Passenger Trains > Can a Train Break Even Financially?

I’m not an expert on these matters but if we take a typical long distance passenger train i.e. the Empire Builder, CZ, SW Chief, etc. the figures say they lose money.
Assuming full occupancy isn’t an issue just how long would these trains have to be to make a profit?
I guess what I’m asking is if for an example the Chief ran with say 5 full sleepers and 10 fully occupied coaches are we turning a profit after all costs are deducted?

Posted from iPhone

cost of capital, up keep  for the 15 cars is huge

johnambrose Wrote:
-------------------------------------------------------
> I’m not an expert on these matters but if we
> take a typical long distance passenger train i.e.
> the Empire Builder, CZ, SW Chief, etc. the figures
> say they lose money.
> Assuming full occupancy isn’t an issue just
> how long would these trains have to be to make a
> profit?
> I guess what I’m asking is if for an example
> the Chief ran with say 5 full sleepers and 10
> fully occupied coaches are we turning a profit
> after all costs are deducted?

This makes the assumption that moving a car full of people at today's fares AND SPEEDS could actually turn a profit.

What many people don't consider is that a big part of the problem is the speeds, not the capacity.

It might not matter how many cars the train has, as it is quite possible that no matter how many cars are hauled, they will all lose money if they go too slow.

The cost of equipment and the cost of maintaining equipment is a huge part of the burden.  The only way to reduce those costs is to use less of it for each person hauled by making it more productive by increasing the number of turns it makes per week.  This is also the only way to lower most of the labor costs on the train without indulging in more automation.

Say ten coaches w/sixty seats each @ $1000 per seat and five sleepers w/ten berths each @ $5000 per bertth will get you $850,000 revenue per trip.
Positive cash will flow long after the cows come home.
Just a simple matter of getting $$$ from butts in seats.
 

$1000 per seat  to chicago?  what are you talking about?  10 berths in  a superliner 



Edited 1 time(s). Last edit at 05/13/19 21:51 by dan.

Those prices are roughly what Via charges for the Canadian between Toronto and Vancouver. I don't think you'll replicate that on LD trains in the U.S. 



Edited 1 time(s). Last edit at 05/14/19 01:36 by ctillnc.

IN coach?

The cost of using host railroads has to play a major factor in the operation of all LDTs.
Imagine the legacy host railroads (each of whom essentially were given carte blanche access to dirt cheap right of way costs 150+ years ago by the US Government) now charging Amtrak serious bucks to carry the republic's passengers.  Such a deal.

Those costs are not unreasonable but not sure how many could or would want to pay that much. They are on par with flight costs for trips that take far less time. $1,000 is about normal for a flight from the U.S. to Europe in economy. And $5,000 is about normal for a flat bed in business class. Speed being the only substantial difference (sadly even the meals are becoming about the same as you get on the plane). 

I view it this way:

HOW TO MAKE AIRPLANES AS UNPROFITABLE AS PASSENGER TRAINS (put them on a fully allocated cost basis)
.  Transfer TSA employee costs from the Government to airlines
.  Transfer all airport improvement cost and upkeep from Government to airlines
.  Transfer majority of Air traffic Control cost from Government to Airlines


HOW TO MAKE AMTRAK AS PROFITABLE AS AIRLINES (Government to assume fixed costs similar to Airlines)
.   Transfer all station costs to Government (as is done with Airports)
.  Transfer all track improvements and maintenance of the NEC to Government (as runways are government maintained)
.  Transfer all signal cost and maintenance  to Government (as is done with the Air Traffic Control System)

The above situation has always explained to me why passenger trains don't make money.
.  

 

johnambrose Wrote:
-------------------------------------------------------
> I’m not an expert on these matters but if we
> take a typical long distance passenger train i.e.
> the Empire Builder, CZ, SW Chief, etc. the figures
> say they lose money.
> Assuming full occupancy isn’t an issue just
> how long would these trains have to be to make a
> profit?
> I guess what I’m asking is if for an example
> the Chief ran with say 5 full sleepers and 10
> fully occupied coaches are we turning a profit
> after all costs are deducted?
>
> Posted from iPhone

if l.d. passenger trains could turn a profit, i don't think the freight railroads would have discontinued so many of them in the 60's and 70's and then let amtrak take over the remaining l.d. passenger trains.........

66

No doubt the freight RR’s saw passenger trains as a HUGE headache and expense. However, when Amtrak came along and the whole Northeast rail industry imploded, it ushered in massive de-regulation on the railroad industry. Had the de-regulation come earlier, had the federal government responded earlier to the passenger cry, had there been a different set of circumstances that unfolded in a different order - things could have turned out “potentially” a little bit different. I often still look at - could the government have brokered a deal with the private railroads to keep their passenger sectors going while providing a grant to offset the losses and new equipment. You would have still needed some sort of oversight looking over how the freights were operating passenger rail service and how government was to fund it etc. Still creating a middleman, but not as powerful or as robust as Amtrak has become. But to think that Conrail would have had to operate the NEC...... It still would have been a sticky situation. 

A passenger railroad company also has to generate enough cash flow so it can “bank” that money and reinvest it into the company (to buy new rolling stock, and pay for any special MOW work/repairs). Cash flow is different than generating a “profit.” So for a train to break even financially, AND be sustainable for the future, you need positive cash flow generation and an operating profit (including the accounting for depreciation expense - expensing the cost of capital over time). Most people see this as a double hit. It’s not. It’s just more to consider in the sustainability of the company. 

goneon66 Wrote:
-------------------------------------------------------
> johnambrose Wrote:
> --------------------------------------------------
> -----
> > I’m not an expert on these matters but if we
> > take a typical long distance passenger train
> i.e.
> > the Empire Builder, CZ, SW Chief, etc. the
> figures
> > say they lose money.
> > Assuming full occupancy isn’t an issue just
> > how long would these trains have to be to make
> a
> > profit?
> > I guess what I’m asking is if for an example
> > the Chief ran with say 5 full sleepers and 10
> > fully occupied coaches are we turning a profit
> > after all costs are deducted?
> >
> > Posted from iPhone
>
> if l.d. passenger trains could turn a profit, i
> don't think the freight railroads would have
> discontinued so many of them in the 60's and 70's
> and then let amtrak take over the remaining l.d.
> passenger trains.........
>
> 66

ronald321 Wrote:
-------------------------------------------------------
> I view it this way:
>
> HOW TO MAKE AIRPLANES AS UNPROFITABLE AS PASSENGER
> TRAINS (put them on a fully allocated cost
> basis)
> .  Transfer TSA employee costs from the
> Government to airlines
> .  Transfer all airport improvement cost and
> upkeep from Government to airlines
> .  Transfer majority of Air traffic Control cost
> from Government to Airlines
>
>
> HOW TO MAKE AMTRAK AS PROFITABLE AS
> AIRLINES (Government to assume fixed costs
> similar to Airlines)
> .   Transfer all station costs to Government (as
> is done with Airports)
> .  Transfer all track improvements and
> maintenance of the NEC to Government (as runways
> are government maintained)
> .  Transfer all signal cost and maintenance  to
> Government (as is done with the Air Traffic
> Control System)
>
> The above situation has always explained to me why
> passenger trains don't make money.
> .  

Several flaws in your logic here.

Airport costs are burdened by the tenants - airlines, cargo airlines, car rental companies, FBO, corporate tenants, etc. The master lease(s) govern all the various rates and charges that comprise the O&M as well as debt service of a given airport. So your premise that government should bear station costs in this example is incorrect. Airlines bear the terminal costs, thus in this example Amtrak should bear the station costs.

Same thing for airfield maintenance. At most airports with scheduled air carrier service (be it cargo or passenger) an airport operator developes a CIP for a 5-10 year period which lays out investments in infrastructure. Let's use your runway example and assume that runway A needs to be resurfaced in 2 years. A plan is put in place and it's presented to those who have signed on to the master lease along with all other capital projects. Simplified, the signatories to that lease vote typically using MII (Majority In Interest) provisions to authorize or reject each project. Often (not always) the lease has a three strikes provision whereas a project can be proposed 3 times and if the airlines vote it down three times the airport operator could continue to move it ahead in year 4. All of this review and voting or even year 4 of the three strikes results in that capital project being funded ultimately by the tenants and signatories to the master agreement and non signatories through rates and charges. The municipality or authority that operates the airport floats the funding for it (typically GO Bonds) and the signatories and rates and charges fund the debt service on that Bond obligation. So no, government doesn't pay for runway repairs as you propose. They are a partner for sure, but the users pay for it.

On your FAA cost your assertion presumes that the airlines consume the bulk of FAA resources. While the scheduled airlines are a significant user for sure, it's roughly half or a little bit more of the overall FAA workload. What you've omitted is the vast inventory of private, general aviation, air taxi and corproate aviation that occurs daily. How do you propose that Bob flying his Beech Baron on the weekend pays for his consumption of the ATC environment? Keep in mind that the FAA is funded through the airport and airway trust fund which is mostly funded via aviation related transportation taxes (it's built in to your plane ticket, fuel costs, etc.).

Outstanding reply, jcoons.  Not just as simple as some make it appear when doing the apples and oranges comparison of trains versus planes.
 

It does seem pretty much a no-brainer that long-distance trains will cost less to operate with them running on freight-owned or public entity-owned track. The NE Corridor, being Amtrak-owned and maintained is a different story. No one however thinks that the NE Corridor should be shut down. In fact, if costs were broken down honestly and sincerely the freight RR's probably deserve more $. To say that the NE Corridor is profitable while no one yet knows for sure about how Gateway will end up is outrageous not to mention Baltimore tunnels and Portal Bridge. etc. We don't seem to be hearing any more about moving the New England section of the Corridor further inland.

All this seems good reason for Airnet-21, separating out infrastructure and ROW maintenance from rail operations. Makes everything much more transparent. I have yet to hear what opposition there is for this plan yet I must admit I have a suspicion - at least where it would come from, but perhaps without real reason. I'm all ears.

jcoons Wrote:
-------------------------------------------------------
> Several flaws in your logic here.
>
> Airport costs are burdened by the tenants -
> airlines, cargo airlines, car rental companies,
> FBO, corporate tenants, etc. The master lease(s)
> govern all the various rates and charges that
> comprise the O&M as well as debt service of a
> given airport. So your premise that government
> should bear station costs in this example is
> incorrect. Airlines bear the terminal costs, thus
> in this example Amtrak should bear the station
> costs.
>
> Same thing for airfield maintenance. At most
> airports with scheduled air carrier service (be it
> cargo or passenger) an airport operator developes
> a CIP for a 5-10 year period which lays out
> investments in infrastructure. Let's use your
> runway example and assume that runway A needs to
> be resurfaced in 2 years. A plan is put in place
> and it's presented to those who have signed on to
> the master lease along with all other capital
> projects. Simplified, the signatories to that
> lease vote typically using MII (Majority In
> Interest) provisions to authorize or reject each
> project. Often (not always) the lease has a three
> strikes provision whereas a project can be
> proposed 3 times and if the airlines vote it down
> three times the airport operator could continue to
> move it ahead in year 4. All of this review and
> voting or even year 4 of the three strikes results
> in that capital project being funded ultimately by
> the tenants and signatories to the master
> agreement and non signatories through rates and
> charges. The municipality or authority that
> operates the airport floats the funding for it
> (typically GO Bonds) and the signatories and rates
> and charges fund the debt service on that Bond
> obligation. So no, government doesn't pay for
> runway repairs as you propose. They are a partner
> for sure, but the users pay for it.
>
> On your FAA cost your assertion presumes that the
> airlines consume the bulk of FAA resources. While
> the scheduled airlines are a significant user for
> sure, it's roughly half or a little bit more of
> the overall FAA workload. What you've omitted is
> the vast inventory of private, general aviation,
> air taxi and corproate aviation that occurs daily.
> How do you propose that Bob flying his Beech Baron
> on the weekend pays for his consumption of the ATC
> environment? Keep in mind that the FAA is funded
> through the airport and airway trust fund which is
> mostly funded via aviation related transportation
> taxes (it's built in to your plane ticket, fuel
> costs, etc.).

Nonetheless, the airlines didn't have to build the airport from the ground up before ever landing a plane there. They also didn't have to pay for an air traffic control system before they started flying. Simply having to pay as you go is a massive advantage.

Let's not forget the technological boost to the aviation industry first from World War II and then the Cold War. A great deal of the technology used in commercial aviation was created on the taxpayer's dime. Had it not been for World War II and the Cold War, the technology would never have advanced so fast. The ready supply of former military pilots is yet another huge subsidy.

Wasn't DIA, among others, built with tax-free Muni bonds ? 

Outstanding reply, jcoons.
~~~~~~~~~~~~~~~~~~~~~~
Ditto.

Had it not been for World War II and the Cold War, the technology would never have advanced so fast.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Speculative at best and way more difficult to validate as an axiom.  I would, however, agree that the development, growth and phenomenal output of NASA back in those days was probably a direct result of alignment with the Cold War / Space Race.  As a kid growing up in the 1960s the monthly subscription of National Geographic couldn't arrive fast enough for my hungry eyes to pour over any article related to Mercury, Gemini & Apollo.  Heady stuff for kids with robust imaginations!

Not such an outstanding reply by jcoons.

My airport vs rail station comparison is valid.

There is a reason why airlines wouldn't dream of owning airports--the way Amtrak owns rail stations.  Here's a hint

LeGuardia recently received muilt-million dollar upgrades--Penn Station is also undergoing multi-million track upgrades.
Trains bare full cost--airlines pay a fraction in landing fees (and landing fees are often low, as a way Cities subsidize more service)

I'm  not trying to defend Amtrak -- only trying to explain why trains cannot break even on a fully allocated cost basis.(airlines couldn't either)
Acela is already profitable (big time) when only operating costs have to be covered from tickets--which is basically how the airlines make profits.