand and improve financial performance. o Improve accommodations for disabled customers. o Improve the economics of on-board food service by generating additional food and beverage revenue from a greater number of passengers carried."
In the original post two primary errors were made:
1. Amtrak does not state that the reduction in costs are soley or even largely from the removal of the diner. $10+ Million in avoided costs for this action is nonsensical as shown by the back check above. It appears to be a dependent variable error.
2. Previous reports (PRIAA 2011) show that coach passengers make up about half of the diner patrons on the eastern long distance routes, whose preference for a diner is evidenced by the decline in coach revenue representing more than 2/3rds of the revenue decline.
We as a nation pay for automobile operating costs, such as the serious medical costs of a drunken driver's accident, sometimes requiring decades of care, costing far and above any fuel taxes ever collected, but fresh toast and an omlet to induce that same person onto a safer train is off limits? We can't have anything nice as all the funds have to be sacrificied to the unquestionable automobility idol after all.
The larger story is that the elimination of the Silver Star diner was not mentioned at all as a net revenue improvement in the studies under PRIIA while various activities proposed to increase revenues were not undertaken. It seems that the realistic cost avoidance is pretty close to the revenue drop, aka no apparent net improvement. Have we even talked about the costs of layoffs and bumps?
So why are no actions taken to increase revenue or sensibly reduce costs such as by step-off food service staff agreements?
Here were the benefits identified 5 YEARS AGO for the Viewliner II order that would improve this train far beyond the sillyness.
Page 85 PRIIA 2011 Report
"New dining cars on order will allow Amtrak to:
o Operate long-distance trains at up to 125 miles per hour (mph) on the Northeast Corridor...
o Implement cart-based galley equipment that increases operating and mechanical efficiency in the yard and commissary.
o Improve accommodations for disabled customers.
New sleeping cars on order will allow Amtrak to:
o Increase sleeper capacity on single-level trains, which frequently sells out today, to accommodate demand and improve financial performance.
o Improve the economics of on-board food service by generating additional food and beverage revenue from a greater number of passengers carried."
The key change impacting the operating costs of the Silver Star between 2015 and 2016 was the removal of the dining car, accompanied by a reduction in the sleeping car fares. This is what we know.
Unless you can identify another major change in the Star's operating cost structure, it is fair to say that removal of the dining car, while maybe not the only change, was the biggie.
Five or more year old studies are ancient history for current operating and cost information. Unless you have access to Amtrak's books, you are speculating.
Rio Grande Valley, CFI,CFII
So let’s get this straight, anything spoken against the original post point of view is speculation, while the original post speculation is not speculation? The incomplete Viewliner II order itself is 6 years old, but a 5 year old report is too old to be relevant?
The entire direct Food and Beverage cost of the Silver Star food service (diner and café) is $5.5 Million per Amtrak OIG (Page 4). So cutting a portion of the staff cannot exceed that amount. It would appear my cost estimate is roughly correct, though I could tell that the OIG reported labor numbers have some management costs baked into them that likely did not disappear with the cut, so cost recovery would decline logically.
It has been said time and again, that the Total Cost numbers have no use in evaluating actual changes in service. They are allocations based upon dependent variables, and are in no way audited for accuracy. Further, Amtrak has stated they cannot provide Variable Cost route measurements in the monthly or even yearly reports, so why would they be able to do so now when Congress has required them by law to provide the results?
Recall that even with the current relatively poor labor utilization arrangement on long distance trains, nearly all of the OBS labor is being covered with revenue, the big issue is dividing up $59.8 million in nearly fixed commissary costs, which are strangely disproportionally assigned to long distance trains, though the commissaries are shared with all trains and managed by Aramark.
This all gets down to the reality that decreases in food service quality hurt ridership, up to 13%, based upon evidence when tried before in the early 1980’s. Degrading the service will not result in net savings.
Just for the record: I am far more confident in Professor Payne's extrapolations than all of NRPC's financial statements. There is only one dollar number from Amtrak we can count on, what they charge for a ticket. After that, who knows?
Editor Emeritus, This Week at Amtrak
D.CarletonJust for the record: I am far more confident in Professor Payne's extrapolations than all of NRPC's financial statements. There is only one dollar number from Amtrak we can count on, what they charge for a ticket. After that, who knows?
Academics (since when is Payne a professor?) use the best available data. Extrapolating numbers is about one step up from just making stuff up. Amtrak's numbers are audited. Insulting their accounting department's product is rather rich, coming from a (former for unspecified reasons) Amtrak employee.
C&NW, CA&E, MILW, CGW and IC fan
schlimm D.Carleton Just for the record: I am far more confident in Professor Payne's extrapolations than all of NRPC's financial statements. There is only one dollar number from Amtrak we can count on, what they charge for a ticket. After that, who knows? Academics (since when is Payne a professor?) use the best available data. Extrapolating numbers is about one step up from just making stuff up. Amtrak's numbers are audited. Insulting their accounting department's product is rather rich, coming from a (former for unspecified reasons) Amtrak employee.
D.Carleton Just for the record: I am far more confident in Professor Payne's extrapolations than all of NRPC's financial statements. There is only one dollar number from Amtrak we can count on, what they charge for a ticket. After that, who knows?
As for myself, mainline passenger railroad employee? Yes, to this day. Amtrak employee? No, never nor have I claimed such. I know what the "real world" numbers are on a real railroad that has to answer to someone. By comparison I know NRPC's numbers are questionable at best. We owe a great debt to people like Professor Payne, and others, who wade into the minutia and attempt to extract at least some kernel of truth.
I'm just a licensed engineer with a masters, and a bit of experience. Engineers are trained to understand things as systems and find errors.
I have no idea exactly how the $10+ million in reported costs savings was produced by the formula, but it is not all food service changes, as the previously reported cost of all food service (cafe and diner and commisary) is just $5.5 million.
What really irks me is just 5 years ago this was not even an idea identified after the PRIIA studies. At some level Amtrak needs to be more transparent in the decision making as befits a government agency.
V.Payne I'm just a licensed engineer with a masters, and a bit of experience. Engineers are trained to understand things as systems and find errors. I have no idea exactly how the $10+ million in reported costs savings was produced by the formula, but it is not all food service changes, as the previously reported cost of all food service (cafe and diner and commisary) is just $5.5 million. What really irks me is just 5 years ago this was not even an idea identified after the PRIIA studies. At some level Amtrak needs to be more transparent in the decision making as befits a government agency.
D.Carleton V.Payne I'm just a licensed engineer with a masters, and a bit of experience. Engineers are trained to understand things as systems and find errors. I have no idea exactly how the $10+ million in reported costs savings was produced by the formula, but it is not all food service changes, as the previously reported cost of all food service (cafe and diner and commisary) is just $5.5 million. What really irks me is just 5 years ago this was not even an idea identified after the PRIIA studies. At some level Amtrak needs to be more transparent in the decision making as befits a government agency. So, getting back on topic, was this really an "experiment" or a rationalization of an action? Makes one wonder.
So, getting back on topic, was this really an "experiment" or a rationalization of an action? Makes one wonder.
I feature it was a direct response to Mica and his antagonisms toward Amtrak as it was applied to a train serving Mica's district. With him having been defeated who knows what the future holds.
Never too old to have a happy childhood!
V.PayneI'm just a licensed engineer with a masters, and a bit of experience. Engineers are trained to understand things as systems and find errors.
True, but in only the various areas of engineering, not in corporate financial statements. For that, I'd prefer to rely on an experienced accountant for expert opinion.
Is the thought that it costs nothing to build or that contract documents have no cost analysis?
There are actually several classes taught in what is called engineering economics, which deal with fixed and variable costs, to determine the cost of production. I currently support a large international manufacturer where accountants are not used to figure out how much products cost internally or price them for the public, a mixture of engineers and product analysists do such, the accountants just reconcile the overall accounts.
The route level Total Costs are not audited anyway, look at the notes in the reports.
My theory on why the reported Total Costs showed such a large decline is that everything reported on the route level now has a large multiplier attached (around 80%) to the true cash or Direct Costs.
However, if one does not understand that the only savings from a partial service change is the Direct Costs (no management was laid off after all right or commisary carts sidelined) silly decisions will be made when attempting to sell a continually declining product to the public as a result.
But once again, none of these changes were part of any plan, particualarly the one required by Congress.
V.PayneHowever, if one does not understand that the only savings from a partial service change is the Direct Costs (no management was laid off after all right or commisary carts sidelined) silly decisions will be made when attempting to sell a continually declining product to the public as a result.
The biggest costs were crew labor, supplies and maintenance of diners. The workers were transferred to other trains; supplies no longer needed from commissary or outside; and maintenance of those cars costed to the trains that use them (or perhaps they were retired?). Why should any of those costs continue to be carried by the Silver Star?
Comparing the taking of one or two classes in engineering economy/economics with accountants and CPAs, who take many in accounting, economics, finance and business law, is rather fatuous. It's like saying a physician/internist who takes one or two classes in clinical psychology is comparable to a licensed clinical psychologist in depth of knowledge. He/she would never make such a claim.
I suppose I should tell the CEO he has it set up wrong?
Let me draw you a picture, engineering economics would be used to figure out the relative cost of say steam turbine generation and gas turbine generation so that the plants could be designed and operated. An accountant would only set up and monitor the accounts as a plant is built and operated and has limited ability to say what changes cost wise with design of the system.
I don't believe there is anywhere to reassign the employees, likely they were paid a severance. The commissary is a warehouse essentially, it provides food and linens to the trackside, so it has fixed costs and variable costs.
I included the avoided maintenance costs, fuel, and running maintenance of the removed cars in my appendix above.
He who knows not, and knows not that he knows not, is a fool - shun him.
He who knows not, and knows that he knows not, is a child - teach him.
He who knows, and knows not that he knows, is asleep - wake him.
He who knows, and knows that he knows, is a wise man - follow him.
V.PayneLet me draw you a picture, engineering economics would be used to figure out the relative cost of say steam turbine generation and gas turbine generation so that the plants could be designed and operated. An accountant would only set up and monitor the accounts as a plant is built and operated and has limited ability to say what changes cost wise with design of the system.
Let me say two words: cost accounting. This is what you want for determining costs of an existing system, such as with Amtrak. You are giving the example of designs yet to be engineered, built and operating.
As you seem to be condescending in tone, let me show you the real picture:
Dont forget the Donald Rumsfeld axiom regarding known knowns and known unknowns......
Dont forget the Donald Rumsfeld axiom regarding known knowns and known unknowns...... (Too tired to look the rest of it up tonight)
matthewsaggieDon't forget the Donald Rumsfeld axiom regarding known knowns and known unknowns...
My question to all the philosophers here is a bit different:
My father, of blessed memory, loved Heineken. My mother called it the old Dutch philosopher, because after between 5 and 6 greenies he would start waxing eloquent over various aspects of life and wisdom. One of his better tidbits was 'you have to know what you know, and what you don't know, but you also have to deal with what you CAN'T know.' (This was not at all the same thing as Shakespeare's 'more things in heaven and earth' or James Whale's (?) "things that man was not meant to know").
Here we have people, sober, who acknowledge there are things we can't know, but are applying the tools of engineering cost allocation, etc. to them. There is a place for that (in hypersonic engineering, perhaps, or complex systems that push the edge of tech research) but perhaps not when second-guessing political accounting. There are very likely reasons why things are framed as they are in Amtrak's accounting, and perhaps a very real possibility that some of the data or its presentations are intentionally obfuscated.
I don't say that to stop speculation about things like the relative success or failure of the Star's dining-car 'experiment' -- only to cut off the increasing nastiness about accounting vs. engineering criteria for costing and the like.
As my daughter's song has it, you're all "better than that."
RMEcut off the increasing nastiness about accounting vs. engineering criteria for costing and the like.
Perhaps you should remember that if you ever need brain surgery and your internist says he can take care of it. There is a good reason people get and need extensive education and training/experience for certain occupational tasks. Eg., I took three or four accountancy classes as an undergrad, but I have never claimed I am an accountant or claimed I can do the tasks of that profession. And I doubt if engineers in any of their specialties would agree that a CPA is a good choice to design a bridge. I do not know what your field is, but the same applies there.
D.CarletonEnron's numbers were audited too.
Not in any legal sense. Enron used the same Auditing firm that sold it Consulting Services and at times supplied it's business executives. Not only a conflict of interest existed there but a quid pro quo, give us a great audit report and we will expand our other business relationship. So legally one can make the argument they were not audited in the legal sense since the auditing firm was not independent of the business operation. And in fact the Enron Accounting Department warned of that conflict of interest repeatedly years before the collapse.
When you sign a Financial Statement as an Auditor the public presumes based on law that you are a independent auditor. If your a dependent auditor than your audit is open to questions of bias legally and ethically.
schlimmPerhaps you should remember that if you ever need brain surgery and your internist says he can take care of it.
Yes, but that's not 'apples to oranges' when all that's happening is talk about brain surgery or neuroscience on an Internet board. There, the internist may well know a great deal, or contribute a great deal, to a particular issue whether or not they have the full training, manual dexterity, patience, etc. needed to perform actual procedures professionally. I might add that I'd much rather have brain surgery actually programmed into a good da Vinci robot by someone knowledgeable in machine control than by even the most recognized current surgeons. (Note the different point between this and knowing 'what the procedure is supposed to accomplish', for which of course you still need distinctive medical and surgical experience.)
What's being bandied about -- and I am, believe it or not, more than a little sympathetic to your position -- is people who have magisterial opinions on topics, often express them in the sort of ex cathedra fashion infamous to (for example) East Coast "establishment" intellectuals, and start arguing with people who do have educational or professional 'chops'.
Again, though, this is an Internet board, not the faculty study, and as my grandmother said, sometimes "you can learn from the dumbest of people". On the other hand, ignorance may not be stupidity, but wilful protracted ignorance comes mighty close to it, and refusal to at least show that there has been careful listening and acknowledgement of other positions, in a civil manner and without the infamous 'yes, but' form of dismissal, is more than just poor thinking, it's poor manners.
Not that I am a particular paragon of these particular lessons, or entitled to lay down any sort of 'rules for discourse' here. Just saying that civility, and the sort of open-minded non-ad-hominem keeping to the actual issues that is representative of the real scientific method, would be a better approach than badminton nastiness.
CMStPnP D.Carleton Enron's numbers were audited too. When you sign a Financial Statement as an Auditor the public presumes based on law that you are a independent auditor. If your a dependent auditor than your audit is open to questions of bias legally and ethically.
D.Carleton Enron's numbers were audited too.
My observation of this is that noboby has disputed the backcheck in the appendix provided above to show that $10+ million of cost reduction cannot possibly be from taking a single diner off a route, and not even Amtrak makes this claim, only the original post did.
Afterwards contrary opinions decide to attack the person who is presenting the challenge, again without arguing the points presented both by backcheck analysis and the OIG report which said all food service on the Silver Star (cafe, diner, and commisary) cost $5.5 million.
Perhaps Mr. Frailey can ask Mr. Moorman (also an engineer with lots of cost analysis experience as a CEO) how exactly Amtrak got the cost reduction numbers in the route reports prior to his joining Amtrak, recalling the OIG report's Direct Cost numbers and some points from this discussion.
That would be interesting. Until then...
http://cs.trains.com/trn/b/observation-tower/archive/2014/10/24/amtrak-food-service-doesn-t-make-money-on-its-own-but-that-s-not-its-purpose.aspx
Pretty sure that Audits do not mean the company is going to avoid bankruptcy their only purpose is to ascertain that generally accepted accounting methods and rules were used / applied and that the Financial Statements reflect accurately the state of the Company. I don't think anyone disputed the Financial Statements were accurate as to the financial condition of the company in Penn Centrals case. Enron in comparison was wildly off with their reporting of the financial condition of the company by Billions of dollars.
"The removal of the diner from the Silver Star appears to have been a major factor in producing a significant cost savings for the train in FY16."
A careful reading of the initial post shows no claim that removing the dining car from the Silver Star was the only factor that drove the 2016 cost reduction for the train.
This statement claimed removal of the dining car was a key change, but went also contained this clairification:
".....it is fair to say that removal of the dining car, while maybe not the only change, was the biggie."
It did not say that removal of the dining car was the only factor driving the cost reduction.
Without access to Amtrak's books an outsider does not know what other factors may have contributed to the cost savings.
Here is EY’s attest statement from its 2015 Amtrak Audit Report transmittal letter.
“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, 2015 and 2014, 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.”
EY's opinion regarding Amtrak's financials statements is unqualified, but the auditor adds a clarifying note regarding Amtrak's status as an on-going entity:
“As explained in Notes 1 and 2 in the accompanying consolidated financial statements, the Company has a history of operating losses and is dependent upon substantial Federal Government subsidies to sustain its operations and maintain its underlying infrastructure………Without the receipt of Federal Government funding, the Company will not be able to continue in its current form and significant operating changes, restructurings, or bankruptcy might occur. Our opinion is not modified with respect to this matter."
The audit process is not perfect. Nor are the auditors. They make mistakes, with Enron being a classical example. Since the Enron debacle the accounting profession has taken steps to separate itself from its clients and to enhance the robustness of its audit standards and oversight of auditor processes. Also, the principle regulatory bodies (PCAOB, SEC, AICPA, IIA, etc.) have stiffened their oversight of the external and internal auditors.
To conclude that Amtrak’s financials or those of any other entity are suspect because of mistakes made many years ago by compromised auditors is without warrant.
V.PayneMy observation of this is that noboby has disputed the backcheck in the appendix provided above to show that $10+ million of cost reduction cannot possibly be from taking a single diner off a route, and not even Amtrak makes this claim, only the original post did.
Perhaps nobody disputed your backchecks in your appendix because it's mostly your inferred or extrapolated numbers based on your assumptions? You attack audited Amtrak financials with impugnity but present us with your assumptions dressed up to appear more authoritative. You've done the same thing with your "true"costs of driving in the past.
Had you read the OP more carefully you would see that the Star savings were never claimed to be wholly from dropping the diner.
I include your appendix for convenience.
Appendix – Check on Cost Savings claimed by NRPC for Silver Star FY16 vs. FY15:
Assuming the US average full time wage x 142 % the labor cost might be $1.815 Million a year (20 hours paid per one-way trip if correct).
Assuming $2000 per trip for the cost of goods sold for a cost of $1.461 Million a year.
Assuming that the staff is based from NYC the Miami layover cost might be $0.132 Million a year. If they were Miami based, then a step-off agreement near NYC would allow for a same day turn back.
Finding $1.151 Million a year in car related maintenance cost:
1. Using 0.2 gallons of diesel a car-mile from the Davis equation, acceleration energy, and HEP energy x $2 gallon (no road tax)
2. Using $0.35/car-mile for a prorating of overhauls and $0.27/car-mile for routine servicing and repairs.
There is no attack against the legitimacy of that work by Amtrak's audit accountants, but their work does not contain route level costs!
The only Amtrak financial statements that are externally audited are helpfully labeled as Audited Consolidated Financial Statements – Fiscal Year 2015.
All the route level costs are based on a internal to Amtrak formula and are not audited by an external party. It is like a manufacturer who makes ovens and microwaves, who determines what each product costs using a formula, but the auditors only report how much it costs to run the overall factory by cost categories like labor not by product line.
Of course the difference is Amtrak is constantly trying to provide the least amount of service for their fixed subsidy, unwittingly it seems when they concentrate on infrastructure, which in and of itself provides no service to the public, whereas a manufacturer has a profit motive for production. The Legislature could reintroduce this by tying the subsidy to a fixed communter infrastructure amount and a variable by passenger mile operating subsidy.
All the unit values presented in the Appendix are found in other reports checked by the authorities that be (except food COGS) and are not of my own doing (though I back checked them). I only later refound the OIG report and suprisingly everything prorated after the fact within 10%.
I just applied the unit values to this situation with a bit of knowledge.
I plan to start a new post to expand on this...
“I will tell you, though, that generally, in retrospect, all of those (route) eliminations back in 1995 and 1996 ended up costing the company more in lost revenue than we were able to take out in the way of expenses, given the fixed cost nature of the operation.”
- Former Amtrak President Warrington, US Senate Testimony, 2000
Bottom line: Business on the Florida trains is off. Isn't the question of what happened to the coach traffic on the Star at least as interesting as the money saved on the diner?
Somebody suggested expanding the experiment to another LD route. Good plan; which one has traffic it can spare?
Yes, coach traffic is off as well and its loss makes up 2/3rds of the revenue decline, with coach diner patrons previously representing a bit less than half the patrons in the diner.
If you think about this is similar to the Broadway to Three Rivers to sleeping on a bench in Pittsburg evolution of a devalued service, just no change in names yet.
V.PayneYes, coach traffic is off as well and its loss makes up 2/3rds of the revenue decline, with coach diner patrons previously representing a bit less than half the patrons in the diner.
When you make quantifiable statements it is customary to give a citation or link.
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