FRA's proposal for Long Distance Trains

[Triley]

Lets back up and start from the beginning. Congress is willing allow privatization and provide a government subsidy equal to 90% of what the route was receiving. The winning bidder gets to use Amtrak passenger cars and the Amtrak system resources. The winning bidder of the route then gets to sell tickets and keep the revenue. If the winning bidder is a freight railroad they own the track and there is no track usage fee. Sounds like a great deal to me. The only caveat is that the bidder would have to pay the on-board employees union scale wages, pension benefits and health insurance. This is contrary to what private industry does. Private industry focuses mainly on using the cheapest labor available (without any benefits) to drive their profits higher and satisfy the benevolent Wall Street investors.

If Amtrak had to provide the train consists to the winning bidder, yes it would be a great deal, however I don't think that's the plan. "Amtrak would be obligated to provide the new operator with access to its own reservation system, stations, and facilities."

 

[Bob Dylan]

Yep,Im from Missouri when it comes to Private Operators doing Long Distance Train Service!

Sure way to lose Large Amounts of money! Ask the Class I Roads!

 

[FormerOBS]

To "Just Thinking":

How about this?

You invest your money in a new company that tries to take over an Amtrak route.

I'll stuff an equivalent amount of money into a pillow case.

I know which of us will have more money when it's all over, but I suspect you'll be surprised.

I'll sell you a map to the Poor Farm for a quarter.

Tom

 

[Triley]

To "Just Thinking":

How about this?

You invest your money in a new company that tries to take over an Amtrak route.

I'll stuff an equivalent amount of money into a pillow case.

I know which of us will have more money when it's all over, but I suspect you'll be surprised.

I'll sell you a map to the Poor Farm for a quarter.

Tom

Oh, I've missed you...

 

[FormerOBS]

To "Just Thinking":

How about this?

You invest your money in a new company that tries to take over an Amtrak route.

I'll stuff an equivalent amount of money into a pillow case.

I know which of us will have more money when it's all over, but I suspect you'll be surprised.

I'll sell you a map to the Poor Farm for a quarter.

Tom

Oh, I've missed you...

See how that works?

Of the two of us, I'm the one who will have made money ----- 25 cents.

Tom

 

[Just-Thinking-51]

 

[neroden]

DOA. Although Amtrak's allocated costs are completely opaque, it is clear that Amtrak has economies of scale. Any startup bidder *wouldn't*, and would end up with a higher cost structure than Amtrak. There's no way for anyone to make a profit doing that, so there will be no bids. It gets worse: the class Is are infamous for demanding very high fees for commuter railroads to operate on their lines, much higher than they demand from Amtrak. Any startup bidder would be unable to negotiate a track access deal with them, so that's another reason there will be no bids. Theoretically the Class Is wouldn't have this problem, but they won't bid either; BNSF is the only one who is even willing to do new contract commuter operations.

 

[dlagrua]

DOA. Although Amtrak's allocated costs are completely opaque, it is clear that Amtrak has economies of scale. Any startup bidder *wouldn't*, and would end up with a higher cost structure than Amtrak. There's no way for anyone to make a profit doing that, so there will be no bids. It gets worse: the class Is are infamous for demanding very high fees for commuter railroads to operate on their lines, much higher than they demand from Amtrak. Any startup bidder would be unable to negotiate a track access deal with them, so that's another reason there will be no bids. Theoretically the Class Is wouldn't have this problem, but they won't bid either; BNSF is the only one who is even willing to do new contract commuter operations.

My assumption is that the freight railroads who already own the tracks could be the logical bidders but I would say that they are probably not looking to get back in the passenger train business. There are Amtrak routes that are profitable though. The Autotrain is a good example of a mixed consist that, if it becomes available, may be very attractive to the CSX. Time will tell..

 

[FormerOBS]

It's more likely that one of CSX's fondest dreams is to be rid of all Amtrak trains --- including Auto Train.

I could be wrong, but I doubt it.

Tom

 

[Thirdrail7]

DOA. Although Amtrak's allocated costs are completely opaque, it is clear that Amtrak has economies of scale. Any startup bidder *wouldn't*, and would end up with a higher cost structure than Amtrak. There's no way for anyone to make a profit doing that, so there will be no bids. It gets worse: the class Is are infamous for demanding very high fees for commuter railroads to operate on their lines, much higher than they demand from Amtrak. Any startup bidder would be unable to negotiate a track access deal with them, so that's another reason there will be no bids. Theoretically the Class Is wouldn't have this problem, but they won't bid either; BNSF is the only one who is even willing to do new contract commuter operations.

My assumption is that the freight railroads who already own the tracks could be the logical bidders but I would say that they are probably not looking to get back in the passenger train business. There are Amtrak routes that are profitable though. The Autotrain is a good example of a mixed consist that, if it becomes available, may be very attractive to the CSX. Time will tell..

It's more likely that one of CSX's fondest dreams is to be rid of all Amtrak trains --- including Auto Train.

I could be wrong, but I doubt it.

Tom

While I agree that most freights would not get back into the passenger business, I can assure you CSX did everything in their power to get out of the passenger business.

Indeed, they opted out of operating the MARC trains even though their costs were guaranteed. They were also offer first crack at the VRE Fredericksburg Line while NS was offered first crack at the Manassas Line.

They both declined.

I can see Iowa Pacific providing a few trains but that assumes that their is language in the agreements that allows for new operators access to the territory at the same rates Amtrak pays. Freights have steadfastly refuse to grant new operators the same rules thus far.

The bottom line is you'd need a subsidiary of a major corporation that owns a fleet to take this on.

 

[railiner]

A friend of mine recently posted a comment on Facebook, calling it "Back Door Union Busting".

Tom

Or more simply "back door Amtrak busting".....another scheme to eliminate Amtrak...

 

[dlagrua]

A friend of mine recently posted a comment on Facebook, calling it "Back Door Union Busting".

Tom

Or more simply "back door Amtrak busting".....another scheme to eliminate Amtrak...

Its hard to determine what the FRA plan is, and the freight railroads no doubt have a strong reluctance to passenger rail ,but there is one point that was not brought up. When the class 1 railroads abandoned passenger service in the late 60's passenger rail ridership was at its lowest point. I could not find the numbers but they were low and the red ink had to be flowing at a great rate. Passenger rail was a big money loser.

Today 30 Million passengers per year use the Amtrak service and that number represents a rebound to numbers in the prosperous times of the railroads of the 1940's. I would venture to say that as we move forward , it is likely that we will see private passenger rail pick up steam, Isn't that happening in Florida right now?

 

[FormerOBS]

When William Vanderbilt made his famous statement "the Public be damned" on December 8, 1885, the railroad was the undisputed King of transportation, with no competition from air modes or motorized highway transportation. If ever there was a time when passenger rail service was, or could be, profitable, that was it.

His comment was widely regarded as a disdainful attitude towards the general public and the railroads' obligation to serve it. However, most historians agree that his real intention was simply to state the obvious: the money to be made in passenger service is far less than the money to be made in freight service. Freight does not need to be fed or provided restroom facilities. Freight can tolerate temperature extremes. Schedules can be imperfect. There is more latitude, with less liability.

Luxury train travel was provided to impress the wealthy Captains of Industry, who would hopefully be induced to use that railroad for freight shipments. Business travelers were catered to, in the hope that the railroad's good passenger service would pay off in the form of freight business. When passenger rail service became unnecessary to the wealthy and the business traveler, the railroads' motivation to provide it disappeared.

It is unlikely that anyone will ever be able to run passenger trains at a profit, except in a very few highly selective and unusual situations. In general, the best we can hope for is a break-even proposition, or one in which the losses aren't too great.

These are facts.

I personally believe there is a great social benefit to retaining and expanding rail passenger service because of the environmental benefits as well as the social benefits. But we have to understand context.

Tom

 

[neroden]

Speaking in terms of *corporate culture*, it is 100% clear that CSX doesn't want to run passenger service even if it is profitable, bending over backwards to get rid of it. CN and CP have also gone to extraordinary lengths to get rid of passenger operations. NS doesn't want to run passenger operations either, though they're more OK with someone else running it on their tracks. UP seems to be content with its Chicago commuter operations but has been ultra resistant to starting up any new operations. . KCS doesn't host any passenger operations and presumably doesn't want to.

BNSF is the only one of the class Is who seems to consider passenger operations as a potential source of profit (they operate commuter operations in three different locations). But the only long-distance train which runs on an all-BNSF route is the Southwest Chief, and I don't see a way for BNSF to operate that more cheaply than Amtrak does. (Now, if the proposal was to privatize corridors like the Quincy route, they might take a look at it. But it isn't.)

 

[Lonestar648]

If a company bids on a route will they be required to service all the station stops that Amtrak currently does? Eliminating many stops, trying to capture just the high traffic ones, therefore possibly increasing the speed between the train's origin and destination could maybe save a small amount of labor costs, maybe add a couple passengers because the route takes less time. Cutting food service to a minimum would save a lot of cost but would also drop a number of passengers negating the savings. The only Amtrak resources the operator gets is the reservation system, stations, etc, but what equipment is available to be leased or purchased and who does the maintenance? The costs of a maintenance operation just for one train eliminates any potential profit, so the operator has to strike an agreement with an existing shop (Amtrak??). So is the operator suppose to continue to provide a service to the public or operate a for profit business, you can't have both on most if not all routes. If I am considering bidding, but I have to operate just as Amtrak, then its a no bid, no worth the risk and the time and effort required. Also, any ROI would be so minimal that it would be a decade or more to break even or show a profit from what I can determine if just copying Amtrak's existing route and stops and connections.

 

[WoodyinNYC]

The more I think about it, the more I'm convinced it's 100% bull.

A large part of the haters in Congress and on hate-talk radio want to kill Amtrak as a government service. However, they are fine with the idea of privatizing it, claiming that more efficient private enterprise can make a profit. That idea fits their religious-like economic world view.

Amtrak's supporters, in both parties, offered this compromise to the haters: A little experiment toward privatization. So they told the FRA to work up a plan. Fine, that bought Amtrak two more years of the status quo and another election cycle.

At the end of the current exploratory phase -- buying another year or two of normalcy -- it will be clear to all that no Class I railroad wants any part or parts of Amtrak, and nobody else does either.

By then we'll have a different President and a different Congress. What to do about Amtrak will still be a question. But no one will be able to keep a straight face about how the cure is to privatize it. Maybe things will get better when there's more real and less bull.

 

[Anderson]

Well, the $64m question is what the basis of the subsidy is. Bear in mind that (conceptually, at least) Amtrak is keeping 10% of the subsidy for overhead, Arrow, stations, etc., so the new operator doesn't have to have their own systems...

Remember the "Boardman chart" from a few years ago and how it showed far lower losses than the September (end-of-FY) Monthly Performance Reports tend to for all the LD trains. If the MPR figure is used then there is absolutely no reason that an operator couldn't operate at a slightly lower loss figure...especially if more equipment is brought in (e.g. an operator running a Meteor with 4-6 sleepers would probably be in the black vis-a-vis Amtrak running it with only three). A contract of 4-8 years at 90% of the MPR-indicated losses but funding the Boardman chart losses would probably give the operator enough room to mostly finance a new batch of equipment. A handy example is that the Boardman chart showed the Meteor roughly breaking even while the September 2015 MPR showed a year-end loss of about $31.9m for the Meteor. If the out-of-pocket losses for the Meteor are, say, $5m/yr (I'm presuming there are some indirect costs you couldn't avoid) but the subsidy the operator would get is around $28.5m, that provides a net of $23.5m/yr (or about $90m over four years/$180m over eight years). Over an eight-year contract that's actually enough to finance somewhere around 72 cars (or perhaps 64 cars and 4 locomotives)...basically enough to fully re-equip a much larger version of the train.

There are other places to improve performance, such as a fuller bar being available, actually stocking the cordials in some reasonable amount (which should have enough of a shelf life so as not to be worried about spoilage from trip to trip), improving turnaround time in the diners, improving cafe selections (like we're seeing on the Cardinal, etc. now), and getting the OBS to nudge pax towards a pre-dinner or post-dinner drink like is done on the Canadian.

Put plainly, the main place for improvement is in bumping up volume...given the prices of some of the trains (particularly in the East) and the fact that they'll still get close to selling out quite often, even if you knocked average sleeper fares down by about 10% but pushed to increase volume by 40-50% without a major shift to demand patterns you'd probably come out ahead.

 

[Just-Thinking-51]

Thank you Anderson.

 

[jis]

Anderson, a very good point. If there is a real will a way can be found. The problem with the current rules that FRA is working on is that there are too many untied loose ends. The obligations of each party is not spelled out in great enough detail and granularity for it to be a workable proposition. In short, needs more work to make it an operationally viable proposal. Until for example, the charges imposed for using Amtrak's reservation system (which BTW is the correct approach IMHO) is spelled out, it would eb impossible to figure out the cost of operation.

So as you see, I am quite willing to entertain the possibility. But it has to be put together in a proposal that is as comprehensive as was the British one for creating TOCs (and ROSCOEs) and not a half though out bunch of random things, which is what the FRA proposal based on the random things thrown at them by the Congress, looks like at present.

 

[Lonestar648]

An interesting thought, on those trains where Amtrak has a guaranteed connection, but say one leg of that connection goes private I would assume that the Private operation can operate the train when ever it wants with out any regard to the train's current operation under Amtrak. If this were true, just a couple routes privatized could reek havoc to parts of Amtrak's scheduling. (i.e. Coast Starlight/Empire Builder - Portland, Coast Starlight/Sunset Limited - LA both directions, Empire Builder/Capitol Limited or Lake Shore Limited - Chicago)

 

[jis]

An interesting thought, on those trains where Amtrak has a guaranteed connection, but say one leg of that connection goes private I would assume that the Private operation can operate the train when ever it wants with out any regard to the train's current operation under Amtrak. If this were true, just a couple routes privatized could reek havoc to parts of Amtrak's scheduling. (i.e. Coast Starlight/Empire Builder - Portland, Coast Starlight/Sunset Limited - LA both directions, Empire Builder/Capitol Limited or Lake Shore Limited - Chicago)

These are the sorts of things that need to be codified in the obligations to the consumer to be met by operators, sort of passenger's bill of rights. It is a matter of policies that are set, and cannot be just assumed to be this way or that a priori.

 

[ScouseAndy]

This proposal seems to be very similar to how UK rail services are run, companies bid on how little subisdy they want from the government and then try and make a success of it, some TOCs are very good and some are abysmal. However from experience it is the commuter services which fare worst under this model and intercity services do fare far better (with the exception of 1 route the east coast Main line between London & Scotland which has seem 3 out of 4 companies which ran it get into sever finacial issues - although this is one of the few routes which companies actually pay to run rather than getting a subsidy)

Point being its works in the UK (sofar as saving the tax payer money)so it can work in the states, im sure you will see companies with experience of running european trains be very interested and the likes of DB, Stagecoach, arriva and abelio queuing up to take US tax payers $

 

[neroden]

Point being its works in the UK (sofar as saving the tax payer money)so it can work in the states, im sure you will see companies with experience of running european trains be very interested and the likes of DB, Stagecoach, arriva and abelio queuing up to take US tax payers $

Nope. Big difference: you have nationalized railway tracks in the UK, we don't in the US. Makes a huge difference to whether it's possible to make a deal.

 

[MikefromCrete]

Neroden is right. The key difference is that the track infrastructure in the U.K. is owned and operated by the government. In the U.S., private operators would have to negotiate deals with each of the private (or publicly-owned) right of way owners. Also, I believe only two or three routes in the U.K. are profitable. Everything else is subsidized by some sort of governmental body -- national or local. Plus, of course, the government maintains the right of way. Also, ticket prices are much higher in the U.K. than the rest of Europe. So, I don't think British taxpayers are saving that much with their privatization scheme.

 

[jis]

But the real issue in UK was their odd political culture which was killing passenger rail completely. The privatization deal sort of created a renaissance partly because it was able to release more government subsidy for it. This is very peculiar to the UK. The only lesson I pick up from there is that the only way privatization can succeed is if at least initially subsidies are increased substantially. But if it is possible to increase subsidies substantially without privatization, who is to say that service could not be improved equivalently or more? However, the problem in US at present is that it is not clear that subsidies can be increased either way. Maybe post election things will change if at least one house of federal legislature changed hands.