Passenger Trains > Amtrak Concedes Perpetual $1 Billion/Year Operating Losses

Eno Center for Transporation: Amtrak Concedes Perpetual $1 Billion/Year Operating Losses

 April 21, 2022  | by Jeff Davis

 What a difference two years makes.

In fiscal 2019, Amtrak only lost $29 million on operations, and the budget estimates submitted to Congress in March 2020 predicted a break-even that year, followed by small but steady operating profits through 2025. The very profitable Acela service and the less profitable regional service between D.C. and Boston had finally pulled in enough operating revenues to pay for the (alleged) losses of the long-distance trains, as was originally envisioned back in 1970. By 2023, the unified operating profit would reach $35 million, and that would double two years later.

It didn’t turn out that way, of course. Former CEO William Flynn told Congress in September 2020 that “Amtrak was on track to generate passenger revenues exceeding operating expenses in FY 2020 for the first time ever…Unfortunately, the COVID-19 pandemic then hit this nation. Amtrak, like all transportation providers, was hit especially hard. In a matter of weeks, Amtrak’s ridership plummeted by 97% and we undertook immediate actions to protect the health and safety of our customers and employees and reduce capacity.”The combined operating loss for the railroad went from $29 million in the pre-COVID FY 2019 to $789 million in the half-COVID FY 2020 to $1.08 billion in the completely-COVID-but-getting-vaxxed FY 2021. Those losses have been covered by $3.7 billion in emergency COVID funding provided by Congress in fiscal years 2020 and 2021. But ridership is now returning – Amtrak’s new projections estimate that ridership will return to pre-COVID levels, just a couple of years behind schedule.

And, with ridership comes ticket revenues. Amtrak now predicts that gross ticket revenue will be back to the pre-COVID annual level by FY 2024: Yet, despite ridership and revenue returning to pre-COVID levels, Amtrak has apparently decided to give up on ever getting back to the pre-COVID position of an operational break-even.

The new budget assumes $1 billion per year combined operational losses, in perpetuity.

Full article:

https://www.enotrans.org/article/amtrak-concedes-perpetual-1-billion-year-operating-losses/

I can't imagine how operating shortened trains fewer days per week with fewer amenities would negatively affect revenue.

With a headline like that, the conservative news media will have a heyday!
The long distance revenue forecasts are hamstrung by a lack of equipment!
Pretty bullish revenue forecast for the NEC though!
Some intersting comments about the change in the recent law at the end.
 



Edited 1 time(s). Last edit at 05/08/22 01:12 by mp51w.

mp51w Wrote:
------------------------------------------
> The long distance revenue forecasts are hamstrung
> by a lack of equipment!
> Pretty bullish revenue forecast for the NEC
> though!


Self-fulfilling prophecies!!!

Remember it was the Liberal run states that did the most draconian shut downs. After the initial 2020  nation wide closures, most Conservative states dropped nearly all restrictions including travel. Anyone fortunate enough to be living in states like  Florida or Idaho during the past two years would know that. 

"The very profitable Acela service and the less profitable regional service between D.C. and Boston had finally pulled in enough operating revenues to pay for the (alleged) losses of the long-distance trains, 

Neither NEC services are the least bit profitable. These ENO eggheads need to lean about GAAP accounting. 

Perhaps this hand picked Amtrak "leadership" is doing exactly what it was intended to...make Amtrak look so bad that everything outside the NEC will be shut down or spun off to local agencies.

Posted from Android

There is no excuse for railfans not understanding that NEC trains (both Acela and Regionals) are indeed
profitable to Amtrak as the operator, but,  a popular subsidy (loss) to the Federal Government.

This is why, two years ago, the operators of Brightline made a bid to take over the operation of NEC trains ---
provided, of course, current subsidies continue.

The President of Brighline said at the time -- they consider the NEC the "Holy Grail" of passenger operations in the U.S. -
and they haven't given up trying to take over from Amtrak. 

He knows that if current subsidy of fixed costs continue -- his company stands to make a profit of $400 Million on Acela, and
$300 Million on the Regionals annually.   This would make any CEO's mouth water.

It's high time railfans understood this.



Edited 1 time(s). Last edit at 05/08/22 07:20 by ronald321.

ronald321 Wrote:
-------------------------------------------------------
> There is no excuse for railfans not understanding
> that NEC trains (both Acela and Regionals) are
> indeed profitable to Amtrak as the operator, but,  a
> popular subsidy (loss) to the Federal Government.

NOT true.
Amtrak's appropriation includes a line item for NEC overhead, incorrectly called "capital". It does not come out some mysterious place in the federal government. Maintaining 160 MPH trackage should be tossed on Acela's operating budget, since no other train requires it. 
 



Edited 1 time(s). Last edit at 05/08/22 07:34 by joemvcnj.

Guys need an accounting class,covering operating costs is not a profit.

Bob

Posted from Android

thank you rob..........

66

To robj

High time the "non-be livers" see the light.  Covering operating cost DOES mean a profit -- if someone else 
picks up all the other costs.

Otherwise you must tell the President of Brightline he needs an accounting lesson.- and ask him why
he worked so hard to operate trains that lose millions. 

He must know something you don't know.

 -

ronald321 Wrote:
-------------------------------------------------------
> To robj
>
> High time the "non-be livers" see the light. 
> Covering operating cost DOES mean a profit -- if
> someone else 
> picks up all the other costs.
>
> Otherwise you must tell the President of
> Brightline he needs an accounting lesson.- and ask
> him why
> he worked so hard to operate trains that lose
> millions. 
>
> He must know something you don't know.
>
>  -

Simply covering a cost is just break even....if you have revenues that exceed all expenses that might be a profit...regardless of a government entity picking up some cost...that is net nothing...nothing spent, nothing monetary received. Being a government concessionaire is potentially a lucrative gig....much potential cost is not born by you....good operation of the rest can mean revenues in excess of expense....revenues much more easily obtained since most costs are absorbed elsewhere...Brightline is no different from all other government contractors...working for the government means money money money.  Good or bad....that's what it is.....and if there is a commercial contractor that could run Amtrak well, it might mean that all of it could survive even with continued govenrment subsidy...for sure Amtrak needs leadership that is not all lawyers and hidebound government employees. I don't know who in the commercial world is qualified but I am sure there are plenty. Gardner ain't one of them....he's a wonk. 

BrightLine also has a vast portfolio of real estate assets that have been advantaged by the railroad.

FWIW, the railroad makes junky properties much more valuable.

Posted from Android

Train29 Wrote:
-------------------------------------------------------
> Remember it was the Liberal run states that did
> the most draconian shut downs. After the initial
> 2020  nation wide closures, most Conservative
> states dropped nearly all restrictions including
> travel. Anyone fortunate enough to be living in
> states like  Florida or Idaho during the past two
> years would know that. 

Plenty of people made have decisions to travel/not travel and based on their comfort or lack of comfort with being close to many other people, not the political ideology of their destinations. 

For the first time in over 45 years, I did not travel anywhere by train in 2020.  All of my out of town trips were in a car. 

In 2021 and March 2022, I rode on several Amtrak trains, as well as on commuter trains and a tourist railroad excursion train.

I've traveled to withint PA (my home state) and to NY (both New York City and Upstate NY), OH, IN, IL & MI.  I was able to do pretty much everything I would have done pre-COVID regardless of the states' politics.  

I made two trips to MI in 2020 and 2021 where I visited a few rail-related sites (mostly depots).  You, on the other hand, post photos of trains/depots from all over except MI.

How ironic that it is me, as an out of stater, not you, as MI resident, to be one who says Yes! to M!CH!GAN.

 

Only way Amtrak can actually cut loses is restore the LD Fleet back to normal, allow coach passengers back into the diner, add the dorm and bag back on the Chief, Starlight, and Sunset, restore those 2 and the lounge back on the Eagle, and the NEC being Profitable Ronald, until they can use their own money from this "profits" to actually get the NEC in A Shape, I'm with everyone else who countered your argument!

Dear World:

It is ENTIRELY possible to have positive operating earnings while running at a significantly negative net income.  Any company with a lot of debt and interest payments is liable to have that happen.   Or, if your financial statements let you get away with putting below-the-rail costs in non-operating expense you'll get the same result.

If it's really true that the NEC makes an operating profit, of COURSE Brightline or even the local Subway franchisee would be interested in taking it over, as long as someone else is paying for the "non-operating" expenses.

ronald321 Wrote:
-------------------------------------------------------
> There is no excuse for railfans not understanding
> that NEC trains (both Acela and Regionals) are
> indeed
> profitable to Amtrak as the operator, but,  a
> popular subsidy (loss) to the Federal Government.
>
> This is why, two years ago, the operators of
> Brightline made a bid to take over the operation
> of NEC trains ---
> provided, of course, current subsidies continue.
>
> The President of Brighline said at the time --
> they consider the NEC the "Holy Grail" of
> passenger operations in the U.S. -
> and they haven't given up trying to take over from
> Amtrak. 
>
> He knows that if current subsidy of fixed costs
> continue -- his company stands to make a profit of
> $400 Million on Acela, and
> $300 Million on the Regionals annually.   This
> would make any CEO's mouth water.
>
> It's high time railfans understood this.

So by your twisted logic government money to pay for Northeast corridor infrastructure doesn’t count, but government money to subsidize the long haul trains does. Either way, it’s government money that’s required to operate the service. Without the money neither one of them operates. Really no difference, they both come out of the federal treasury.

Posted from iPhone

I don't know if folks read through the entire document, but there's a mention of something often discussed on TrainOrders.  That Amtrak has a porous border between operating items, which include repairs and "normal" maintenance, and capital improvements, which includes building new stuff. A lot of items can flow between the categories.  If you can't trust the accounting and how stuff is charged against which budget, you don't have good footing to make decisions.

The discussion also looks at changes in how Congress and the President chose to direct Amtrak to report its mission, as it applies to long distance trains.  The "Southwest Chief" bill made significant changes to what Amtrak is expected to do.  It's good reading, and contradicts some of the "shoot from the hip" criticism

This is the text applying to commuter lines using Amtrak rails, dispatching, etc:

Another perpetrator is the Infrastructure Access service line. In the last pre-COVID forecast, IA operating losses were expected to hover around $100 million per year forever, since most IA costs are recouped by payments from the state and local governments that use the Corridor and other Amtrak-owned infrastructure. But the new budget shows IA operating losses heading steadily upwards, from the pre-COVID $100 million per year to $450 million per year. We think this is due to the fact that Amtrak bills planning and engineering of projects to the operating budget, not the capital budget, so they are showing their planning for the spending of their tens of billions of dollars in IIJA money out of their annual operating budget, not out of the IIJA money or their annual capital budget.

Has anyone actually read the article for which the link is provided for above?

After reading the headline I found the article not only very deceiving but disjointed and lacking any depth. The author got numbers from Amtrak and kinda just threw them against the wall showing the difference in what was being projected Pre-COVID to what is now being projected in perhaps a Post-COVID world (over the same time period). The article lacks to fully explain what is causing the difference in the two projections.

For the Northeast Corridor, more riders are being projected in post-COVID over same periods - why? What's the driver for this increase? Yet the increased ridership doesn't translate to additional revenue. Food revenue is even projected to be half of what it was pre-COVID? Why? Again, no explanation. No real explanation is given for why any of the revenue turns out LESS despite more ridership - and ONLY if looking at the Northeast Corridor. But it gets worse..... Of six or so line items for expense from operating Northeast Corridor trains, there's no substantial discussion digging into the cause for expenses rising (other than a few line items) in post-COVID forecasts, as compared to pre-COVID forecasts. 

Worse yet - there's no discussion or digging in as to why the National Network is running double the loss in the post-COVID forecasts, as compared to Pre-COVID forecasts. No discussion on consists or capacity, or riders, food service, and equipment. There's been no major changes in the inventory of long distance passenger cars pre to post-COVID... Yes, Amtrak shot itself in the foot by reducing and sending the LD fleet to a pre-mature storing and moth-balling. That's not discussed, nor the fact that LD trains are LACKING capacity and frequencies; and running largely at good load factors. But even in 2023, 2024, 2025 and beyond - why no recovery? LD trains are gradually returning to daily service, and it is hoped that capacity is restored to pre-COVID levels, so then wouldn't there be some validity to use the pre-COVID forecast? If no, why not? Isn't this supposed to be a "restoration" of service? What's causing the gap? Yes, there's likely a spike in the cost of labor, but that's not the full explanation for the gap between the two forecasts. 

They create a good headline by simply adding numbers; but what do the numbers mean.....Maybe the pre-COVID numbers were a bit on the imaginative side or the forecast calcs flawed? No major depth or digging in as to the "why."