best ways for Amtrak to cut its operating losses?

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I think Amtrak is kind of hamstrung in the market that they can really exploit-the 200-300 mile corridor runs. Any trip that takes 5 hours or less is very attractive competition to airline travel. The fact that these now have to be funded by the states eliminates Amtrak starting, and making successful, these routes, then selling that operating cost to the states after showing value for that state on those routes. In the current fiscal climate, very few state governments are going to stick their budgets out there to subsidize an untested route. If PRIA could be tweeked to allow this, it might open up new markets for corridor rail and eventually high speed rail in some corridors. The time people spend in airport lines make these shorter routes very attractive.
sJust about all Amtrak growth in the short distance markets has occurred because of state support. The state-supported routes have thrived. It's the best way to launch new services. If local government isn't interested, then their states lose out. It's not fair to the states that support their local services to give free rides to those that don't want to back up their desires with money.
The answer here, as usual, is quite a bit more complicated. Starting up a corridor is generally going to run a couple hundred million dollars, so Amtrak is going to need external support to start any. The more important question, though, is who should pay for for those costs and operating costs during "ramp up", since losses in the first few years can be larger than those later on.

Of course, it's also worth noting that there has been no serious talk of actively ditching a state-backed train that had existed for more than 2-3 years in about thirty years. The chatter in the last year or two surrounded states not picking up the tab on an existing train whose cost to them was being hiked/transferred to them. There have been a few demonstration projects that sputtered (the Gulf Breeze, for example).

By the way, the reason the rules exist restricting Amtrak's ability to add routes is because of a bunch of bad judgment on this front in the late 90s (yet another legacy of Warrington's Freight Follies).
 
How to cut the deficit (starter list):

Invest government money in long-term improvements that save money (any action whose payback is ten years or less e.g.)

Take the politics out of Amtrak decisions. Too many politicians have their hands in the decision making as to what is done at a low level.

Enforce the rules requiring RRs to give Amtrak priority.

Add rules requiring RRs to allow new Amtrak trains with an arbitrator deciding costs.

Holding RRs financially responsible when they fail to give Amtrak priority and make it somewhat punitive.

Require Amtrak to improve onboard service and give them more authority to terminate non-complying employees.
All well and good, but every form of public transportation is subsidized by government, so why should Amtrak along be required to make a profit?
Neither I nor MIRAILFAN in his opening statement ever made any statement to the effect that Amtrak should make a profit. I agree that as a public service, Amtrak should be subsidized. The question was

best ways for Amtrak to cut its operating losses?and I proposed ways that it could happen. Please don't confuse any suggestion for reducing losses with making a profit. To reduce losses, one must pursue ways to increase revenue and to reduce losses. Amtrak's best method of increasing revenue is to increase ridership. This can't work enough unless Amtrak fills more and more trains and reduces its cost. To fill more trains, you need more trains, better on-time performance, better service and more efficient means of providing that service. It can't be done without more money and more some laws.
 
I realize what I am saying but the biggest way to reduce losses on Long Distance trains is to give food service to a 3rd party that is not required to hire full time union employees.

How does it work for the Amtrak Downeaster Service? They have a better food selection than Amtrak offers anyways...
 
I say reduce the long distance train frequency .
Then you don't understand the first thing about railroads.

The first thing about railroads is that they have huge fixed costs and small variable costs. They are therefore efficient when dealing with BIG VOLUME and inefficient when dealing with LOW VOLUME.

The best way for Amtrak to cut its operating losses is to leverage the same fixed costs over more service (more service == more revenue).

- run longer trains;

- run more frequencies on the same routes;

- run the same trains faster (using less equipment to run the same number of frequencies, and attracting more passengers);

and of course,

- run the trains on time, which has been proven to get much higher ridership than not running them on time.

As for the administrative positions? You need expertise in a bunch of different things, which means you need to hire a bunch of different administrators. Keep the same number of administrators, but have them administering *a lot more train service*, and suddenly it will seem like an appropriate level of administration.

Railroading is *all* about the economies of scale. Almost entirely.
 
By the way, the reason the rules exist restricting Amtrak's ability to add routes is because of a bunch of bad judgment on this front in the late 90s (yet another legacy of Warrington's Freight Follies).
I can't think of any example which actually fits your claim here. Warrington's judgment on route selection seems to have been fine. The Kentucky Cardinal was a good route in principle, except too damn slow. The Lake Country Limited had exactly the same issue; if it ran at speed it would have been fine. Other routes introduced under Warrington were the Downeaster and the Heartland Flyer!
Warrington didn't start any other new routes as far as I can tell. Gunn, however, eliminated a number of routes which were around well *before* Warrington.

I don't know why people blame Warrington for everything; alienating the Class Is was a bad move, but on the whole he did a much better job than his disastrous predecessor, Downs.

If we're going to discuss the change in the public mood, we should note that the "Carter cuts" and the "Downs cuts" caused little reaction among Congress or the Amtrak board; they were generally fine with shrinking Amtrak.

By contrast, the Gunn cuts got Gunn *fired*. This is a sign that the public mood had changed.
 
too bad we can't electrify the routes. would be costly but diesel savings would be huge.
Diesel fuel costs are roughly around 10% of the total operating costs of an LD train. For example, the PRIIA mandated Capitol Limited Performance Improvement Plan (PIP) report provided a useful breakdown of the expenses for the CL in FY2010. The fuel cost $3.0 million out of a fully loaded (direct and overhead) cost of $40.1 million or 7.5% of the total.

The western trains have a higher fuel cost percentage, because they run trips taking 2 days. The PIP report for the California Zephyr listed its fuel cost as $12.0 million out of a fully loaded cost of $101.1 million.

Electrification can save on operating costs, but it requires a high volume line such as the NEC or commuter lines.

If you want to learn about where Amtrak's money goes, the PIP reports, annual financial reports, monthly performance reports, compliance reports are all available on Amtrak's website Report & Documents page.
 
Even airlines don't make a profit. The idea is to have Amtrak break even.

People are still mad they removed the Sunset Limited between New Orleans and (umm... help... Atlanta? Florida?),
Florida. It joined the "Silvers" at Jacksonville and continued to Miami originally, later Orlando. This was severed in 2005
People are also mad about the reroute of the Sunset Limited away from Phoenix (in favor of, um, the middle of nowhere), although Amtrak was stuck with that because nobody was willing to maintain the tracks to Phoenix. This was severed in *1996*.

And some of us, having done our research, are angry that the Interstate Commerce Commission permitted Southern Pacific to cut the Sunset Limited from daily to three-a-week on the EVE of Amtrak, in October 1970. People complain constantly that the service isn't daily -- and it would have been daily if the ICC hadn't permitted this act of sabotage, which it permitted, even though the ICC knew that Amtrak was coming in seven months!

and that was years ago. Cutting service is not the answer, especially since many LD trains sell out months in advance.
People still complain about the loss of direct Philadelphia-Chicago service (in 2005), the loss of "Inland Route" service between Boston and New York, the loss of service from Vermont to Montreal, the loss of service through Fort Wayne.

Entire state delegations to Congress complain about the loss of the North Coast Hiawatha.

I complain about the loss of service from Michigan to the East, and a few years ago I read that "Detroit to New York" was the nonexistent service most often requested by callers to Amtrak's call center. I witnessed a couple turn away from the ticket window at Syracuse because they couldn't get to Detroit by direct train.

The demand is for expansion. That said, expanding along new routes is the single most expensive form of expansion. More frequencies per day on the same routes is much more cost effective and people really do like it, a lot. I think a second frequency from Chicago to Minneapolis/St. Paul, and a second frequency from Chicago to Denver, are both obvious improvements. New York to Chicago could support multiple additional frequencies, preferably with slight route variations to pick up more intermediate ridership (one should go via Pittsburgh and Philadelphia; one should go via Ann Arbor and Detroit). Even more obvious is the need for the Cardinal and Sunset Limited to operate daily rather than three-a-week.

For reference, Amtrak tried running a bunch of routes three-a-week back under the disastrous Downs administration in the 1990s. It's a ridership and revenue disaster. You might expect that 7 days a week would have 7/3 (2+1/3) as much ridership as 3 days a week? It doesn't. It consistently has more than 2.5 times the ridership, often 3 times, thanks to network effects. You might expect that 7 days a week would have 7/3 (2+1/3) the costs? Nope, it has less than twice the costs, because of economies of scale.
 
Interestingly ridership numbers oscillated between 19 million and 22 million (and change) all the way from 1978 to the end of Warrington's term. It then started growing, and has grown consistently since then except for a one year dip (2009) presumably due to the 2008 economic hit. I don't know what the aggregate reasons for such are. But possibly has to do with better management of revenues, schedules and capacity by the managers post Warrington than those pre-Warrington. Warrington appears to be the dividing line of sorts.
 
How to cut the deficit (starter list):

Invest government money in long-term improvements that save money (any action whose payback is ten years or less e.g.)

Take the politics out of Amtrak decisions. Too many politicians have their hands in the decision making as to what is done at a low level.

Enforce the rules requiring RRs to give Amtrak priority.

Add rules requiring RRs to allow new Amtrak trains with an arbitrator deciding costs.

Holding RRs financially responsible when they fail to give Amtrak priority and make it somewhat punitive.

Require Amtrak to improve onboard service and give them more authority to terminate non-complying employees.
Point 2 (line 3) and point 5 are mutually conflicting, the remainder while important and valid only assume a vision of what Amtrak is to do.

Chief Alan Brucacini of the Phoenix Fire Department stated a simplified 5 key points of management. As Congress is responsible for stating what they want from Amtrak and paying the bills they are responsible for effective mangagement. Brucacini's points, with suggested implementation...

1. Tell you people what you want them to do. For Amtrak this should involve a fairly detailed authorization which specificies general routes, frequencies, and some sort of subscription/subsidy model (in my mind a subscription of service is when you underwrite the costs to provide a service/route. If the fare recovery model will show a net wash or even profit for a level of usage the funding is subscription. If the fare recovery can not profit the difference is subsidy.) These should be measurable and achievable goals.

2. Give them the tools to do the job. For Amtrak this means investment in infrastructure. Locomotives, cars, track, stations, etc.

3. Teach them how to do it. For Congress, if Amtrak is not able to change something show them an alternative that works (not gunna happen)

4. Get (the hell) out of their way. "Take the politics out of Amtrak decisions" says it well. The politics need to be in the goals.

5. Tell them how they did. If there are measurable and achievable goals then Amtrak should be judged against them. An management (and even union contracts) should have some sort of bonus structure in place for exceeding them. Not the multi-million high end corporate stuff, just enough to be able to say we are looking and we like what we see.

Not that this will happen, but its nice to vent.
 
Interestingly ridership numbers oscillated between 19 million and 22 million (and change) all the way from 1978 to the end of Warrington's term. It then started growing, and has grown consistently since then except for a one year dip (2009) presumably due to the 2008 economic hit. I don't know what the aggregate reasons for such are.
Some suspect that there were larger economic trends at work.
If you correlate with gas prices, you see that they rise fast in the 1970s, and Amtrak ridership rises with them. Then they drop and flatline in the 1980s and Amtrak ridership drops with them. They start a massive runup again from 2000-2008, and then stay there.

Airline "attractiveness", of course, took a huge drop around the end of 2001.

If you control for these broader economic factors, the biggest contrast between Amtrak administrations is between the Claytor administration (1982-1993) and the Downs administration (1993-1998). I can't see any big difference in broader economic conditions, especially regarding transportation, between the two periods. (I can't imagine that the fall of the Soviet Union had any impact, and it's the only major change which comes to mind!)

Under Claytor, Amtrak was stable, with slight growth,. Under Downs, Amtrak suffered a cash crisis, massive increases in debt load, *and* sharply declining ridership. I can also point to specific actions which, in retrospect, were mistakes, by the Downs administration.

Such as the '96 switch of many services (Empire Builder, California Zephyr, Desert Wind, City of New Orleans, Chicago-Indianapolis) from daily to three-a-week -- quickly reversed.

Or the loss of Houston-Dallas service (not reversed), the Gulf Breeze from NY to Mobile (not reversed), and the Lake Cities Limited which provided Detroit-Toledo service (not reversed).

The Downs administration was a disaster. The Clinton administration wasn't especially or uniquely hostile to Amtrak, certainly no more than the Reagan administration had been. I suppose we could blame the problems on the Gingrich Congress, which was certainly a very serious problem for Amtrak, and that might be fair. But during the same period, urban rail systems were continuing to open all over the country, with federal support; it seems odd that Amtrak was unable to weather the political situation. It seems like Amtrak had no contingency plan or reserves going into 1995.

Worse, it seems like the cuts which were made by Downs were very poorly thought out (losing Detroit-Toledo especially, but also three-a-week anything). Gunn's cuts hurt, but I understand them: the International and Montrealer were sabotaged by the post-2001 border crossing madness, the Kentucky Cardinal was a "stub" which simply wasn't running fast enough to be usable, and the other cuts were carefully chosen to try to minimize the loss of network effects while achieving more economies of scale. By contrast, I do not understand why anyone would ever have considered cutting Detroit-Toledo, a vital network link.

But possibly has to do with better management of revenues, schedules and capacity by the managers post Warrington than those pre-Warrington. Warrington appears to be the dividing line of sorts.
Could be. :shrug:
 
I've read that Claytor did a heck of a lot of deferred maintenance on equipment, especially the new Superliners, screwing over his successors as a result; any truth to that? Certainly the massive increase in Heritage equipment under his watch didn't help any. And of course expanding the long distance network rather than corridor services was a complete misuse of the new equipment.
 
How to cut the deficit (starter list):

Take the politics out of Amtrak decisions. Too many politicians have their hands in the decision making as to what is done at a low level.

Require Amtrak to improve onboard service and give them more authority to terminate non-complying employees.
Point 2 (line 3) and point 5 are mutually conflicting, the remainder while important and valid only assume a vision of what Amtrak is to do.
Points 2 and 5 shown.

Disagree totally. Government should not be into whether Amtrak provides a specific amenity, station feature, station or other internal issue. That does not mean, the federal or state shouldn't say "Here is some money to add this route or make this change" since they are funding the addition or change.

As to #5, again, government has the right to set minimum standards when such standards are below norm. So, if the average rating of onboard standards based on an independent evaluation is 6 out of 10 with lows on certain trains being 4, it is not unreasonable to require that Amtrak raise those standards to an average of 8 with a low of 6. That doesn't mean government should decide how it is done but setting standards is the role of government.
 
I've read that Claytor did a heck of a lot of deferred maintenance on equipment, especially the new Superliners, screwing over his successors as a result; any truth to that?
Could be. It's an old railroad trick, every one of the freight Class Is has done it more than once.
People can actually make money trading railroad stocks based on tracking the deferred maintenance if they know what they're doing, because most people in the market are paying no attention to it. The railroad stock goes up as the maintenance is deferred due to apparent higher current-year profits, until the failures start happening and then the stock crashes; it's predictable and one can trade based on it. Disclaimer: This is not investment advice and I am not your investment advisor.
 
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And of course expanding the long distance network rather than corridor services was a complete misuse of the new equipment.
He didn't expand the LD network much (there's Sunset East, I guess). Compare the 1984 map (early Claytor) to the 1993 map (end of Claytor).
http://www.narprail.org/resources/fact-sheets/2043-historicmaps

(by the way, if you try to look at the 1996 map, the link is bad: the correct link is http://www.narprail.org/cms/images/uploads/map96.pdf)

Anyway, from 1984 to 1993, we see:

- unfortunate reductions in Tampa-Miami service

- lost Duluth service

- Dallas to Houston added, albeit less-than-daily

- cuts to the "inland route" related to improved service on the "shore line route" near Boston

- changes related to state funding/support in Mississippi

- cuts to the Pioneer

- St. Louis - eastward cut

- miscellaneous reroutings

- several corridor frequency expansions

As far as I can tell, Claytor largely left the LD trains in a holding pattern and actually reduced them slightly, while expanding corridor services where he could get funding.
 
Interestingly there is some similarity of approach between Claytor and Boardman in the way they are managing the mix of LD vs. Corridor. Claytor manage a net growth in ridership of about 3 million. But as Nathaniel has mentioned there were several external factors at play through that period and indeed the entire last quarter century of the 20th Century.

One exercise that would be useful is to see what the equipment situation was and what the equipment rebuilding/maintenance budget situation was over that period. Through substantial parts of that period the situation was abysmal as far as I recall, but my recollection could wrong. As I recall, a lot of the cuts were the result of simply not having enough equipment remaining in good serviceable order to continue running everything that was running previously. Which is what in my mind made Warrington's decision to spend gobs of money on freight cars somewhat ill-advised, when that money could have been better spent on either refurbishing existing rolling stock or buying new passenger rolling stock.
 
I almost want to say don't feed the troll, but I won't.

The answer to the question of cutting Amtrak losses and (quite likely) an operating profit is 'Stay the course'. Amtrak's operating subsidy has gotten whacked down quite a bit in the past few years, and a few hugely expensive problems are about to go away. The heavy maintenance spending on Heritage cars and the AEM-7 and HHP-8 fleets is almost over. Boardman has shown a solid grasp on how to maximize revenue while working diligently to eliminate a wide range of excess costs. People have been saying RUN AMTRAK LIKE A BUSINESS! Well, Boardman has been running Amtrak like a business, and quite successfully.

Running Amtrak like a business does not automatically mean upgrading amenities to increase ridership. Sorry, it just doesn't. The long distance system is basically running at capacity, once you allow for the basic natures of train travel (such as empty seats and rooms because you couldn't manage to fill space from every possible city pair where demand does not exist, despite the fact that at other points on the route the train is literally full), paying prices that are constantly increasing.

If I have a hotel with 500 rooms, and I fill 100 of them on average, there are things I can do to maximize my profit. I can renovate the hotel. I can add features, build a swimming pool, and include free breakfast, and even dinner. I can upgrade all the rooms with the most comfortable feather-down temper-pedic supercalafragilistic mattresses ever. And naturally, I might even do this while lowering prices. Unless there is something basically wrong with my hotel (such as it is located where nobody could go, or would want to go even if they could get there) that won't work, but it is the ideal model for fixing it. And you keep harping on this model.

If I have a hotel with 300 rooms in the middle of Manhattan, where I have no land, and can not expand the hotel because I have very little money, I am filling an average of 225 rooms a night, with the hotel frequently full when demand for hotels in the area is high, and because of various factors I still don't make much money, or even lose money, then my options and logical choices are very different. The first thing I do is raise prices wherever I can. The second thing I do is cut costs wherever it is reasonable to do so without creating significant long term effects to my business (such as deferring maintenance).

Why? I don't need to attract people- I already have that. I need to attract money. I don't do this fast and drastically, but I still do it. I raise my prices a little here and a little there trying to gauge the point at which my customers have reached their limit. At the same time, I cut a few features here and there again looking for that tipping point. I carefully raise and lower prices and amenities until I find the precise balance where I make the most profit.

Boardman is operating the 300 room hotel in Manhattan, gentlemen. Amtrak has limited capacity, limited ability to actually expand the system, and is losing money. The first things being done early in Boardman's term, and to a small extent under Alex Kummant, was working to maximize that occupancy. That has happened, gentlemen. Now Boardman is taking his limited resources and attempting to maximize their fiscal performance, by cutting expenses grandly wherever possible, decreasing amenities that cost money here, there, and yonder a little at a time, and raising prices as fast as he dares, in the hope of actually approaching that moment where Amtrak can declare, for the first time, an operating profit.

I assure you that if Amtrak starts to see substantially worse financial performance from the result of ANY of these changes, the changes will be reversed. But so long as people keep riding the trains and paying the higher prices, this is the way it is going to be. But more than that. This is the way it should be, if Amtrak is to be run as a business, and if Amtrak is to continue running Long Distance trains at all.
 
GML, I couldn't agree with you more. All this Boardman bashing that goes on here has seemed to be a bit over the top, and even more so lately. If you look at the overall strategy that Boardman is following it in many ways aligns with what Graham Claytor was doing. No I am not a Boardman fanboi, and can put together a long laundry list of considered criticism of my own. However, I also do not see the justification for the unbridled hate and contempt that is tossed his way around here.

On the matter of level of service, rest assured that the airlines did not get this way because airlines drove things here in spite of what the customers wanted. Airlines got here because this is what the customers are willing to pay for and tolerate. They voted using their feet and pocketbooks, while often cursing the result of their own decisions, I might add. Amtrak is no different as a running business concern, and inevitably, similar things will happen to Amtrak. The customers will get exactly that service which they are willing to pay for, and tolerate. You can already see that in spades on the NEC and other corridors. The LDs will get there too in time. Services that have better cost recovery will tend to have somewhat better bells and whistles.
 
I wonder how much savings would be realized by implementing RCM system wide compared to the savings from eliminating chocolate squares. Of course, one steps on powerful toes that have a vested interest in the status quo and the other doesn't. Just a thought.
 
Running Amtrak like a business does not automatically mean upgrading amenities to increase ridership.
Absolutely not. *Downgrading* popular amenities is something you have to be very careful with, though, lest you sink in reputational class.

Example I know: Home Depot. Amenity: well-informed employees who could find things for you and give you reasonably competent advice regarding what to buy. Home Depot expanded like gangbusters until a "cost cutting" CEO decided that it didn't need to have employees who knew anything about the products, fired all the experienced employees and hired minimum-wage untrained employees, without training them.. Lowes promptly ate their lunch.

At the same time, I cut a few features here and there again looking for that tipping point.
Amtrak should already realize that cutting china is a mistake. Bring back china and the price Amtrak can charge will go up meaningfully. It's not just the "quality", it's the ability to run environmental-themed advertising.

I assure you that if Amtrak starts to see substantially worse financial performance from the result of ANY of these changes, the changes will be reversed.
But it'll be, in some sense, too late. Home Depot reversed its change, but it didn't change the reputation it had developed, and Lowes now has a loyal base of customers due to it. Reputational losses are something you mess with AT YOUR PERIL, because the changes are *durable*. Amtrak actually benefitted from the airlines burning their reputations in several different ways -- even though they've reversed some of those changes since then, the airlines get no credit for the reversal. Amtrak management should recognize this.

Amtrak has already made several mistakes of that sort over the years. It has to stop making mistakes like this. Before you remove something which may have a reputational impact, you need to be very, very careful. The reputational impact won't show up in the bottom line immediately, but once it shows up it will be *persistent* and you won't be able to get rid of it for years.

Now, what recent changes can I absolutely support? Well, amenities which most people didn't even notice or comment on obviously weren't important (chocolate squares; real flowers vs. silk). And of course free passholder travel for former railroad employees on the Auto Train is costing quite a lot, and I don't see that Amtrak gets *any* reputational benefit from it whatsoever; it may even be hurting Amtrak's reputation.

If you're running a 300-room, constrained, Manhattan hotel, and you keep screwing around with "testing the waters" by cutting amenities, eventually your highest-paying clientele just abandons you and goes to the hotel which doesn't screw around. And you *can't get them back* even if you restore the amenities. You just dropped your star rating, your maximum price point just went down permanently, and you're stuck with the consequences of that. Until you sell the hotel to a different company who changes its name, of course -- Amtrak doesn't seem to have that option. (Greyhound kind of did that, actually, because the Greyhound name is poisoned.)
 
On the matter of level of service, rest assured that the airlines did not get this way because airlines drove things here in spite of what the customers wanted.
That's entirely arguable, and I don't believe it.

The situation with airlines is complicated due to a regulated long-distance duopoly being replaced with so-called "deregulation", below-cost "teaser" services, regional monopolies, pricing on hub slots, the convoluted system of airport financing, the completely non-market-based history of airport security, etc.

I don't think the customers wanted to take their shoes off, go through nudie scanners, or have the TSA rifle through their luggage. Just for a few examples.

I should add that businesses are well known for being stupid about what will improve or decrease their revenues. Bars and restaurants in NY (same is true in California, probably other states) thought that they would lose money if smoking was banned -- almost all of them saw sales rise.
 
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If you look at the overall strategy that Boardman is following it in many ways aligns with what Graham Claytor was doing.
I've generally thought Boardman has done an excellent job. But this feels like "knuckling under to Mica" -- who's not even staying around! -- and I don't see where it leads to a good outcome. Knuckling under to a Congressman who is staying in a powerful position would be another matter!
 
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