You could be right. On the other hand, Ed Ellis at Iowa Pacific genuinely believes that the market is going to shift within the next ten years to the point where there will be real private sector competition in passenger train service. He may be wildly optimistic.... but All Aboard Florida seems to be thinking the same way. Having a good reputation is what lets an organization survive such market shifts.
First a comment about airlines- irrespective of service, I don't use them, unless some emergency comes up. I determined some years ago that I'd rather have an acid enema then fly, so my understanding of the airline industry in general has to do with my last flight, which happened in the very early 2000s, I think 2002 or 2003.
It is possible that Ed Ellis will create some reasonable private rail operations. But up to this point, all of Iowa Pacifics operations have been limited service, generally seasonal tourist trains. When he starts running multi-run corridors and long distance trains year round and daily we can talk about Iowa Pacific. AAF is a different story, of course, but I have long suspected that it is primarily a real estate land grab- the very thing that created the Florida East Coast Railroad to begin with. If it isn't, and they run profitable corridor service in Florida, we can discuss that further.
But until that time, I really suspect trains can run profitably, but not profitably enough to cover capital costs, which will remain a government paid for concept. I do not think that Iowa Pacific could, for instance, buy the old Fort Wayne mainline, pay for adequate upgrades to the Harrisburg-Pittsburg NS line, acquire appropriate rolling stock and locomotives, and run a resurrected Broadway Limited or something vaguely like it, with enough profit to pay off all that capital investment in a timely enough fashion that I wouldn't be, as a shareholder, trying to smash Ed Ellis's head in with a proxy fight.
And I drive a Tesla Model S... partly so that I don't have to bother with going to the gas station, which was continuous aggravation for me!
Part of it is simply that far more Americans are poor now, and the middle class is poorer than it used to be! This is an unfortunate economic trend dating from the late 1970s or early 1980s; real median income hasn't budged since then, and has actually been going down recently. The poorer you are, the less willing you are to pay money for, well, anything. I'm in a funny position because my friends have all been subject to these same economic trends, but I got lucky. So I see it happening and I know why, and it doesn't apply to me personally.
Heh, funny you should mention that. I've been thinking of a Tesla Model S, myself. Although its not in my budget, I've thought about toying around with the idea as a company car. I love the car, but I've been driving Mercedes my whole life, and this is the second gas model I've owned (the rest have been diesels, running back to where I bought a 25 year old swisscheese one for less money than a service costs me now) and I don't like the gas model. Next car will be diesel or electric, I'm fairly certain.
Thats one of the unfortunate things with being a self-made man, actually. You seem to be aware of the reality, and so am I, but the honest to god truth is that we are primarily lucky. Sure, I'm a good manager. Sure, I have good business sense. Sure I tapped into a particular market that worked really well for me. And without a lot of the skills I have, I would not have been able to make it. But at the end of the day, there are a lot of skilled businessmen out there who don't have a pot to **** in or a window to throw it out of- and most of the difference between me and them is luck.
And most of the world's been fresh out of luck, partially because most of the higher up businessmen think that the reason they make so much money is they worked hard, and the reason all the schlubs below them don't make money is they don't work hard. Its hogwash- most people really do want to work hard and be rewarded for it. But the feeling of being rewarded for their effort was lost when the whole union-labor fight concept started going south, and the whole redundancy elimination stuff went around. How many managers say to their employee, who did great work for them, "Gee, you did a really good job. You helped me, let me buy you lunch."
But anyway, we're not discussing the philosophies that have generally run this country onto the rocks right now, and I digress.
That's because you have gobs of money compared to most of them. As do I. It's sobering to look at the actual income percentiles in the US, and even more disturbing, the net wealth percentiles, when you can find them. (Personal debt is a huge issue, so the income percentiles hide some of the changes.)
Isn't it really telling that my knee-jerk reaction to that statement is "no I don't". Yes I do. I don't have a lot of cash-flow on my personal books, but that is by choice. I could easily choose to redirect some of my profits out of the company and into my pocket, but I rarely take more than my (quite small) salary- I redirect my dividends into buying my company back from my investors. And that isn't an option for most people, of course. And I admit that even my so-called quite small salary is above the national average- although probably not above the New Jersey average.
The thing is, this is what's known as a "segmented market" (as I'm sure you know). Amtrak can get both segments if Amtrak is careful, and the well-to-do segment is a good place to make a profit; you won't make huge volume, but there's enough volume to support running sleepers to existing trains. Trying to provide a half-and-half service targeted somewhere between these two segments, by contrast, gets few results, because the market is bifurcating, with the middle segment missing entirely. This is the problem with "slightly premium": it targets a nonexistent middle market.
I would call Amtrak sleeper service fairly premium. It is a lot more premium than coach, certainly, and unless you are super wealthy and can afford your own rail car, it is the only 'premium' option. I haven't seen any evidence of customers dropping out of Amtrak's sleeping cars, anyway. They run full. I'm sure if Amtrak could run 25 car trains with 1st Class Sleepers, 2nd Class Sleepers, and 3rd Class Coach, we might have a better sense of the middle market. But the truth is, sleeper class in other countries, Via excluded, are not particularly premium on most trains- just a berth and sometimes food. Sure, there are exceptions to every rule- the
Rossiya's first class cars are danged nice, for instance.
Remember: in retail, the chains which crashed and burned first from the 1980s to the present day were the middlebrow chains. The bottom of the market survived, the top of the market survived, the middle fell out. This has happened in a lot of different specialized retail situations. The middle still exists in restaurants, for whatever reason (I'm actually curious why restaurants have defied the trend). Looking back at retail, one interesting thing is that the rise of the Internet has made *custom work* much more affordable, so the high-end for clothing and other things which don't have big economies of scale is switching back to custom-made, as it was before the 1950s. In airlines, the high end went off into the stratosphere and is often still unaffordable by even the rather-wealthy. (This is partly TSA-related, as the expenses necessary to avoid them are substantial.)
That's actually a totally different concept. Retail used to be a very corrupt and highly inefficient business. I obviously wasn't in retail then, buy my cousin was. Some examples include the fact that most of the middle class stores had highly corrupt buying departments that usually got kickbacks from suppliers in return for higher prices paid. The stores were heavily staffed by people who were paid heavy commissions, obviously. The fashion business is about as risky as businesses get- misjudge this years fashion trends, and you are dead in the water.
The high end stores, such as Neiman Marcus, Nordstrom, Bloomingdales, and Saks Fifth Avenue concentrated on their core customers, who want hand-and-foot waited, super pampered, every request made, kiss ass service, by providing all of that, as they always have. They make huge mark ups on everything, and can handle the inefficiency that is their business model. You can provide every single thing a customer wants in the buying experience when you charge $250 for a pair of hiking boots that are essentially what you can buy in a Sears for $90. I mean, they are a little better, but not enough better to not imply a gigantic margin. So they went smooth sailing, because nobody but them offered what their customers wanted.
The low end stores- Target, K-Mart, and especially Wal-Mart initially went through and demolished the small players offering similar or the same products the middle players offered, but by eliminating the well-paid salesmen, the corrupt buying practices, the inefficient supply chain mechanisms, and the hoighty-toighty upscale retail store model, managed to do it at prices much much lower than the middle tier. As they grew, they first started cutting their costs further through volume, and eventually by getting the mid-tier brands to make special low-tier variations of the product just for them- their buying power was high enough. In the business we talk about two sizing charts- the "Department store" sizing chart, and the "Wal-Mart" or "Chinese" sizing chart- generally speaking subtract two sizes- a Department large is generally similar to a Chinese 2XL, for instance.
The middle tier, bogged down by huge legacy costs, hyper expensive stores in extremely expensive places, an inefficient buying model, and so on, have gone out of business or consolidated, collapsing under their own weight- the Kleins, the Corvettes, the Steinbach's, the Sterns, the A&S's , and so on. There are only four big national mid-tiers left- Macy's, Lord & Taylor, JC Penny's, and Sears. Two of them are on deaths door, and the other two aren't particularly healthy.
But the game has come full circle. Wal-Mart, Target, and K-Mart (especially) are not in good health at all. K-Mart (and Sears) have died because Eddie Lampert is an imbecile of elephantine proportions. Target is ok- $3 billion in operating income on $72 billion in revenue, although I'd find that margin a little scary. Wal-Mart, though, is on deaths door, honestly- its net income has gone down steadily for the past god knows how many years. They brought in $476 Billion (a substantial increase) in revenue last year, on a net income of $16 billion (a substantial decrease). That's 3.3% as a net margin. I call that dead.
