Passenger Trains > Acela hemorrhages money...blame for losses is shifted.

Acela, apples, watermelons — and profit?

The Acela does not make money. It hemorrhages money while blame for
losses is shifted.

TRAINS Magazine
June 2013
by Don Phillips

> Seldom in my life have I seen such a mass of misinformation spread
> about any one subject as is being spread now about the American
> passenger train. The misinformation is spread by confused and
> shallow politicians, young reporters who have no idea what they’re
> talking about, and by Amtrak officials who have learned they can
> count on the first two not to understand their technical jargon.

> Before we go an inch farther, let me say something. This column is
> intended to hammer home this fact: The Acela does not make money. In
> fact, it loses money big time. What’s more, long-distance trains are
> losers but not big money losers. If Amtrak calculated long-distance
> train financials the same way it counts Acela financials, most
> long-distance trains would be profitable.

> Now, please read this paragraph again. Let it soak in. When I first
> heard Amtrak President Joe Boardman call Acela profitable at a Senate
> committee hearing, I had to bite my tongue not to protest openly. In
> later testimony and in meetings with reporters, Boardman has added
> moderating language, and now several months later, his descriptions
> are totally accurate technically. He is also technically accurate
> about long-distance train losses. But his descriptions have set up an
> apples-and-watermelons comparison, whereby Acela makes money and
> long-distance trains lose money.

> The problem is that members of Congress and most reporters (and the
> general public) have no idea what he has said. I guess it’s not his
> fault if those misinformed people don’t know that he is counting a
> small number of cost items in Acela “profits” and has thrown every
> conceivable cost into long-distance “losses.” No comparison is even
> possible on that basis, but those misleading “facts” have become
> holy writ. Acela “makes” money and long-distance trains “lose”
> enough money to drag down Amtrak’s financial results. Just read any
> newspaper story or listen to any TV story about Amtrak and that’s
> what you see. It’s wrong, wrong, wrong...


Full story in June 2013 TRAINS.

You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

Abraham Lincoln


But there is some controversy in attribution, I think PT Barnum might be a better fit?

Bob

An interesting side item that came out of an exhibit that Amtrak had attached to Boardman's testimony before Congress last month was a bar graph showing financial performance of each long distance train. According to the graph, the SILVER METEOR and PALMETTO both showed earning slight "profits" while the other trains showed various losses. One can probably draw the conclusion from the graph that the METEOR and PALMETTO have better financial performance than the other trains in the group; however, I'd be hesitant to make any assumptions beyond that.
There are lots of politics involved with the Acela, which was part of a project that received extensive federal funding through the '80's and '90's. With the high fares that are charged and pressure upon Amtrak management for the Acela to succeed, I can see how the management would attempt to spin the numbers so that they come out positive.

Andy

Why don't guys like Don Phillips (and Gene Poon) give up their senseless attacks on Amtrak (and Joe Boardman). Very few believe this kind of anti-Amtrak stuff anymore.

Boardman has said over and over that Acela makes a profit-ON AN OPERATING BASIS-only!!! He has said repeatedly in Mica's hearings that if you include CAPITAL COST they don't make a profit.

Get over it! Acela is just like airlines, buses, trucks, barges: Looked at on an operating basis, they ALL make a profit; but, throw in capital costs paid for by the Government, then none of them do.

Even Phillips states that Amtrak is technically correct in this. So, what's the beef? Is it just more Amtrak bashing? Probably.

Joe

I don't see it as Boardman bashing - or even Amtrak bashing - I see it as (finally!!) trying to move away from the Acela / NEC- centric concept of Amtrak. I have been so tired of hearing that Acela is the saving grace of Amtrak and that the NEC is the only thing that makes money and is the only passenger rail worth keeping. That is clearly nonsense, and that is what Phillips is saying.

Stop the shell game, and report raw data that is reported equally across all services. There are lies, damned lies and statistics, and what he is saying is that people have hidden behind these statistics for years promoting the NEC & Acela - when they SHOULD be promoting long distance trains, as they make a profit.

floridajoe2001 Wrote:
> Get over it! Acela is just like airlines, buses,
> trucks, barges: Looked at on an operating basis,
> they ALL make a profit; but, throw in capital
> costs paid for by the Government, then none of
> them do.
>
> Even Phillips states that Amtrak is technically
> correct in this. So, what's the beef? Is it just
> more Amtrak bashing? Probably.
>
> Joe

floridajoe2001 Wrote:
-------------------------------------------------------
> Why don't guys like Don Phillips (and Gene Poon)
> give up their senseless attacks on Amtrak (and Joe
> Boardman). Very few believe this kind of
> anti-Amtrak stuff anymore.
>
> Boardman has said over and over that Acela makes a
> profit-ON AN OPERATING BASIS-only!!! He has said
> repeatedly in Mica's hearings that if you include
> CAPITAL COST they don't make a profit.
>
> Get over it! Acela is just like airlines, buses,
> trucks, barges: Looked at on an operating basis,
> they ALL make a profit; but, throw in capital
> costs paid for by the Government, then none of
> them do.
>
> Even Phillips states that Amtrak is technically
> correct in this. So, what's the beef? Is it just
> more Amtrak bashing? Probably.
>
> Joe

Amtrak bashing? I suggest reading this report:

http://www.oig.dot.gov/library-item/6087

RSWEBBER you are right on.

457 miles between Washington DC and Boston does not a system make. It is a commuter line that should be paid for by the states that use it. It should be sold or given to a regional rail authority, not a national agency such as Amtrak. Any interconnecting Amtrak trains such as the Crescent, Silver Star, and Silver Meteor, and Cardinal that happen to use it north of Washington, should pay their fair share just as they do for track usage in the rest of the country. Now, don't get me wrong, I am not against taxpayer subsidy for needed services. Like highways, though, it should be funded with the participation of the states the corridor runs through, and with sufficient dedicated continuous funding to keep it maintained on down the line. Surely they can afford to ante up at least the same 10% match for rail that they once anted up for their interstate highways.

If Amtrak can continue to justify such trains as regionals 66/67, and the Carolinian and Palmetto, they also should pay their share toward the upkeep of the corridor.

If new equipment to replace the Acela's can be secured at a reasonable cost, perhaps Amtrak could be a contributor, but like the AEM-7's, much of the traffic they handle is local, and should be turned over to the states as is happening elsewhere under PRIIA.

Amtrak is not funded sufficiently to even begin to maintain the 457 mile corridor, much less improve it for higher speeds, rebuild tunnels, and create or upgrade grand palacial stations in New York City.

It is clear that over $100 billion is needed immediately for just bare upkeep of this corridor. Mr. Boardman has, among others, including some of his predecessors, have stated this many times. This is obviously more than there has ever been or ever will be a political will to provide in the US Congress. It is also several times more than Amtrak has ever received in subsidies over its entire 42 year history.

Looking at high speed rail in the future, can you say trillions of dollars? We really will have to jack up the price of a cup of coffee on the Empire Builder to pay for that!

Gee you can't even tell the truth anymore in this country. Now the messengers are bashed!

Know this---any facts,data,and or info that comes from washington (not capitalized on purpose)can be spun to look any way they want. The truth be damned!
ALL WAYS!

Amtrak's allocation of expenses has always been a shell game. Move this expense over here, and charge it against this train. Move it over there, and charge it against capital construction, even though it isn't. Divide the legal department's budget by route miles served, etc. Ignore replacement costs since there's no depreciation to consider. When things break, they're gone and yo can get Congress to buy you a new one. Or not.

Consider this against Via Rail Canada. Equipment is rebuilt, and rebuilt again. Equipment stays in use, none of these 22 hour layovers at Sunnyside Yard in NY. Equipment pools and good maintenance / servicing means you can get Via equipment out and earning money in 3 hours.

Amtrak is run, and has always been run, as a government agency. There's no incentive to make more efficient use of the equipment, or apply spot market pricing to get more traffic on board in places where there's capacity (NC/SC to FL, for example). There's nothing wrong with a government agency or enterprise, it's just a different kind of business than a profit driven, service driven firm.


(Government enterprise = federal government license plates on Amtrak highway vehicles, don't have to pay state fuel taxes, etc)

You know what I would do if I were Joe Boardman?

I'd call up Don Phillips (maybe Mr. Poon later) and say: You know, Don, I realize you're only a media "talking head", and can say any BS you want to; but to keep you from whining so much,---ok, ok, Acela is not profitable. Happy now? Now you're free to go look under another rock; or in another dark corner, to turn up something else to show Amtrak does everything wrong.

Then I'd hang up and think to myself: Geese! why don't these guys get a life. Don't they know Amtrak is one of the most audited government agency there is; and our accounting practices get the seal of approval from all who matter. But why bother, it's not my fault they don't understand what an "operating" profit is.

Joe

floridajoe2001 Wrote:
-------------------------------------------------------
> You know what I would do if I were Joe Boardman?
>


I don't think you understand the reason they keep preaching that the NEC is profitable. Those in power want to keep the trains where they live (between Boston and DC) because they are 'profitable' and end service to rest of the country - aka flyover country.

What Philips is saying is that they are playing games (political or otherwise) to justify ending LD train service between DC and California. Why are you criticizing him for calling them out on this?

Wow, some of the posts in this thread are downright comical

The NEC is NOT a "commuter trolley line" as some posters on here keep on asserting. It's a 460-mile INTERCITY trunk route that has what probably amounts to only world-class rail infrastructure in the US. Yes, commuter trains use it too, but commuter trains also use UP, BNSF, CSX, and NS lines in various parts of the nation.

Finally, Don Philips is NOT a media "talking head". He's a very well respected transportation journalist, and frequently calls things like they are.

To Floridajoe specifically - what you have to realize (and seem to keep refusing) is that many of us are pro-passenger rail first, not pro-Amtrak first (this is a vital point), and will praise Amtrak when it succeeds, and criticize it when and where it fails due to managerial incompetence, b.s., arrogance and "groupthink".

Posted from Android

Lackawanna484 Wrote:
-------------------------------------------------------
> Consider this against Via Rail Canada. Equipment
> is rebuilt, and rebuilt again. Equipment stays in
> use, none of these 22 hour layovers at Sunnyside
> Yard in NY. Equipment pools and good maintenance /
> servicing means you can get Via equipment out and
> earning money in 3 hours.

VIA does not turn Canadian equipment in 3 hours, and the pool of 188 cars does not see intensive use outside the summer. It only takes around 8 trains now to cover the ri-weekly schedule, and the schedule allows a generous 36 hour turn at each end.

> Amtrak is run, and has always been run, as a
> government agency. There's no incentive to make
> more efficient use of the equipment, or apply spot
> market pricing to get more traffic on board in
> places where there's capacity (NC/SC to FL, for
> example).

Raleigh-Florida is a very big market for Amtrak.

To reply to Floridajoe and others, Amtrak allocates 80% of it's costs and that is under it's 'new' accounting system, audited or no. Before it allocated 95% of it's costs. Freight railroads only allocate maybe 20%, mostly overhead. In other words, Amtrak has no clue what a specific train really costs to run. To test all this, I run my own program on the LD trains using numbers that I gleen from Amtrak's own reports and other sources and I find that the LD trains are not the big losers that Amtrak claims and some of them actually turn an 'operating' profit. Simply put, you cannot believe anything that Amtrak publishes on individual trains, only their overall numbers are even close to 'real'. The solution to this malady is to separate the NEC from all other Amtrak operations and run the LD trains and the state supported corridor trains as separate businesses. I believe Amtrak is actually working on doing just that. So future reports might be interesting.

"Raleigh-Florida is a very big market for Amtrak."

Yes, I suppose so. On any given night, I suppose there are about 40 or 50 passengers who board Train 91, the Silver Star, to go somewhere south, whether it's to Columbia, Savannah, Jacksonville, or any of the various stations in Florida.

That's a busload. That's 1/3 of a plane. Maybe 40 or 50 people is a big market for Amtrak but it's not for anyone else. Next Tuesday, just to pick a random day, Southwest Airlines offers 4 nonstop flights from Raleigh-Durham Airport to Orlando, along with 13 1-stops. It also offers 3 nonstops to Tampa, along with 13 1-stops. It offers 5 1-stops to West Palm Beach. It offers 1 nonstop to Ft. Lauderdale and 14 1-stops.

And that's just Southwest. Other airlines in the Raleigh-Orlando market are AirTran, American, Delta, United and USAirways.

There isn't much point to operating one train per day in a market. Especially a train with 4 coaches, which is about 240 seats.

Joe .... Amtrak and the American passenger train could not have better friends than Don Phillips and Gene Poon. Their interest lies solely in making sure that the facts we are all working with are correct so that the best public policy decisions can be made in the hopes of giving us the best possible passenger train -- and public transportation -- system. We owe them both a debt of gratitude for their tireless efforts on our behalf.



Edited 1 time(s). Last edit at 04/18/13 13:52 by stuporchief.

knotch8 Wrote:
-------------------------------------------------------
> "Raleigh-Florida is a very big market for
> Amtrak."
>
> Yes, I suppose so. On any given night, I suppose
> there are about 40 or 50 passengers who board
> Train 91, the Silver Star, to go somewhere south,
> whether it's to Columbia, Savannah, Jacksonville,
> or any of the various stations in Florida.
>
> That's a busload. That's 1/3 of a plane. Maybe
> 40 or 50 people is a big market for Amtrak but
> it's not for anyone else. Next Tuesday, just to
> pick a random day, Southwest Airlines offers 4
> nonstop flights from Raleigh-Durham Airport to
> Orlando, along with 13 1-stops. It also offers 3
> nonstops to Tampa, along with 13 1-stops. It
> offers 5 1-stops to West Palm Beach. It offers 1
> nonstop to Ft. Lauderdale and 14 1-stops.
>
> And that's just Southwest. Other airlines in the
> Raleigh-Orlando market are AirTran, American,
> Delta, United and USAirways.
>
> There isn't much point to operating one train per
> day in a market. Especially a train with 4
> coaches, which is about 240 seats.

Yes. That was pretty much where I was going with the comment.

Amtrak could add another 50-100-200 people a day with some marketing perhaps. Not a huge number, but enough to move the needle and add some incremental revenue.

In conversations with OBS staff over the years (at Newark), it's pretty clear that a lot of people get off the trains in southern VA, and the Carolinas. Those seats mostly stay empty all the way to Miami.

selling a few of those empty seats would be money in the bank at very little additional expense. The crew, train, etc are already going all the way to Miami and Orlando, etc.

----------

ETA: I received a PM from an informed person who adds some additional information.

This person adds that the trains do empty out in the Carolinas as NY and DC people get off, but a good number will board in Raleigh each day. The train empties out again by Savannah, and then refills at Tampa.

So, there are more seats to be sold along the Silver Service route. But contrary to what the OBS people have said, the train doesn't "empty out" until it gets to Georgia.



Edited 1 time(s). Last edit at 04/18/13 17:34 by Lackawanna484.

jfrank39 Wrote:
-------------------------------------------------------
> To reply to Floridajoe and others, Amtrak
> allocates 80% of it's costs and that is under it's
> 'new' accounting system, audited or no. Before it
> allocated 95% of it's costs. Freight railroads
> only allocate maybe 20%, mostly overhead. In

I highly doubt the 20% figure, although real freight rail costs are just as obfuscated as Amtrak's by the ruse of calling replacement of capital assets like track and locomotives during normal maintenance "capital expenditures" instead of considering them an ongoing operating cost.

As to 80%, what costs that Amtrak allocates do you think it should not? MOW? Commissaries? Shared stations? Yard operations? Equipment inspections? President Boardman's salary? The reservation system? When a Superliner coach which is used on multiple trains goes to the shop, which train should pay for it?

> other words, Amtrak has no clue what a specific
> train really costs to run. To test all this, I

Trains cost a different amount to run depending on what question you are trying to answer. Such as "What is the cost of adding or subtracting one train?" or "How much revenue does a train need to earn to fully support its fair share of common costs?"

You have to know your question to get an answer, and I get a sense you aren't sure what question Amtrak is asking.

> run my own program on the LD trains using numbers
> that I gleen from Amtrak's own reports and other
> sources and I find that the LD trains are not the
> big losers that Amtrak claims and some of them
> actually turn an 'operating' profit. Simply put,

It all depends on what costs you include, and who you stick the overhead with. In my personal opinion, the best view is one of short and long term avoidable costs vs. revenue to determine a contribution to Amtrak's (relatively) fixed overhead. On this basis, most of Amtrak's trains make a "profit" that goes towards the overhead.

> you cannot believe anything that Amtrak publishes
> on individual trains, only their overall numbers
> are even close to 'real'. The solution to this
> malady is to separate the NEC from all other

How do you seperate the NEC? The NEC is:

Revenue: Regional and Acela tickets, Eastern Long Distance/short distance attributed/apportioned tickets, Keystone apportioned tickets, Conrail/NS/CSX/P&W trackage rights payments, Commuter trackage/station/electricity payments, real estate rents, state capital payments

Costs: Train operations, power distribution, MOW, most of the Engineering Department, Yards, Stations, a lot of the policing costs, etc.

Its so mixed up with so many different things, its hard to imagine a clean seperation of costs and revenue.

When people look at just Acela and Regional costs/revenues and make a declaration about what the NEC "earns" or its "revenue" or "costs" they are missing a big part of the picture.

> Amtrak operations and run the LD trains and the
> state supported corridor trains as separate
> businesses. I believe Amtrak is actually working
> on doing just that. So future reports might be
> interesting.

I have great respect for Don Phillips, and know him to only offer critical comments when he is sure both that his facts are correct and that his commentary may enhance his audience's understanding of the subject.

I fear that the concept of productivity expressed as passenger-miles is too complex for some media and political people to grasp, and the present reports of long distance trains being "big losers" offends the fewest passengers, voters, and their elected representatives. We have seen numerous reports on subsidy per passenger which show LD trains as "big loses" and regional corridor trains as "not as big losers". But the subsidy per passenger mile for LD trains is usually found to be quite modest.

As stated in the above reports, the NEC is politically sensitive, being highly visible from Washington and linked to NYC and east coast history for over a century. It is too vital to ever consider abandonment and enhancements are too expensive to be politically acceptable.

The real quandary seems to be how to allocate capital and infrastructure costs to the various types of service. I suspect that a "fair" assignment of capital costs to the Acela and other NEC trains would show them to be huge "losers", but they are a vital public service to the region and highly unlikely to be discontinued. As to compare modes, the assignment of capital costs to the users of air and highway modes is as opaque (and often intentionally so) as the rail mode.

abyler Wrote:
-------------------------------------------------------

> VIA does not turn Canadian equipment in 3 hours,
> and the pool of 188 cars does not see intensive
> use outside the summer. It only takes around 8
> trains now to cover the ri-weekly schedule, and
> the schedule allows a generous 36 hour turn at
> each end.
>

There are only four consists required for the tri-weekly Canadian (which resumes in about two weeks) and three consists for the current twice-a-week service. The turn-around time in Toronto is 12 1/2 hours. The consist of #2 goes out as #1 the same day with rare exceptions.