Passenger Trains > Airlines have never been profitable. Ever!

There was a discussion about American Airlines bankruptcy a few days ago. The CBS News had a blurb at the end of the story on Tuesday I think that I found interesting. According to the the story all airlines together since 1954 have lost 34 Billion dollars. They have never made a single penny in the history of commercial airline service.
The general public need to realize that moving people is not profitable in any form. So what is cheaper? Building more airports, rail, or highways either way the tax payer is footing the bill.
Derek

howeld Wrote:
-------------------------------------------------------
> There was a discussion about American Airlines
> bankruptcy a few days ago. The CBS News had a
> blurb at the end of the story on Tuesday I think
> that I found interesting. According to the the
> story all airlines together since 1954 have lost
> 34 Billion dollars. They have never made a single
> penny in the history of commercial airline
> service.
> The general public need to realize that moving
> people is not profitable in any form. So what is
> cheaper? Building more airports, rail, or highways
> either way the tax payer is footing the bill.
> Derek


No, that's not entirely it.

It's whether, for example, the average person is better served by a system that gets them coast to coast in 5 hours, or in 72 hours. And many airlines are currently profitable by some standards, just like Amtrak's Acela is profitable. The question is less about profitability than about utility. Trains have clearly outlived their usefulness for many applications. They retain some utility in limited applications. Imagine the cost of accommodating all the airline travel on Amtrak. That's a huge cost, and it will still take 72 hours, which consumers do not want.



Edited 2 time(s). Last edit at 12/01/11 18:39 by reindeerflame.

Warren E. Buffett once quipped that the best thing that could have happened to the American airline industry was for somebody to shoot down the Wright brothers' plane at Kitty Hawk in 1903.

The Oracle had just lost a huge pot of money in one of US Airways periodic trips to the bankruptcy courts...

Long time ago I heard AMR/AA's CEO Bob Crandall in a TV interview say that he enjoyed running an airline but would never invest in one because they can't make money.

A friend went from a career as a newspaper photographer to flying a 767. He thanks his lucky stars that he has a good seniority date with a company that makes money, is on an international domicile in his hometown and has never heard one complaint from the back of the plane. His carrier is a pilot's "dream employer" right now....UPS.

One mile of highway will get you nowhere. One mile of runway will get you everywhere.

We need ALL forms of transportation. However, it's hard to deny the Airline Industry is an unprofitable affair; and when individual carriers occasionally report a "profit", it is because the Government is picking up a lot of their "below the rail" cost--which is the identical situation with "profitable" Acela's.

Donald Trump told us what a "terrible business" the airlines are; and he knows the airline industry's cost realities from the inside (remember the Trump Shuttle between NY-WASH?). He claims this was his biggest business blunder.

Yet Trump never once agonized over whether unprofitable airlines are "worth it", like some railfans do over Amtrak being "unprofitable". Some airlines--and Acela--are "profitable", but "profit" has to be properly understood for both industries.

Airlines are "worth it" for their speed and tremendous passenger volume; Amtrak is "worth it" because of it's record growth all over the country; as well as Acela's "airline-type profits" due to high fares; popularity; and sold out conditions.

It's time we admit the nature of the passenger business--both airlines and rail--and stop complaining that ALL modes require "below the rail" subsidy. They are unprofitable but worth it.

Joe



Edited 1 time(s). Last edit at 12/01/11 18:22 by floridajoe2001.

United, Delta, Southwest are all profitable now.

In any case, the taxpayer did not cover their losses...banks, investors, employees, and pensioners did. Yes, the taxpayer contributes to airline systems like air traffic control and infrastructure. But that system has been set up, and the airlines are allowed to use it, so from perspective, the costs are not theirs.

We could charge them, but then we might need to charge a minimart owner for costs of national defense that allow them to function in a largely free society. There's no end to it.

It really doesn't matter whether airlines, as an academic matter, lose money indirectly. People still crave them. Amtrak, by comparison, is a minor player, unfortunately, and is craved by this board.

They are profitable to a certain extent, depending on which balance sheet you look at.

Joe gets it!!!

reindeerflame Wrote:

>
> It's whether, for example, the average person is
> better served by a system that gets them coast to
> coast in 5 hours, or in 72 hours. And many
> airlines are currently profitable by some
> standards, just like Amtrak's Acela is profitable.
> The question is less about profitability than
> about utility. Trains have clearly outlived their
> usefulness for many applications. They retain
> some utility in limited applications. Imagine the
> cost of accommodating all the airline travel on
> Amtrak. That's a huge cost, and it will still
> take 72 hours, which consumers do not want.


You are mostly correct. I would modify your statement to say that long-distance trains have outlived their usefulness.....and probably did about 50 years ago. Shorter routes can be profitable and useful, and would prove competitive with airlines, who win on long-distance routes, hands down.

I disagree. The airlines some years are profitable.....and other years, are not. They are also the most taxed industry in the world. Delta, whom I work for, will make a profit, this year, of about 900 million.

Don't forget that our military could not fully function without all the charters that airlines like Delta perform.......every day. I'll also tell you that half of our seniority list, like me, still perform military service in the Guard and Reserves.

Don't hammer the airlines.....they perform a needed service that sometimes is profitable and sometimes isn't. When they aren't......it's usually due to some corporate raider performing a leveraged buy out........or some other self serving idiot getting rich while running a company into the ground.

floridajoe2001 Wrote:
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> Amtrak is "worth it" because of it's record growth all over the country; as well as Acela's "airline-type profits"
> due to high fares; popularity; and sold out conditions.


Record growth all over the country: a large growth on a very small customer base, as Amtrak has (except in the Northeast, where
it is the most highly and expensively subsidized mode of intercity passenger transport), still results in a very small customer base.

Acela's so-called "airline-type profits" are nothing of the kind. They result from shifting overhead to the other services operated by
the same company. By doing this, Amtrak pretends that losses to other services don't count (look only at the Acela numbers that
we say make it "profitable", says Amtrak through their hat). A private airline can't do that; overall, it's making a profit
or it's not.

Sold-out conditions on Amtrak represent inadequacy of the fleet due to inflexibility, poor planning and squandering of the company's
resources, more than any kind of "worth it" condition.



Edited 1 time(s). Last edit at 12/01/11 23:22 by GenePoon.

reindeerflame Wrote:
-------------------------------------------------------
> United, Delta, Southwest are all profitable now.
>
> In any case, the taxpayer did not cover their
> losses...banks, investors, employees, and
> pensioners did. Yes, the taxpayer contributes to
> airline systems like air traffic control and
> infrastructure. But that system has been set up,
> and the airlines are allowed to use it, so from
> perspective, the costs are not theirs.
>
> We could charge them, but then we might need to
> charge a minimart owner for costs of national
> defense that allow them to function in a largely
> free society. There's no end to it.
>
> It really doesn't matter whether airlines, as an
> academic matter, lose money indirectly. People
> still crave them. Amtrak, by comparison, is a
> minor player, unfortunately, and is craved by this
> board.

No tax payer liabilities? Really? The $16.8 billion Air Transportation Safety and Stabilization Act never happened?

But I do agree with your point that whether airlines lose money or not, people do crave them. It's been a long time since I've had a row of seat to myself on any of the airlines I've flown in the past year or two, so plenty of people fly. But then, it's been a while since I've been on a relatively empty Amtrak train either, so minority player or not, we shouldn't be whining about the subsidies they receive either.

As railfans we forget that the primary function of the long distance train isn't to carry passengers from end point to end point - something the airlines do quite efficiently - but to carry passengers from mid point to mid point - Sacramento to Elko, Reno to Grand Junction... That is, to connect people in the fly over states with each other as well as the rest of us.

joemagruder Wrote:
-------------------------------------------------------
> As railfans we forget that the primary function of
> the long distance train isn't to carry passengers
> from end point to end point - something the
> airlines do quite efficiently - but to carry
> passengers from mid point to mid point -
> Sacramento to Elko, Reno to Grand Junction...
> That is, to connect people in the fly over states
> with each other as well as the rest of us.


The primary purpose LDTs exist is likely to provide jobs and to reminisce about times gone by. The intermediate cities served are largely by happenstance, and not because of planned service due to need. Elko is on no one's radar screen. (Elko?) Ridership between SLC and RNO is very low, except during peak periods, always has been in the Amtrak era. In contrast, SLC-LAS was always a stronger performer, because LVS was a much bigger market from the east than RNO.

Still, we should try and keep them as long as we can because they can be a fun way to see the country They just shouldn't be confused with modern transportation.

reindeerflame Wrote:
-------------------------------------------------------

> No, that's not entirely it.
>
> It's whether, for example, the average person is
> better served by a system that gets them coast to
> coast in 5 hours, or in 72 hours. And many
> airlines are currently profitable by some
> standards, just like Amtrak's Acela is profitable.
> The question is less about profitability than
> about utility. Trains have clearly outlived their
> usefulness for many applications. They retain
> some utility in limited applications. Imagine the
> cost of accommodating all the airline travel on
> Amtrak. That's a huge cost, and it will still
> take 72 hours, which consumers do not want.

That is one of the Standard Arguments. It doesn't have to be reasonable because it is a Standard Argument. A few weeks ago, I took Amtrak from Seattle to Chicago and back. First - it got me away from phone calls and the need to look at email every couple of minutes. Second, it was a lot less hassle than flying. Third, it was more comfortable than flying or driving (and I was riding coach!). And the greatest shock and horror of the whole thing was that they kept opening the doors and people got on and off. It was almost like Southwest Airlines but more civilized.

Maybe folks should rant against Southwest Airlines flying a piece of equipment cross country too (e.g., 8h10m SEA - MSY [New Orleans]...why bother?).

TAW

TAW Wrote:
-------------------------------------------------------
> That is one of the Standard Arguments. It doesn't
> have to be reasonable because it is a Standard
> Argument. A few weeks ago, I took Amtrak from
> Seattle to Chicago and back. First - it got me
> away from phone calls and the need to look at
> email every couple of minutes. Second, it was a
> lot less hassle than flying. Third, it was more
> comfortable than flying or driving (and I was
> riding coach!). And the greatest shock and horror
> of the whole thing was that they kept opening the
> doors and people got on and off. It was almost
> like Southwest Airlines but more civilized.

TAW, I've been curious whether you think the mileage and performance fees that Amtrak pays the railroads are remunerative to them. If not, in your opinion what ballpark should those charges be in?

Don't forget all the TSA security that was created mainly as a benefit to the airline industry. The ticket taxes don't come close to covering the staggering costs. Clearly, the airline industry should be paying for their security, not people who are not even customers.

When the long dist. trains become history, to the apparent delight of some of you, what happens when Amtrak is slamed with yet another budget cut? With nothing left but the grossly over-subsidized NEC, what is there to throw on the alter to appease those ax swinging congresspeople? Wait a minute, I almost forgot about those Acela profits! Those should eventually eliminate the need for any subsidy. Right? There's the old BS line you can't cut costs in the NEC by cutting trains, because of fixed costs, etc. Amtrak doesn't pay for the infrastructure anyway, so cut costs by eliminating everything but Acela and charge real costs to the commuter lines. Stating Acela is profitable implies everything else loses money.