Any Changes so for under Mr. Moorman?

[willem]

Big difference between providing train service (Amtrak's primary goal) and providing "better" meal service. Amtrak steaks should not be a requirement on Amtrak trains and something taxpayers should have to pay for when cafe car food is acceptable to many passengers.

I'll go along with no subsidized steaks, but I would like the food offerings to be consistent with government recommendations for a healthy diet. My impression of the cafe car, where I have rarely eaten, is that it has mostly high-fat, high-salt, high-sugar, low-nutrition stuff.

This is not to say that the dining car food is particularly healthy, just that I would like healthy food available at a price competitive with other available food.

 

[A Voice]

I'll tell you, TBike, what the problem is. The problem is that it is very hard to *demonstrate* the degree to which crappy food service is driving away customers and reducing ticket income. There are so many variables affecting ticket income that the best you can do is make an educated guess. I'm quite certain that crapifying the food service is losing more money in tickets than it saves in costs, but how do I *prove* it?

the Star's revenue was down from $33.1 to $29.3 million year over year, or a decline of $3.8 million. Costs are down from $77 million in FY 2015 to $63.1 in FY 2016, a savings of $13.9 million. During the same period, the Meteor's cost savings were $2.8 million, so it seems the diner cost slightly over $10 million to run. So Amtrak comes out ahead by about $6 million for the year.

Where are you getting $10 million to operate the dining car per year? Remember the diner is not the only thing the Silver Star lost, there was also formerly a second locomotive. That saves money too, it's not just the diner. I'd really like to see numbers (anyone?) on what that costs annually, because those savings combined with the revenue loss greatly closes the gap between dining car expenses and income (when revenue loss is considered).

One comparison of the STAR and Meteor may be this past Thanksgiving season. The Star kept its usual consist of 3 - 4 coaches and 2 sleepers. The Meteor on the other hand had up to 4 sleepers and 5 - 6 coaches. There were some days Meteor had 13 cars. Now that is not a complete parallel as there are different north and south Carolina stations. Plus the extra Tamps stations for the Star. Star did have a few more sell outs but with the restricted consist ? ?

If appears that on this dual service ( actually there is also the Palmetto ) routes there is requirements for both diner lite ( or just snacks ) and full service diners. The full service diners do suffer from enough diner crews and the inability to restock enroute and often exclude coach passengers due to lack of meals. There were several reports of same during Thanksgiving.

Note adding the Meteor and Palmetto riders together gives some indications but just what ?

Amtrak directly controls both train capacity and pricing, along with other factors (marketing, amenities, etc.), and this can make a tremendous difference in both revenue and allocated costs.

I don't understand why dining car service can't be evaluated like any other product Amtrak offers. .. But if it's a money loser, can't be fixed and it doesn't have a meaningful impact on ticket revenue, cut it, scrap it or contract it out and take it off the books.

By that reasoning, the trains should stop altogether. Now.

Big difference between providing train service (Amtrak's primary goal) and providing "better" meal service. Amtrak steaks should not be a requirement on Amtrak trains and something taxpayers should have to pay for when cafe car food is acceptable to many passengers.

Nobody has said steaks are a requirement, that's a straw-man argument. What is a requirement, for trains which are on the move for many hours or even several days, is food service of reasonable price, selection, and quality. Lounge (cafe) car fare may be acceptable, but is it desirable; Is it something which will make people more likely to travel by train (because ticket revenue is far more important than cafe sales) or rather dissuade potential passengers? Point is, you cannot look at food service in isolation. Plenty of (often first-class) travel options in all modes of travel (train, plane, ship, etc.) offer complimentary meals, which is more than made up in higher ticket prices.

Does it not seem strange to anyone else that an organization which loses money and thus needs all the revenue it can possibly get would pursue a business plan which calls for reduced fares (and hence revenue)? Wouldn't you instead expect the company to offer greater amenities and services so it can command higher ticket prices? You cannot make food service a profit center (or break-even), that's impossible regardless of what Joe Boardman told Congress, so the amenity should be used to drive higher revenue and improved customer service (not something just 'acceptable' that people put up with).

What those numbers do not show is the long term effect that it has on ridership. I personally think consistent customer service is the #1 way to win long-term customers. After that... providing good quality food and beverage service should be the next priority. That doesn't have to mean full service dining cars, but I don't think any passengers are fully satisfied with the current offering on the City of New Orleans, Silver Star, Lakeshore, and Cardinal.

I'll be willing to bet you an Amtrak steak that plenty of LD passengers can live with cafe car food and don't have to have Amtrak steaks to enjoy the ride.

Plenty of LD passengers could live with an unsedated colonoscopy instead of dinner, but that doesn't mean it would make them satisfied passengers who will return and tell everyone what a great way trains are to travel. Just because you were satisfied with lounge car food doesn't mean everybody else was.

Granted, the dining car service could really use more coach passengers as customers (assuming adequate capacity; perhaps extended service hours). if Amtrak truly wants to 'experiment' with food service options (in principle, that's a good thing) then it should include tests to increase dining car revenue, and not solely ways to cut costs.

 

[crescent-zephyr]

A Voice seems to get it....

I survived riding the City of New Orleans with severely cut back diner service.... the food was edible. But it is a huge factor when planning future trips on that route. Also, when fellow travelers ask me about that route, I tell them about the cut back diner service. It seems to discourage them as well.

 

[fulham]

After reading all the comments regarding dining car service it is clear their are various opinions on the subject.

First I do not think that eliminating steaks from the diner is going to have much of an impact on anyone's taxes.

Second, Amtrak has brand new diners coming on line that are set up to prepare meals as opposed to just heating them up. To go back and reconfigure the kitchen portion of the cars so they would be similar to an airline galley would probably be very expensive.

Third, once the diners all come on line and are being used, Amtrak management needs to do a better job of utilizing the cars to maximize revenue. On Amtrak trains the dining car experience can be inconsistent. It all depends on the crew. The key, and this is going to be tough from a management standpoint, is to get the crews to get as many people on the train to use the diner as possible. None of the "sleeping car passengers only" mentality, not announcing last call, closing the car to far in advance of endpoint arrivals, etc. Maybe have specials for coach passengers...offer take-out service...let passengers pre-book meals in advance...find a way to be creative. Sure not all passengers will use the diner for all meals (me included) but again find ways to maximize revenue. The V-II diners appear to be very nice cars. Amtrak needs to take advantage of this and promote them accordingly.

 

[TiBike]

Does it not seem strange to anyone else that an organization which loses money and thus needs all the revenue it can possibly get would pursue a business plan which calls for reduced fares (and hence revenue)? Wouldn't you instead expect the company to offer greater amenities and services so it can command higher ticket prices? You cannot make food service a profit center (or break-even), that's impossible regardless of what Joe Boardman told Congress, so the amenity should be used to drive higher revenue and improved customer service (not something just 'acceptable' that people put up with).

Amtrak doesn't need more revenue, it needs more profit. If you reduce expenses by more than you're reducing revenue, then you're increasing profit. There's a limit to that, as many people have pointed out, but unprofitable amenities, like dining car service, that are intended to drive core revenue, like ticket sales, should be evaluated on that basis.

I don't think there's anything Amtrak can do to make dining car service profitable – its labor costs are too high. It could try for the best of both worlds by subbing out food service to a company with a better cost structure, but it can't do it with current staffing and compensation levels.

Reducing fares would not necessarily reduce revenue. Look up price elasticity of demand. If disproportionately more people buy something at a lower price (i.e. the demand for that something is elastic), then total revenue will go up. That's a particularly important consideration in a high fixed cost business, like railroads. Amtrak knows that – that's what fare buckets are all about.

 

[Ryan]

That assumes that supply is unconstrained. It isn't.

 

[A Voice]

Does it not seem strange to anyone else that an organization which loses money and thus needs all the revenue it can possibly get would pursue a business plan which calls for reduced fares (and hence revenue)? Wouldn't you instead expect the company to offer greater amenities and services so it can command higher ticket prices? You cannot make food service a profit center (or break-even), that's impossible regardless of what Joe Boardman told Congress, so the amenity should be used to drive higher revenue and improved customer service (not something just 'acceptable' that people put up with).

Amtrak doesn't need more revenue, it needs more profit. If you reduce expenses by more than you're reducing revenue, then you're increasing profit.

You're assuming that profit is the objective, rather than providing a valuable and important public transportation service. No Amtrak route or service - including Acela - is truly profitable, nor should that be the ultimate goal. That said, Amtrak certainly should use its taxpayer funding wisely and efficiently, but again, don't look at food service in isolation. We're not talking about subsidizing someone's meal; Rather, the question should be what level of amenities support a reasonable fare structure for the most (financially) efficient operation.

There's a limit to that, as many people have pointed out, but unprofitable amenities, like dining car service, that are intended to drive core revenue, like ticket sales, should be evaluated on that basis.

Again, food service is not intended to be a profit center, and you cannot properly evaluate it as such, any more than you can air conditioning or the restrooms.

Reducing fares would not necessarily reduce revenue. Look up price elasticity of demand. If disproportionately more people buy something at a lower price (i.e. the demand for that something is elastic), then total revenue will go up. That's a particularly important consideration in a high fixed cost business, like railroads.

It does when there is a finite supply of the commodity, and you can otherwise sell-out inventory (or close to it) at the higher price. This is a particular problem on Amtrak, which seems to be chronically short of equipment for years and years. Particularly with single-level (Viewliner I) sleepers, you're basically limited to the same two cars regardless of the level of demand (so rooms tend to be sold in the higher fare buckets). Thus, when fares were reduced to match the loss of the dining car amenity, it did indeed cause a reduction in revenue. If Amtrak ever had more equipment, then what you suggest could work, producing a better financial result (still not 'more profit', but rather smaller losses). However, that question opens the debate of how many hundreds of millions taxpayer dollars do you want to spend buying more cars to meet demand, which although it will improve the finances, at the end of the day the train will still require an operating subsidy (based on fully allocated costs).

 

[neroden]

I'll tell you, TBike, what the problem is. The problem is that it is very hard to *demonstrate* the degree to which crappy food service is driving away customers and reducing ticket income. There are so many variables affecting ticket income that the best you can do is make an educated guess. I'm quite certain that crapifying the food service is losing more money in tickets than it saves in costs, but how do I *prove* it?

I'll take a crack at it. Per Amtrak's September monthly report (https://www.amtrak.com/ccurl/515/889/Amtrak-Monthly-Performance-Report-September-2016-Preliminary-Unaudited.pdf), the Star's revenue was down from $33.1 to $29.3 million year over year, or a decline of $3.8 million. Costs are down from $77 million in FY 2015 to $63.1 in FY 2016, a savings of $13.9 million.

Good crack at it, but unfortunately those "costs" include ALLOCATED costs. We have no evidence yet that the removed "costs" are all *real* removed costs. How much did allocated costs increase on the *other* trains? If you subtracted out *the sum total of all increases in costs on all the other trains* and you still had a drop in costs, then you might have a convincing lower bound on the cost for operating the dining car. Meanwhile, the $10 million number may be no more than a Wild Ass Guess by Amtrak based on its notoriously ridiculous allocations. I believe that it is and I believe that it is at least twice the real incremental cost.

So, if you want to convince me, try harder. A bottom-up estimate of dining car costs (based on staffing expenses) would be more convincing, for example. Every time I do such an estimate I come up with a number much, much lower than $10 million -- more in the $2-4 million range. It's hard enough to do the estimates that it might be $5 or $6 million, but not $10. There are allocations involved in that $10, I'm pretty sure. Of course another possibility is that the Heritage cars had insanely high maintenance costs, but that wouldn't reflect on the economics of dining cars in general either.

Anyway, I was actually referring to the *crapification* of dining car service. The complete removal of a dining car potentially saves money. Failing to stock the dining car properly, failing to provide a decent menu, using plastic instead of china, is crapificication. That *doesn't* save money and it costs lots of revenue.

(P.S. It's absolutely true that if you can completely remove a commissary and crew base, you may really be able to cut costs substantially by removing a dining car. This obviously was not the case on the Silver Star, where actual savings were strictly operations and maintenance costs. )

 

[neroden]

The key, and this is going to be tough from a management standpoint, is to get the crews to get as many people on the train to use the diner as possible. None of the "sleeping car passengers only" mentality, not announcing last call, closing the car to far in advance of endpoint arrivals, etc.

Yes, this is very important. Since most of the dining car costs are fixed, the key is to spread the costs over the maximum number of customers.
And step one is STOP UNDERSTOCKING. It's critically important that the dining car *not run out of food*.

 

[neroden]

Big difference between providing train service (Amtrak's primary goal) and providing "better" meal service. Amtrak steaks should not be a requirement on Amtrak trains and something taxpayers should have to pay for when cafe car food is acceptable to many passengers.

Taxpayers aren't paying for steak. In fact every steak I buy on Amtrak is subsidizing coach passengers (I'd estimate about $10/steak in subsidy from me to coach passengers). So, I'm happy to relieve your worries on that count!
It is really annoying how many people don't understand how to do accounting properly. The difference between fixed costs and variable costs is fundamental on so many levels, and many people seem unable to get it through their heads. It is *particularly* key to railroads, which have unusually high fixed costs and unusually low variable costs compared to most businesses. The process of evaluating something vs. the alternative seems to be lost on most people.

It *is* accurate to say that taxpayers are subsidizing the almost-population-free route of the Southwest Chief through northern New Mexico and western Kansas, because it could run on the Transcon route through Amarillo faster, for lower costs, more passengers, and higher revenue.

It is inaccurate to say that taxpayers are "subsidizing" steak. Removal of steak would simply reduce gross profit margin (revenue - incremental cost), reduce volume of sales, and as a result would be bad for the bottom line. Just like removal of the nut and fruit desserts removed sales and gained nothing.

To get back to the topic, Wick Moorman has a decent understanding of the economics of railroads and I'm sure he understands how economies of scale work, but I don't know if he'll be able to get it through the heads of some of the dopes in the departments below him.

 

[neroden]

In any case, the three values of the revenue worth of the diner I came up with were $3.8 million, $2.4 million, and $1 million, all against an operating cost of $10 million. I don't see any scenario in which Amtrak didn't win.

Thanks, those are good numbers.[

As noted, they are not good numbers.

 

[neroden]

Getting away from the discussion above, I see a great challenge ahead for Mr. Moorman in getting proposed new routes opened.

Bluntly, the economics for opening new routes is bad.
The problem is exactly what I described before: economies of scale, fixed costs vs. variable costs. A new route has a lot of brand-new fixed costs. Yes, it leverages the Amtrak reservations system and backshops. If you're lucky, it leverages one or two major terminal stations at either end. And then a lot of new fixed costs. Amtrak can't responsibly take those on its books, which is probably why the policy has been to make cities pay for their own stations. They still need new crew reporting points, etc. etc.

There are advocacy groups for a daily Cardinal

This, on the other hand, has good economics. It leverages economies of scale. The cost of operating the stations already exists; the overhead of contracting with CSX already exists; all the crew change points already exist; etc. etc.

like all aboard Ohio that is also pushing for new train service on part of the old PRR mainline which would route through Lima, Columbus, Ft Wayne, Valparaiso, Gary and on to Chicago.

Good idea but lots of new fixed costs. As a result, All Aboard Ohio is pushing for *not less than six trains per day each way*, if I remember correctly, because you need to go big to leverage the fixed costs.

Then there is the old Sunset Route from NOL to ORL that needs to be reopened.

They're doing their best to leverage fixed costs on that, but still, a lot of new fixed costs, even if most are borne by the cities. I don't think one crew can take it from NOL to ORL, am I right?

 

[Ryan]

Not at all. Looked at a random 2003 timetable, and ORL-NOL is 1345 to 0920 the next day. Going by the "separate arrival and departure times shown" guess, crew changes were likely at JAX and PNS.

 

[jis]

They're doing their best to leverage fixed costs on that, but still, a lot of new fixed costs, even if most are borne by the cities. I don't think one crew can take it from NOL to ORL, am I right?

I would guess at least three T&E crew.

 

[Bob Dylan]

Re Neroden's comment about the "dopes" under the CEO, the first candidates for "pink slips" should be the CFO that supposedly cut the Diner from the Silver Starvation behind Mr. Boardmans back, and the other bean counters that dreamed up the nickel and dime cuts to the Service in the Diners and Sleepers. YMMV

 

[TiBike]

It's a good and plausible analysis of the available data, that points towards an answer. We don't have all the numbers – this is a chat board, not the Amtrak board room – but the numbers we do have support (i.e. fail to falsify) the hypothesis that, in some if not all instances, dining car service costs more than it contributes to the bottom line – directly and indirectly.

Amtrak does have all the numbers, and has people who can do a full analysis and get as close to a definitive answer as you can in managerial accounting. I assume 1. the above hypothesis is correct and 2. Mr. Moorman is a capable executive, as everyone seems to think, so I'm predicting that we'll see less dining car service in 2017, rather than more or the status quo.

Easy enough to prove me wrong.

In any case, the three values of the revenue worth of the diner I came up with were $3.8 million, $2.4 million, and $1 million, all against an operating cost of $10 million. I don't see any scenario in which Amtrak didn't win.

Thanks, those are good numbers.[

As noted, they are not good numbers.

 

[Ryan]

With new diners rolling off the line, you're going to be wrong pretty quick. We'll see dining car service restored to both the Star and LSL before 2017 is over.

 

[TiBike]

With new diners rolling off the line, you're going to be wrong pretty quick. We'll see dining car service restored to both the Star and LSL before 2017 is over.

Cool. Let's see where the facts take us this coming year.

 

[WoodyinNYC]

. . . a great challenge ahead for Mr. Moorman in getting proposed new routes opened.

Bluntly, the economics for opening new routes is bad.
The problem is exactly: economies of scale, fixed costs vs. variable costs. A new route has a lot of brand-new fixed costs. Yes, it leverages the Amtrak reservations system and backshops. . . .

There are advocacy groups for a daily Cardinal

like all aboard Ohio that is also pushing for new train service on part of the old PRR mainline which would route through Lima, Columbus, Ft Wayne, Valparaiso, Gary and on to Chicago.

Good idea but . . . All Aboard Ohio is pushing for *not less than six trains per day each way*, iirc, because you need to go big to leverage the fixed costs.

Then there is the old Sunset Route from NOL to ORL that needs to be reopened.

. . . I don't think one crew can take it from NOL to ORL, am I right?

The plan is for two more sets of equipment. Taking the CONO extension to Miami would require a third additional consist. That's why it won't be going to Miami. (Connections available.)

p 23

http://www.newsherald.com/assets/pdf/DA2111216.PDF

 

[A Voice]

Little new here, except that Amtrak has spoken to President Elect Trump's team:

http://www.wbur.org/hereandnow/2016/12/27/amtrak-ceo-charles-moorman

 

[neroden]

Thanks for that article. This one may seem like a low-content quote, but I think he's spotted some of the *penny-wise pound-foolish* stuff I've noticed in previous Amtrak behavior:

"They're very different in some ways, and they're very much the same in others. Clearly, hauling people is a lot different than hauling containers, or automobiles, or coal. And the customer requirements are clearly different as well. But, at the end of the day, the things that it takes to run a good freight railroad are, by and large, the things that it takes to run a good passenger railroad. And so, as I've stepped into this role and looked around, I've been able to bring a lot of my experience, and actually have brought a few folks in to look and see where we can improve the railroading side of Amtrak.""

 

[Ziv]

TiBike, riding a train for more than 12 hours with just a cafe car is irritating. Having a real dining car serving fresh, hot meals adds a huge amount of pleasure to a trip that is really hard to quantify. I know that I would not have taken my last EB trip if they hadn't had a diner.

Obviously given the cost of labor, it is going to be hard for the diner to "pay for itself" but if you don't have a diner, those profitable sleeper cars are more likely to be half full.

I have seen large American corporations cut costs and ruin their customer satisfaction levels. Sometimes being penny wise and pound foolish is a great way to destroy your business.

It's a good and plausible analysis of the available data, that points towards an answer. We don't have all the numbers – this is a chat board, not the Amtrak board room – but the numbers we do have support (i.e. fail to falsify) the hypothesis that, in some if not all instances, dining car service costs more than it contributes to the bottom line – directly and indirectly.

Amtrak does have all the numbers, and has people who can do a full analysis and get as close to a definitive answer as you can in managerial accounting. I assume 1. the above hypothesis is correct and 2. Mr. Moorman is a capable executive, as everyone seems to think, so I'm predicting that we'll see less dining car service in 2017, rather than more or the status quo.

Easy enough to prove me wrong.

 

[Palmetto]

Dining cars have never--and will never--pay for themselves. The private railroads knew that long before they relinquished their passenger train service Anyone who thinks that dining cars can break even is not in touch with reality, IMO. Mr. Mica comes immediately to mind.

 

[TiBike]

That's my point – evaluate the impact of dining cars on overall revenue and costs, but do it train by train. If a dining car increases the overall profitability of a train by increasing sleeper travel, then great, keep it. But it's possible that too few passengers agree with you about dining car service to make that case. That would be the purpose of experiments and market research.

TiBike, riding a train for more than 12 hours with just a cafe car is irritating. Having a real dining car serving fresh, hot meals adds a huge amount of pleasure to a trip that is really hard to quantify. I know that I would not have taken my last EB trip if they hadn't had a diner.

Obviously given the cost of labor, it is going to be hard for the diner to "pay for itself" but if you don't have a diner, those profitable sleeper cars are more likely to be half full.

I have seen large American corporations cut costs and ruin their customer satisfaction levels. Sometimes being penny wise and pound foolish is a great way to destroy your business.

 

[jis]

That's my point – evaluate the impact of dining cars on overall revenue and costs, but do it train by train. If a dining car increases the overall profitability of a train by increasing sleeper travel, then great, keep it. But it's possible that too few passengers agree with you about dining car service to make that case. That would be the purpose of experiments and market research.

TiBike, riding a train for more than 12 hours with just a cafe car is irritating. Having a real dining car serving fresh, hot meals adds a huge amount of pleasure to a trip that is really hard to quantify. I know that I would not have taken my last EB trip if they hadn't had a diner.

Obviously given the cost of labor, it is going to be hard for the diner to "pay for itself" but if you don't have a diner, those profitable sleeper cars are more likely to be half full.

I have seen large American corporations cut costs and ruin their customer satisfaction levels. Sometimes being penny wise and pound foolish is a great way to destroy your business.

I tend to agree with that in principle. The problem is designing an experiment that provides an apples to apples comparison. IMHO even the Star experiment does not,since the train consists are not the same or even close. and the routes are sufficiently different, and even before the change it was known that the travel profile on the Star was measurably different from that on the Meteor.