Is Private Rail the Future for Regional Routes?

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?

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.

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.

MikefromCrete said:

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.

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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.

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.

dlagrua said:

MikefromCrete said:

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.

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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.

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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.

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....

Just-Thinking-51 said:

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

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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.

A Voice said:

dlagrua said:

MikefromCrete said:

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.

Click to expand...

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.

Click to expand...

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.

Click to expand...

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.

jis said:

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.

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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?

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.

dlagrua said:

A Voice said:

dlagrua said:

MikefromCrete said:

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.

Click to expand...

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.

Click to expand...

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.

Click to expand...

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.

Click to expand...

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.

dlagrua said:

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

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

How does that compare to 2015? 2014?

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?

Eric S said:

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?

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

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

Triley said:

Eric S said:

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?

Click to expand...

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

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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.

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.

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.

Carolina Special said:

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.

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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.

jis said:

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.

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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.

redacted

If private operators could make money running trains, wouldn't they already be doing so? Obviously some might still have been had there not been the general downtrend in the post WWII era, but I tend to think not for a variety of reasons.

Question for JIS: weren't the early railroad lines in the US (and much of the London Underground) on a similar business model to FEC, i.e. increasing value of their properties?

Metra Electric Rider said:

If private operators could make money running trains, wouldn't they already be doing so? Obviously some might still have been had there not been the general downtrend in the post WWII era, but I tend to think not for a variety of reasons.

Question for JIS: weren't the early railroad lines in the US (and much of the London Underground) on a similar business model to FEC, i.e. increasing value of their properties?

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Yep, and a lot of the Japanese private railroads too. Theoretically even the early NYC IRT and BMT systems were for developing properties in the outer reaches, which were unpopulated suburbia at that time, and then so was LIRR.

Railraods were initially built for one of two reasons or a combination thereof - Property and Commerce development or perceived needs of Defense and Security.

Remember, even our Interstate highway system was justified by needs of National Defense.

There are three possible outcomes as to who pays:

1) Federal/State government pays and passes the bill onto taxpayers.

2) Private enterprise pays.

3) No one pays and the trains disappear.

I will never be convinced that #2 isn't the best option of the three. Certainly you can argue #2 isn't plausible and our "real" outcomes are #1 and #3. But if the government can encourage #2 I think we're better off. I'm not going to just say spend more of our tax money until the cows come home unless there is a future "payoff" (use your own judgment as to what qualifies as a payoff).

If government is substantially paying for part of your income for a "private" service, I would argue that is no longer private rail. The business has to be able to pay for itself with minimal government support. Otherwise the businessman is subject to whatever changes the government makes to the contractual terms when the winds of politics change, which happens fairly frequently. In a business with high fixed costs, like passenger rail, that is a recipe for disaster.

So I can't see private rail working except under rare circumstances that are not repeatable around the whole country.