Privatize Amtrak Or No?

In anyone's opinion, should Amtrak become a privately-owned company, or leave it as government-owned?

IF it ever becomes a privately-owned company, how well would it work compared to it currently being government-owned? Also, IF it ever becomes a privately-owned company, how well would it work compared to freight carriers, such as CSX, UP, BNSF, NS, etc? And how would it be as far as money and its trains (whether regional or long-distance)?

Ideally, I'd much rather it be private and not controlled by the government so demand/revenue would drive service like as is the case for planes and buses.

Realistically, you have to find someone willing to pay for it. Hopefully Brightline, Texas Central, and Xpress West among others succeed and there will be more interest in the future.

Lots of discussions on this board around privatization vs gov't. How about doing some reading / searching.

Gov't took over because private didn't want it (and was losing money). I doubt anything has changed in the last 45 years to make someone want to own passenger rail.

Philly Amtrak Fan said:

Ideally, I'd much rather it be private and not controlled by the government so demand/revenue would drive service like as is the case for planes and buses.

Realistically, you have to find someone willing to pay for it. Hopefully Brightline, Texas Central, and Xpress West among others succeed and there will be more interest in the future.

Click to expand...

I can agree with ya on that!

AmtrakBlue said:

Lots of discussions on this board around privatization vs gov't. How about doing some reading / searching.

Gov't took over because private didn't want it (and was losing money). I doubt anything has changed in the last 45 years to make someone what to own passenger rail.

Click to expand...

What she said. Amtrak exists for a reason, and the fundamentals haven't changed in the last 50 years. Everything is subsidized, even the bus and airlines you'd like to be more like. We can have a conversation about reversing Amtrak's model to match them (private companies operating over subsidized infrastructure, but good luck convincing anyone to nationalize the country's rail infrastructure.

The government owns all the highways, airports, and the air traffic control system.

To make Amtrak like the airlines and buses the government would have to own all the train tracks and dispatching facilities.

Sort of building off what Ryan wrote, when talking about "privatizing" Amtrak you first needs to define "privatize." What sort of model are you suggesting?

I don't mean to be snide or condescending but kindly go back and study the history of passenger rail in the US from 1950 to the start of AMTRAK. You'll find decreasing ridership due to competition from private autos and commercial aviation. Note that both of these are heavily subsidized by the government. Railroads, making most of their money from freight, grew less and less interested in passenger services. Often, they had seen passenger rail as an advertisement. Mr. Executive, see how well we treat you; well we will treat your freight just as well. Once the execs started flying, this went away. Passenger service deteriorated and ridership fell even more. The railroads (with few exceptions) wanted out of the business and wanted out bad. Thus the government "takeover" of passenger rail under the aegis of AMTRAK.

Passenger rail requires subsidies. In any country. Just as all other modes of transportation. To think that privatizing without subsidizing the railroads will work is imnsho folly.

By the way, when AMTRAK was set up it was supposed to fail under its own weight in a few years. Hah!

The UK model where companies bid to run loss making services at the lowest government subsidy or profitable routes at the highest price for x number of years and are allowed to keep any profit they keep isn't a bad way half way house, companies have to run the service to an agreed minimum level but are free to add additional services and are tied in to the full so they have to make best off and do their hardest to make money

I would be all for returning Amtrak and rail passenger service in general to private ownership...provided that structural changes were made to allow it to operate at a profit. My own suggestions are:

1. A complete exemption on ad valorem (property) taxes imposed by any state or entity chartered by a state on any railroad line which hosts a qualifying passenger service. "Qualifying" meaning that the service needs to meet modest capacity (no tacking a rider coach onto a freight three days a week to claim the exemption for the full distance between New York and Chicago) and timekeeping requirements. This exemption would apply regardless of who operates the passenger train, be it Amtrak, Iowa Pacific, or the host railroad itself if it felt inclined. To be fair across modes of transportation, this exemption would also apply to privately owned and operated toll roads and privately owned and operated airports.
2. Amtrak's exemption from state and local sales taxes should apply to all privately operated common carrier trains with the sole exception of dinner and wine trains which return passengers to their point of origin on a regular basis.
3. Two tiers of subsidy: a lower tier for each and every seat operated regardless if it is filled or not...say half a cent per mile. A higher tier for every seat occupied by a passenger...say a cent a mile, or 1.5 cents a mile if the train offers restaurant-quality food service on board.

The most effective forms of subsidy are those which leverage a customer's dollar, so this would provide incentive for railroads to run those trains and then to fill those seats...which is what I'd like to see.

Also, note that it was voluntary, not a takeover, and the railroads had to BUY in. They had to pay a certain percentage of their passenger losses incurred over the prior 3 years either in-kind in the form of equipment or in $$$. That was part of Amtrak's start up capital. The stick Amtrak had was that the ICC would not consider any discontinuance petitions at all for 5 years for railroads that did not join.

Not all railroads joined:

Rock Island did not join because they couldn't afford the buy in and Amtrak did not want their beat-up equipment. They got out from under some of their runs after 1975, and, of course, the bankruptcy finished off any remainders.

D&RGW did not join because they did not want Amtrak dictating schedules over their single track mountain railroad (and, in fact, they operated the Rio Grande Zephyr as a 2nd Class train, so 1st Class hot freights had rights over it, something that they could not have done with the standard Amtrak contract of the time). Amtrak and Rio Grande finally negotiated a modified contract in 1983. Amtrak wanted on the D&RGW badly. D&RGW had the ICC turn down all their discontinuance petitions, even the partial one just between Grand Junction and Salt Lake City where they had very low ridership. I was on it one time when there were fewer than 10 people onboard departing Salt Lake City. A bunch of people got on at Grand Junction, and that train was completely full departing Glenwood Springs.

Southern did not join because they felt they could run their remaining trains as a class act with minimum losses, having already successfully decimated most of their passenger services under Brosnan. They got rid of the trains other than the Southern Crescent after 1975 and turned that over to Amtrak in 1979.

There was a relatively small RR in the South that did not join (Central of GA?), but were able to discontinue after 1975.

Santa Fe came very close to not joining. They only signed the Amtrak contract in the middle of April 1971, just a couple weeks before Amday. John Shedd is on the record having said that had Santa Fe been allowed to cut back to the trains that Amtrak itself kept (Super Chief/El Capitan and the San Diegans) and dropped the ones Amtrak did (San Francisco Chief, the former Grand Canyon-23/24, the Tulsan, and the Denver-La Junta connecting train), he could have convinced the Board to stay out. That wasn't the way the legislation was written, though. As it was, they estimated that operating losses from running all the passenger trains would have wiped out all the freight profits by 1975. And Santa Fe actually wanted to stay in the business, but on their terms.

Wouldn't prices go up if Amtrak went private? I thought Amtrak is government subsidized. (But I once thought I'd be married "until death do we part")

KmH said:

The government owns all the highways, airports, and the air traffic control system.

To make Amtrak like the airlines and buses the government would have to own all the train tracks and dispatching facilities.

Click to expand...

Counting tracks Amtrak owns as government owns, service seems better and faster on those routes than others. In theory, the government would invest on either buying roads from the freight companies or building their own but good luck with either. Obama's HSR vision in 2009 was a starting point and some of that money did go to improve CHI-STL service.

If the British model of privatization of Train Operating Companies (TOC) and ROlling Stock Operating COmpanies (ROSCO) is followed then it would actually mean more subsidies for about a decade or so and then possibly an opportunity to roll back some subsidies. Privatization does not necessarily mean no subsidies as we already know from the airline business. It is just that the subsidies can be sufficiently decoupled eventually from the operating companies to make them fade in th background. Something that the Brits seem to be slowly achieving with their rail infrastructure subsidies.

Amtrak provides a service to the general public including stops at many small communities in very rural areas that a private firm would eliminate focusing only on the profitable stops. All transportation is subsidized even though some in Washington try to make you think that only Amtrak is subsidized. Commuter rail systems have to be subsidized to keep the ticket prices at a reasonable rate. Same with Amtrak. If the airlines were not subsidized, think of how expensive the tickets would be. What if every highway and local road was a toll road? If Amtrak were privatized, where would it operate? From what I have read the law that allows Amtrak to operate on the Freight network would not be in force if Amtrak was private, thus the host railroads most likely would not permit passenger operations to focus on their own operations. So with equal or higher subsidies, less service, higher fares and possibly loss of the network, making Amtrak private looks like a recipe to eliminate passenger rail in this country.

Well, to privatize Amtrak a new set of laws will have to be enacted. Conceivably the new set of laws can incorporate through grandfathering, the current law parts that give Amtrak access. If that happens then it would be able to operate everywhere where it can now. And depending on how it is done, its access rights and priority rights can be enhanced, should the people's representative actually start serving the people instead of their paymasters.

But poorly executed privatizations is the worst of all worlds and should be avoided at any cost.

Private vs. Public: http://www.reuters.com/article/us-usa-rail-idUSKCN0XW0AY

Lonestar648 said:

If the airlines were not subsidized, think of how expensive the tickets would be.

Click to expand...

Probably not as much as you'd think, really.

The airlines are actually who pays into the trust that is used to pay the subsidies. Most of the subsidies are in turn spent by the FAA itself. That trust is currently running a $13 billion surplus, so the airlines have paid more than they've received.

crabby_appleton1950 said:

Wouldn't prices go up if Amtrak went private?

Click to expand...

On the other hand if there were multiple companies you might get competition which doesn't exist now which in general drives prices down.

Nationalise the infrastructure and then allow anyone and everyone to run what ever train they like with subsidies to run passenger services which aren't profitable

Then see how the class 1's love no longer having control of the dispatchers

Is there any legislation that bars a private company from providing passenger service if they so choose? I'm not aware of any, although any third party player would almost certainly get no federal subsidy (they may be able to talk state and local governments into giving subsidies, however) and they would have to negotiate track rights with the host railroads on their own, which would certainly cost more than Amtrak is paying now.

The fact that no third party has stepped up to compete against Amtrak shows that, at least as a minimum, it's very unlikely that passenger service would continue for most of the nation without some sort of federal subsidy and negotiating power that Amtrak has through its legislation. There may be some private carriers that would serve the NEC, and states would probably find other companies to operate their local trains, but the long distance trains would be no more without either Amtrak or some other organization getting similar favored treatment from the government. There certainly wouldn't be more competition on the long-distance routes if Amtrak was privatized.

That being said, I could see some privatization working to help lower costs within Amtrak, and potentially seeing a reversal of roles working out okay for passenger rail (the government owns the tracks and private companies offer passenger rail, with the government offering subsidies for unprofitable routes that companies won't otherwise take.) On a smaller scale, I could see contracting out the food service on Amtrak to a third party being a net win overall (even outside of the labor costs; a company focused on food service would have pricing power that Amtrak doesn't have, and they may have a way to make the current staff run more efficiently from advancements they've found in their processes.)

But fully dissolving Amtrak and letting private companies pick up the profitable routes? Most routes would be gone, and the thin semblance of a national network we have now would be completely decimated to simply a few corridors of service.

jebr said:

Is there any legislation that bars a private company from providing passenger service if they so choose? I'm not aware of any, although any third party player would almost certainly get no federal subsidy (they may be able to talk state and local governments into giving subsidies, however) and they would have to negotiate track rights with the host railroads on their own, which would certainly cost more than Amtrak is paying now.

Click to expand...

There is none. And your second sentence is exactly what does happen. For instance, with the VRE-Keolis-CSX/NS/Amtrak arrangement.

Part of the problem, as I see it, is that its an inherently non-competitive system. You can only draw so many straight lines between two points. Its like having two subway systems in a city. At the end of the day, you can only put one subway station at the Pentagon, DCA, and Union Station. Unlike an airliner that can fly right off the wingtip of a competitor and the only difference is the 30 seconds between the take-off and landing slots the two had. There's a lot more space up there to throw airliners on the same route, but not so much on the tracks.

jebr said:

On a smaller scale, I could see contracting out the food service on Amtrak to a third party being a net win overall (even outside of the labor costs; a company focused on food service would have pricing power that Amtrak doesn't have, and they may have a way to make the current staff run more efficiently from advancements they've found in their processes.)

Click to expand...

I would think that they already get the purchasing power benefits through Aramark. The process improvements don't require privatization, just some common sense leadership.

Regarding the existence of two privately owned and operated subway systems clearly many here have not had any experience with Tokyo ...

To go to Private Operation of the rail lines, first, everyone has to realize that profit supersedes service. Therefore, all those small community stops that Amtrak makes would be gone since not enough passengers board to justify the stop. Just like the airlines have dropped countless small airports due to the cost and customer revenue, so would Private Rail companies. Second, the rail fares would need to increase dramatically which would lower the number of passengers carried. If the Government nationalized the nationwide rail system, how would they come up with the money to maintain and/or improve the infrastructure? Going Private looks to be an even bigger government disaster than anything that exists now. Based on US history with private passenger rail companies and/or divisions, it seems that little passenger rail, except for commuter operations, will survive. Also, winter is so hard on passenger rail equipment, I could see some routes like the EB being summer only, if they could continue to sell out the summer months.