Can Private Railroads operate passenger service without government help?

[Anderson]

Correlation ≠ causation. Battleaxe tried to privatize everything but strategic sheep islands, private companies left infrastructure to rot to untenable levels, and then the government had to re-nationalize the upkeep again. It has taken decades of effort and many billions to fix what the privatization hath wrought.


When I looked at what actually happened to many private passenger rail companies it was often a severe external setback (like the the 70's oil crisis, the 80's savings and loan implosion, the 90's dot com bubble, the 2001 travel collapse, the 2008 mortgage default, the 2020 pandemic, etc.) that did them in. The core idea seems to have a market with willing customers, but either does not make enough or does not save enough to survive extended market downturns.

Or, in the case of Auto-Train, they pushed into an unwise expansion and then had those derailments.

[I strongly suspect that if Auto-Train had stuck to LOR-SFA alone, they might still be operating.]

 

[cirdan]

Correlation ≠ causation. Battleaxe tried to privatize everything but strategic sheep islands, private companies left infrastructure to rot to untenable levels, and then the government had to re-nationalize the upkeep again. It has taken decades of effort and many billions to fix what the privatization hath wrought.

The trend to cut down on maintenance and do everything on the cheap predates privatization. For example the Pacer, an ultra-low cost train made by marrying a bus body to a souped-up freight chassis was a crime that happened on the watch of British Rail, not of any private company.

When I looked at what actually happened to many private passenger rail companies it was often a severe external setback (like the the 70's oil crisis, the 80's savings and loan implosion, the 90's dot com bubble, the 2001 travel collapse, the 2008 mortgage default, the 2020 pandemic, etc.) that did them in. The core idea seems to have a market with willing customers, but either does not make enough or does not save enough to survive extended market downturns.

A high tide lifts all boats. It is easy to make hay when everybody is making hay. We all know that downturns occur cyclically and will continue to occur. Most businesses do manage to survive because they make allowances for this. A business plan that does not have the robustness to survive such a downturn is not a good business plan. The failure of so many of these schemes would suggest that there is something systemic going on here, meaning it is apparently not possible to generate enough surplus to reach such robustness.

 

[Devil's Advocate]

The trend to cut down on maintenance and do everything on the cheap predates privatization. For example the Pacer, an ultra-low cost train made by marrying a bus body to a souped-up freight chassis was a crime that happened on the watch of British Rail, not of any private company.

I never said British Rail was in great shape before privatization but I am saying without re-nationalizing Network Rail significant portions of the British rail network would be unusable and abandoned. You cannot have much passenger growth without rails to run on.

Most businesses do manage to survive because they make allowances for this. A business plan that does not have the robustness to survive such a downturn is not a good business plan. The failure of so many of these schemes would suggest that there is something systemic going on here, meaning it is apparently not possible to generate enough surplus to reach such robustness.

A private business plan that includes proven and practical workarounds for every economic crisis is a work of fiction. Maybe instead of bumbling our way into a new economic collapse every ten years we could try learning from past mistakes and mitigate the fallout.

 

[MARC Rider]

Speaking as one who remembers British Rail in the 1980s, it was rather poorly run back then. There is still plenty to complain today but back then BR seemed to be mainly about managing decline and letting things rot slowly. Every year passenger numbers were down and every year a couple of lines would be closed down. Since privatisation passenger numbers have shot through the roof, and hardly any lines have closed.

Funny, I visited Britian in 1985, and I was impressed by the BR service. They had a lot of trains and they were mostly on time. Of course, compared to what it was 10-20 years earlier, it might have been going downhill.

 

[cirdan]

Funny, I visited Britian in 1985, and I was impressed by the BR service. They had a lot of trains and they were mostly on time. Of course, compared to what it was 10-20 years earlier, it might have been going downhill.

As the above graph shows, the period of national ownership saw a decline in passenger numbers, whereas the period of privatization has seen a rapid rise to levels never seen before.

Of course there are multiple factors at work here, and I'm not suggesting we can chalk that up to ownership structures alone. But I do think it plays a predominant part.

I don't quite see why people are now so nostalgic for that period of retrenchment and decline and somehow wish for it to return.

 

[jis]

View attachment 36337
As the above graph shows, the period of national ownership saw a decline in passenger numbers, whereas the period of privatization has seen a rapid rise to levels never seen before.

Of course there are multiple factors at work here, and I'm not suggesting we can chalk that up to ownership structures alone. But I do think it plays a predominant part.

I don't quite see why people are now so nostalgic for that period of retrenchment and decline and somehow wish for it to return.

One of the interesting factors as I recall is that government subsidies overall went up dramatically with privatization as the age old dictum of "socialize losses while privatizing profits" took hold in right earnest. Not that it is unequivocally a bad thing mind you. It all depends on how well the whole thing is managed.

 

[cirdan]

One of the interesting factors as I recall is that government subsidies overall went up dramatically with privatization as the age old dictum of "socialize losses while capitalizing profits" took hold in right earnest. Not that it is unequivocally a bad thing mind you. It all depends on how well the whole thing is managed.

I think privatization definitely showed that private companies are better than government held companies when it come to lobbying for more funding (and hence expanding service). This can be a good or bad thing depending on your perspective (essentially on which you like more between trains and money ). This would also explain why around the time of privatization the slow and piecemeal closure of lines more or less ceased, and the pendulum swung the other way with lines gradually being re-opened, including some long lost ones.

Another factor that should not be overlooked is certainty and planning horizons. Under privatization, the government contracted with private companies to run a given service for up to 10 years or more. This meant that once the contract was signed, aside from exceptional circumstances, the company went on to run that service for the designated period. In other words, the service was safe for that period. In the days that the government was in direct control, there were flip flops on policy all the time and lines and services would sometimes be abandoned at a whim, even services that had a few years previously received costly upgrades.

 

[Devil's Advocate]

Another factor that should not be overlooked is certainty and planning horizons. Under privatization, the government contracted with private companies to run a given service for up to 10 years or more. This meant that once the contract was signed, aside from exceptional circumstances, the company went on to run that service for the designated period. In other words, the service was safe for that period. In the days that the government was in direct control, there were flip flops on policy all the time and lines and services would sometimes be abandoned at a whim, even services that had a few years previously received costly upgrades.

Sudden seemingly random changes and feast or famine funding is a great way to make any government service look like a perennial basket case and prime the public for privatization or dissolution. We still struggle with this in the US with no end in sight and it's kind of a miracle we've retained a national network at all.

 

[Northwestern]

I am really hoping that the privately owned "Dreamstar Lines" passenger train, LA to the Bay Area, could come about. I think it could be an inspiration for further private development of passenger train lines across the country.

https://is.gd/fJBzFZ

It will offer multiple levels of service and may also provide some sort of connecting transportation in LA and San Jose.

 

[AmtrakMaineiac]

Funny, I visited Britian in 1985, and I was impressed by the BR service. They had a lot of trains and they were mostly on time. Of course, compared to what it was 10-20 years earlier, it might have been going downhill.

That was my experience also, from trips in the 1970s through the 1990s. While things generally ran on time, it seemed the same tired equipment that had been running in the 1970s was still there in the 1990s, especially on Network Southeast (London area) with its ancient slam door EMUs. Also infrastructure with many semaphore signal bridges, manual signal boxes, and single line operation via token. Great for the nostalgic railfan but very labor intensive.

As for the graph in @cirdan's post #155, we should remember that the decline under BR operation reflected the general postwar movement towards private car ownership which got a later start in the UK than it did in the US but was well under way in the 1950s and 1960s. The desire of some Conservative governments to emulate the US and build more motorways while neglecting the railways certainly exacerbated this. There were also the Beeching cuts in the 1960s that eliminated a number of poorly patronized branch lines as an attempt to cut the deficits but probably reduced the overall utility of the system as a number of destinations would now be unreachable by rail.

 

[cirdan]

One of the interesting factors as I recall is that government subsidies overall went up dramatically with privatization as the age old dictum of "socialize losses while privatizing profits" took hold in right earnest. Not that it is unequivocally a bad thing mind you. It all depends on how well the whole thing is managed.

It may also have to do with diminishing returns. The more you grow your customer base, the more you also need to cater to less profitable sectors.

BR of the 1980s believed they could shrink and prune their way to profitability.

Today the shoe is on the other foot and people see the utility of railroads within their broader societal context, not just within the context of their own balance sheet. This means services are being promoted and grown even when they are not going to be directly profitable.

 

[MARC Rider]

It may also have to do with diminishing returns. The more you grow your customer base, the more you also need to cater to less profitable sectors.

BR of the 1980s believed they could shrink and prune their way to profitability.

Today the shoe is on the other foot and people see the utility of railroads within their broader societal context, not just within the context of their own balance sheet. This means services are being promoted and grown even when they are not going to be directly profitable.

Which is why for-profit private companies cannot run a useful passenger rail system. At best they can "skim the cream" off of a few routes, but that just makes the rest of the system financially unsustainable.

 

[Metra Electric Rider]

This is probably way off topic (seems like we had one recently about schedules where it might have been more relevant) but... I'm reading a cozy mystery loosely set in the late '60's and mention is made of local stations being recently closed due to Dr. Beeching. The same author has a series set in the twenties where the characters check the big print schedule for trains to obscure places, however, the upper-middle-class/posh adjacent heroine (an Hon in impoverished circumstances who married middle-class) is also learning to drive to get places trains didn't go, even then.