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Is Private Rail the Future for Regional Routes?


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#1 dlagrua

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Posted 06 February 2017 - 05:12 PM

Considering the emergence of the Florida East Coast Brightline,. and the numerous regional lines run by private operators like Burlington Sante Fe around the country, I  believe that more commercial operators will be called upon to get into the regional rail business in the next few years.  I say this because Amtrak is perpetually strangled for funds and will soon face a serious shortage of equipment of Superliner and Amfleet coaches. With exception of some states stepping in, there is no requisition for such new equipment on the horizon.  As the 30-40 yr equipment ages and get worn out what will happen? Government will need to turn to private industry to fill the gap and I envision a whole new network of operators will soon emerge. I am not trying to make the argument of the efficiency of private vs government passenger trains, .just pointing out a reality that will bring about changes. What say you?


Edited by dlagrua, 06 February 2017 - 05:14 PM.


#2 MikefromCrete

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Posted 06 February 2017 - 05:21 PM

Do you mean private companies like Brightline running the whole thing on their dime or companies that run trains for governmental agencies like BNSF and UP for Metra or Keolis for MBTA and VRE? I doubt if there will be many private from the ground up operations --- Brightline is only happening because of the real estate side business. However, we may see private outfits running state-supported trains like Indiana tried to do with Iowa Pacific. 



#3 Karl1459

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Posted 06 February 2017 - 06:00 PM

And the answer is..... (drum roll please).... Iowa Pacific/Hoosier.

 

Seriously, the opportunities for un-subsidised services with enough profit to have a reasonable return on investment (including equipment purchase) will be rare to non-existant. Maybe LA to Vegas, but that will likely not start showing a profit until 2 or 3 bankruptcies clean out debt. If multi-year contracts with enough subsidy to warrant equipment purchases were to appear there might be some players, and Amtrak would be one as seen by the Cascades, various California trains, the Heartland Flyer etc.

 

A key concern for national rail advocates is to make sure the ticketing is compatible across the country so anyone traveling does not have to contend with multiple policies and practices.



#4 dlagrua

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Posted 06 February 2017 - 06:01 PM

Do you mean private companies like Brightline running the whole thing on their dime or companies that run trains for governmental agencies like BNSF and UP for Metra or Keolis for MBTA and VRE? I doubt if there will be many private from the ground up operations --- Brightline is only happening because of the real estate side business. However, we may see private outfits running state-supported trains like Indiana tried to do with Iowa Pacific. 

Hard to tell what will be Mike, but my comments were based upon what I see as a severe shortage of Amtrak rolling stock in the coming years. When there is a shortage of equipment to run the routes then what will happen?  The IPH experiment failed because it was ill conceived, underfunded and had too low of a ridership to make it profitable. Amtrak is back for now but as I said equipment will run low in the coming years.



#5 jis

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Posted 06 February 2017 - 06:08 PM

You can rest assured that Brightline will not run anything outside Florida and possibly won't even run everything we dream they will in Florida. They are based on a very normal Japanese model of privatized railroad, but not so much as things are done in the US, a model that is basically one of Real Estate development (of significant pre-existing real estate ownership, being the primary reason for running a railroad. Of course if the government opens up its treasure chest to them so that they make some real money over and above their actual operating cost, then they will probably take on almost anything. but what is the chance of the government actually generously subsidizing operations? Not much in my reckoning. So I'd say, happy dreaming. :)



#6 A Voice

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Posted 06 February 2017 - 06:14 PM

 

Do you mean private companies like Brightline running the whole thing on their dime or companies that run trains for governmental agencies like BNSF and UP for Metra or Keolis for MBTA and VRE? I doubt if there will be many private from the ground up operations --- Brightline is only happening because of the real estate side business. However, we may see private outfits running state-supported trains like Indiana tried to do with Iowa Pacific. 

Hard to tell what will be Mike, but my comments were based upon what I see as a severe shortage of Amtrak rolling stock in the coming years. When there is a shortage of equipment to run the routes then what will happen?  The IPH experiment failed because it was ill conceived, underfunded and had too low of a ridership to make it profitable. Amtrak is back for now but as I said equipment will run low in the coming years.

 

 

Why?  What is going to cause Amtrak to face a worsening equipment shortage?  

 

There is no defined age or deadline "set in stone" by which rail passenger equipment is worn out and/or must be retired.  Indeed, the oldest Heritage cars are approaching seventy years of age; While yes, they should have been retired decades ago, Amtrak had no alternative to the baggage or dining cars, so they remained in service.  Neither Amfleet nor Superlners  face imminent removal from service.  Amtrak (badly) needs new equipment, but lacking that, the old cars will soldier on.  

 

Should the midwest states ever actually take delivery of a bi-level fleet of passenger cars, the Horizon fleet will be released to supplement single-level cars in the east.  That's hardly ideal either, but it could provide some breathing room in the interim.  



#7 Just-Thinking-51

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Posted 06 February 2017 - 06:41 PM

There minor chatter of Siemens start a leasing fleet for the US market. This fleet could come with a Siemens maintenance contract.

One stop shopping for lease equipment for a state contract or Long Distance train. Get a quote for engines and coachs, with a maintenance team. With a single phone call.




My two cents is the State should buy equipment and then contract out the operations. The English model with Leasing equipment companies and private operating companies. Would be another.


No reason why Amtrak can't lease Superliner equipment themself. Or is there....

#8 A Voice

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Posted 06 February 2017 - 06:53 PM

No reason why Amtrak can't lease Superliner equipment themself. Or is there....

 

Equipment leases is how Amtrak obtained the Superliner II cars, P42 locomotives, and Acela trainsets (and HHP-8), among others.  What really prevents that from being done in 2017 is Amtrak's current debt level, with RRIF loans outstanding for the ACS-64 and Alstom built Acela-replacements.  Makes much more sense for Congress to just make a one time supplemental appropriation for new equipment., but we all know the pitfalls of that approach.  



#9 dlagrua

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Posted 06 February 2017 - 06:59 PM

 

 

Do you mean private companies like Brightline running the whole thing on their dime or companies that run trains for governmental agencies like BNSF and UP for Metra or Keolis for MBTA and VRE? I doubt if there will be many private from the ground up operations --- Brightline is only happening because of the real estate side business. However, we may see private outfits running state-supported trains like Indiana tried to do with Iowa Pacific. 

Hard to tell what will be Mike, but my comments were based upon what I see as a severe shortage of Amtrak rolling stock in the coming years. When there is a shortage of equipment to run the routes then what will happen?  The IPH experiment failed because it was ill conceived, underfunded and had too low of a ridership to make it profitable. Amtrak is back for now but as I said equipment will run low in the coming years.

 

 

Why?  What is going to cause Amtrak to face a worsening equipment shortage?  

 

There is no defined age or deadline "set in stone" by which rail passenger equipment is worn out and/or must be retired.  Indeed, the oldest Heritage cars are approaching seventy years of age; While yes, they should have been retired decades ago, Amtrak had no alternative to the baggage or dining cars, so they remained in service.  Neither Amfleet nor Superlners  face imminent removal from service.  Amtrak (badly) needs new equipment, but lacking that, the old cars will soldier on.  

 

Should the midwest states ever actually take delivery of a bi-level fleet of passenger cars, the Horizon fleet will be released to supplement single-level cars in the east.  That's hardly ideal either, but it could provide some breathing room in the interim.  

 

Amtrak was involved in a high number of accidents last year. Accidents remove cars from service and even if they are rebuilt they must go out of service for an extended period of time. Amtrak has very little reserve stock. Its safe to say that the herd will thin in coming years.

 

You can rest assured that Brightline will not run anything outside Florida and possibly won't even run everything we dream they will in Florida. They are based on a very normal Japanese model of privatized railroad, but not so much as things are done in the US, a model that is basically one of Real Estate development (of significant pre-existing real estate ownership, being the primary reason for running a railroad. Of course if the government opens up its treasure chest to them so that they make some real money over and above their actual operating cost, then they will probably take on almost anything. but what is the chance of the government actually generously subsidizing operations? Not much in my reckoning. So I'd say, happy dreaming. :)

I would tend to agree with you that Brightline will remain in Florida only but 1. Florida East Coast owns the track, the railroad equipment, many stations and runs it own crew. Big advantage in my view. 2. The manifestation of the shortage of Amtrak equipment will lead to privatization. How else can the future shortage of Amtrak equipment be solved?



#10 jis

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Posted 06 February 2017 - 07:15 PM

Florida East Coast Railway has a relatively distant arms length relationship with AAF. AAF will only own the Cocoa to Orlando track, not the Florida East Coast Railway track. AAF operating crews will have no relationship to the Florida East Coast Railway. So I am not sure what point you are making.

AAF/Brightline will essentially lease track slots and pay a trackage charge to FECR to run their trains on FECR tracks, using their own crew, just like Amtrak would if it were running on FECR.

And indeed, most interestingly the Fortress Group is contemplating selling off FECR while retaining ownership of FECI and hence AAF/Brightline.

I for one completely disbelieve your premise that shortage of equipment will lead to privatization. That is pure fantasy as good as they come.


Edited by jis, 07 February 2017 - 10:40 AM.


#11 A Voice

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Posted 06 February 2017 - 10:24 PM

 

 

 

Do you mean private companies like Brightline running the whole thing on their dime or companies that run trains for governmental agencies like BNSF and UP for Metra or Keolis for MBTA and VRE? I doubt if there will be many private from the ground up operations --- Brightline is only happening because of the real estate side business. However, we may see private outfits running state-supported trains like Indiana tried to do with Iowa Pacific. 

Hard to tell what will be Mike, but my comments were based upon what I see as a severe shortage of Amtrak rolling stock in the coming years. When there is a shortage of equipment to run the routes then what will happen?  The IPH experiment failed because it was ill conceived, underfunded and had too low of a ridership to make it profitable. Amtrak is back for now but as I said equipment will run low in the coming years.

 

 

Why?  What is going to cause Amtrak to face a worsening equipment shortage?  

 

There is no defined age or deadline "set in stone" by which rail passenger equipment is worn out and/or must be retired.  Indeed, the oldest Heritage cars are approaching seventy years of age; While yes, they should have been retired decades ago, Amtrak had no alternative to the baggage or dining cars, so they remained in service.  Neither Amfleet nor Superlners  face imminent removal from service.  Amtrak (badly) needs new equipment, but lacking that, the old cars will soldier on.  

 

Should the midwest states ever actually take delivery of a bi-level fleet of passenger cars, the Horizon fleet will be released to supplement single-level cars in the east.  That's hardly ideal either, but it could provide some breathing room in the interim.  

 

Amtrak was involved in a high number of accidents last year. Accidents remove cars from service and even if they are rebuilt they must go out of service for an extended period of time. Amtrak has very little reserve stock. Its safe to say that the herd will thin in coming years.

 

 

Losses due to accidents and similar will not "thin the herd" to an appreciable degree so long as Amtrak keeps up with car repairs.  Relatively few passenger cars are truly damaged beyond repair (economical repair is another matter).  It's been far worse before when a lot of damaged equipment was just left parked. 



#12 Ryan

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Posted 06 February 2017 - 10:25 PM

Amtrak was involved in a high number of accidents last year.


How many? How many cars are still sidelined as a result?

How does that compare to 2015? 2014?
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#13 Eric S

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Posted 06 February 2017 - 10:33 PM

Unless we believe that "regional rail" (not sure whether that means commuter rail or shorter-distance intercity rail) will suddenly become profitable for these hypothetical private operators, why are those private operators in a better position to acquire new or rebuilt equipment than Amtrak? Wouldn't either one need funding from some other entity (some level of government) to acquire equipment?



#14 Triley

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Posted 06 February 2017 - 11:06 PM

Unless we believe that "regional rail" (not sure whether that means commuter rail or shorter-distance intercity rail) will suddenly become profitable for these hypothetical private operators, why are those private operators in a better position to acquire new or rebuilt equipment than Amtrak? Wouldn't either one need funding from some other entity (some level of government) to acquire equipment?

 

Precisely my thought throughout reading this whole thread.  Thank you.


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#15 keelhauled

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Posted 06 February 2017 - 11:23 PM

But you're forgetting, this is the fantasy forum, where inconveniences like funding can be hand waved away.

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#16 cirdan

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Posted 07 February 2017 - 04:39 AM

 

Unless we believe that "regional rail" (not sure whether that means commuter rail or shorter-distance intercity rail) will suddenly become profitable for these hypothetical private operators, why are those private operators in a better position to acquire new or rebuilt equipment than Amtrak? Wouldn't either one need funding from some other entity (some level of government) to acquire equipment?

 

Precisely my thought throughout reading this whole thread.  Thank you.

 

 

It has to do with the way debt is structured.

 

If a government agency such as Amtrak takes on debt to buy equipment, that comes under a lot of scrutiny.

 

If a private company takes on the debt, buys the equipment, and then charges Amtrak to use it on a per mileage or per time period basis, overall costs may be higher (as there is a middle man taking a cut of the money) but on the balanace sheet it looks better.



#17 Carolina Special

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Posted 07 February 2017 - 10:36 AM

You can shuffle the balance sheet debt around, but the ultimate economics of the business seem unlikely to change. Ultimately the business operator has to make money or they will find better uses for their investment dollars.

#18 jis

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Posted 07 February 2017 - 10:46 AM

No private outfit in its right mind would take on a debt that is not adequately collateralized. The problem is that the marketplace for leasing rolling stock in the US is remarkably illiquid and therefore it is hard to come by a situation where anyone can credibly collateralize a long term debt like that needed for acquiring a large number of rail cars. As we know there are limited cases where Amtrak is able to do so for Acela replacements. My guess is that they should be able to do the same with replacement of the Northeast Regional rolling stock over time. I would be absolutely astonished if they or anyone else could pull it off for the LD fleet, notwithstanding the fond fantasy of many railfans that the LD network runs at a profit only if it could be detached from the NEC.



#19 cirdan

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Posted 07 February 2017 - 10:57 AM

You can shuffle the balance sheet debt around, but the ultimate economics of the business seem unlikely to change. Ultimately the business operator has to make money or they will find better uses for their investment dollars.

 

Sure.

 

But ticket revenue is not the only source of income but just a major source. Government paying for a service because it has some broader societal benefit (or because they believe it does)  is also "income". In some cases susidy may indeed be money thrown into the wind. But it is wrong to think it is always so.



#20 A Voice

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Posted 07 February 2017 - 11:51 AM

No private outfit in its right mind would take on a debt that is not adequately collateralized. The problem is that the marketplace for leasing rolling stock in the US is remarkably illiquid and therefore it is hard to come by a situation where anyone can credibly collateralize a long term debt like that needed for acquiring a large number of rail cars. As we know there are limited cases where Amtrak is able to do so for Acela replacements. My guess is that they should be able to do the same with replacement of the Northeast Regional rolling stock over time. I would be absolutely astonished if they or anyone else could pull it off for the LD fleet, notwithstanding the fond fantasy of many railfans that the LD network runs at a profit only if it could be detached from the NEC.

 

Again, equipment for long-distance trains has been privately financed (leased) previously; The Superliner II cars and P42 locomotives, in particular.  The difference now is Amtrak's already heavy debt load from the RRIF loans.  No, the long-distance trains do not operate at a profit - then or now - but that fact alone doesn't necessarily prevent equipment financing.  A further problem, however, is that such leased (financed) equipment drives up the annual subsidy required.  Hence, the much better option long term is an appropriation for new cars and locomotives.  


Edited by A Voice, 07 February 2017 - 11:52 AM.





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