Richard Anderson replacing Wick Moorman as Amtrak CEO

[jis]

Those are all on State financed route and are unlikely to have much of a direct impact on Amtrak unless they become wildly profitable in and of themselves perhaps.

 

[WoodyinNYC]

Those are all on State financed route and are unlikely to have much of a direct impact on Amtrak unless they become wildly profitable in and of themselves perhaps.

So this is you now?

But this was you then:

For FY16 AFAICT Total Revenue was $3.2406 million and Salaries, Wages and Benefits was $2.0876 million, making it 64.4% of Total Revenue, not 75%. Numbers used are the YTD numbers from the Summary Financial Results in the September 2016 Monthly Performance Report, Appendix 1 (Audited).

You are saying that the Revenue from state-supported trains is not included in Total Revenue, and the Salaries, Wages and Benefits from state-supported trains are not included in Amtrak's Totals?

I'm pretty sure that the Revenues and Employee Costs of state-supported trains are included in the Amtrak totals. Therefore, when growing revenue outpaces increasing costs on the Lincoln Service, the Wolverines, the Vermonter, and others, Amtrak's overall performance looks better.

If you are not saying that the state-supported figures are not included in Amtrak's totals, what is your point again?

 

[jis]

The costs are included too in the total cost. If the additional revenues (ticket plus state subsidy) do not produce a big net surplus over the added cost then it has relatively small effect on the bottom line. OTOH if they actually produce a huge amount of net positive then at least until the state contract is rewritten on the cost sharing formula, Amtrak comes out ahead. So there is no inconsistency in what I said and the two things you quoted.

 

[neroden]

I think Anderson understands economies of scale and Woody's motto "best cure for Amtrak is more Amtrak". as does Moorman and as did most of their predecessors too

Honestly, I believe Roger "I don't know what I'd do with a billion dollars" Lewis didn't get it -- possibly appointed because he didn't get it -- and Alan Boyd, the hatchetman, didn't get it -- almost certainly appointed because he didn't get it. Thomas Downs did understand this stuff, and ordered the Acelas, but he seemed incapable of cost control and incapable of handling maintenance (he appears to have had similar disasters at every other operation he's led).

Many of the earlier Amtrak Presidents were operating with a different situation, financially. Having dug up those old financial statements... for most of Amtrak's history, until the 1990s, the trains actually were losing money "above the rails". They're not any more, largely because more people are riding trains at higher ticket prices -- consistently higher demand. It seems to partly be gas prices, partly the unpleasantness of airlines, and partly a secular generational trend.

I have to wonder if it's a coincidence that Congress and the President started asking for "fully allocated costs" shortly after many trains started showing consistent above-the-rail profits, and if it's a coincidence that the states which were paying avoidable costs were suddenly asked to pay "fully allocated costs" shortly after several of the state trains started showing above-the-rail profits.

What seems odd to me is that Congress ALSO asked for avoidable costs and Amtrak hasn't been providing them. Given the above-the-rail profitability of nearly everything, this seems counterproductive on Amtrak's part.

 

[neroden]

Jesus, do you folks really think Anderson is that much of an idiot, that he doesn't realize Amtrak is a railroad? That he hasn't taken a good look at Amtrak's finances and corporate structure before accepting the job?

I've repeatedly seen extremely ignorant people walk in and try to manage businesses they didn't understand, resulting in obvious and predictable disasters. It happens ALL THE TIME. It's one of the things I watch out for in investing.

Please note, in this regard, who is President of the United States right now.

I am cautiously optimistic about Anderson, but assuming that he understands the quirky economics of railroads is a heavy assumption. John W Snow certainly didn't understand them, and he was the CEO of CSX. Do I have to mention the executives of the Milwaukee Road who were so bad at accounting that they literally demolished the profitable part of the business and kept only the unprofitable part?

Assuming competence may be polite, but it's usually wrong.

 

[neroden]

Those are all on State financed route and are unlikely to have much of a direct impact on Amtrak unless they become wildly profitable in and of themselves perhaps.

I'm pretty sure they'll have a powerful indirect effect.

It's documented that people who start out riding the Cascades start considering taking the Coast Starlight to California. There are similar effects with nearly all the other state routes. The Capitol Limited basically lives off of connecting passengers; add Norfolk or Roanoake, get a few more people taking the train to Chicago. I've witnessed a startling number of "Oh, you can take the train to Chicago?!? Cool, I have to do that some day!" on the Denver platform from people using the local rail system. The awareness effect is strong, and so are the network effects.

I genuinely believe that every improvement to Cascades service ends up adding a few Empire Builder passengers and a few Coast Starlight passengers. Every improvement to Capitol Corridor or San Joaquin service adds a few California Zephyr and a few Coast Starlight passengers. Every improvement to Missouri River Runner service (not that there have been improvements lately) adds a few Southwest Chief passengers. Every improvement to Piedmont service adds a few Crescent and a few Silver Star passengers. Every improvement to the Dallas DART system adds a few Texas Eagle passengers. And so on.

 

[jis]

Actually, the reason Mrs. Moorman was so annoyed was that she had asked her husband to promise to never take a full-time job again after retirement, and then he got persuaded/sucked into the Amtrak mess. And it turned out she was right--look at the horrible stuff he's had to deal with.

Now, with all due respect, can we please get back to how we can save Amtrak under a CEO from an airline and make him do the right thing (better customer service, keeping long-distance, etc.) and not do the wrong thing (killing Amtrak completely)? I know we all (myself among the worst culprits) tend to get side-tracked (and yes, I think I may have even started it without realizing what I was starting), but this subject is too important for us to lose our focus. Thanks, everyone....

Suffice it to say that past experience suggest that there is not much that "we" venting on AU can do to save Amtrak from its CEO. If we could, Amtrak would not be in the state it is in today. But discussion here is good therapy for many and helps maintain sanity in the face of obvious serious adversity that one faces in retaining a semblance of credible passenger rail service in the country.

And yes, I am all for discussing how we can give credible feedback to Amtrak and hope that they will do something useful with it. For such input to be taken seriously, they need to be presented in a way that would be viewed as credible by the receivers, so that they do not direct it to circular file with the comment "another nutty off the wall thing" or some such. I think many of us with very good intention miss the point that any feedback needs to be in a shape that is likely to be considered seriously by the receiver, which cause a lot of good ideas to get misrouted to oblivion. And complaining that that is unfair is not going to fix the problem either. The screwed up system that we have is what we have to work with, which is a huge challenge.

 

[Thirdrail7]

I just hope he can work with Congress and the states. That is always the bottom line. All the initiatives and proposals won't amount to much if there isn't enough funding for execution and upkeep. Mr. Moorman just completed another round of restructuring and alignment for the on board experience. Hopefully, it will yield results...not that he'll be around too long to see if it works. ^_^ He's definitely attempting to put a force in place for his successor and as a consultant, it will difficult for others to pick apart the efforts by preying on the ignorance of someone without operational experience (e.g. Stadler.)

 

[Mystic River Dragon]

jis--

I agree with you that discussion here is good therapy and helps us keep our sanity . And I admit to being one of the ones who wanders off topic most frequently .

I do think, though, that we, as rail passengers, need to be more vocal advocates. For example, the rally for trains sounded great, but there was no coverage of it in the papers in my region, whereas other gatherings and issues get in the paper over and over, because they have an aggressive marketing campaign, with a laser focus on the issue itself.

Or, as another example many can relate to, the NY and NJ commuters have been complaining non-stop about the delays to their commute this summer because of the Amtrak work in Penn Station, and everyone is trying to placate them, even though they can still get to work. What we need is for people with no Amtrak service to be complaining as frequently and loudly (while still being polite, of course) and never letting up on the focus on the issue.

I think people in general who sometimes take the train but are not rail fans don't see a problem and assume it will just be there--for example, I told my cousin about the possibility of the long-distance trains being cut, and she said, "Oh, don't be silly, Patty--they won't cut the trains--everyone needs them." So the general public doesn't even realize there's a problem.

And I think, because as a group we rail passengers and advocates come across as quiet, polite, nice people who will never make waves, our legislators don't pay attention to us because they are trying to fend off the more aggressive advocates for other causes.

I never, ever thought I'd say this, but I am pinning my hopes on the millennials. They ride trains and they are used to getting what they want. And, frankly, they've got more energy than I do these days to fight an uphill battle.

 

[Devil's Advocate]

I think people in general who sometimes take the train but are not rail fans don't see a problem and assume it will just be there--for example, I told my cousin about the possibility of the long-distance trains being cut, and she said, "Oh, don't be silly, Patty--they won't cut the trains--everyone needs them." So the general public doesn't even realize there's a problem.

How does your cousin explain the current focus on cutting health care or food stamps or clean water protections? Does she think people simply don't need those things? How does she explain the train routes that have already been cut in the past? Does she think those trains were empty?

 

[frequentflyer]

Maybe congress seeing a very successful CEO running Amtrak will soothe their fears of giving Amtrak more money.

And for the record, Anderson is the reason why is the Delta is a financial powerhouse today.

 

[neroden]

Just a warning, because I've seen this before. Suppose Anderson does a great job and Amtrak becomes (barely) profitable. (Not likely but possible).

The right-wingers in Congress will immediately push to sell Amtrak off to private industry, because they cannot *stand* the idea of the government making a profit on *anything*. I've watched this happen far too many times, and multiple times in railroads alone, with Conrail most dramatically. I'm sorry to describe this in partisan terms, but as far as I can tell it is partisan: there's an ideological opposition to profitable government-run enterprises among right-wingers in the US.

It's worse in Canada: historically, both parties pushed for privatization of profitable railroads in Canada.

A paper on the privatization of CN -- it was bad for the country:

http://www.sauder.ubc.ca/Faculty/Research_Centres/Phelps_Centre_for_the_Study_of_Government_and_Business/~/media/Files/Faculty%20Research/Phelps%20Centre/Working%20Papers/2007_03_boardman.ashx

And of course having privatized it they are now buying the track back piecemeal. A worse public policy decision is hard to conceive of.

This particular madness seems less common outside North America, where the idea of the government making a profit seems to be more acceptable even among right-wing parties.

 

[railiner]

.

And for the record, Anderson is the reason why is the Delta is a financial powerhouse today.

Maybe...but I think first you would have to go back and thank C.E. Woolman for that.....

 

[Devil's Advocate]

And for the record, Anderson is the reason why is the Delta is a financial powerhouse today.

You don't think massive fortress hubs, de facto regional partitioning, and vast market consolidation has anything to do with it?

Braniff > Bankruptcy

Eastern Airlines > Bankruptcy

Pan Am > Bankruptcy

TWA > American Airlines

America West > US Airways

Northwest > Delta

Continental > United

US Airways > American Airlines

AirTran > Southwest

I happen to like Delta, and I believe they probably represent the best domestic product as we head toward the vaguely adversarial post-loyalty era, but Delta's current situation is not the result of any one person.

 

[Anderson]

And for the record, Anderson is the reason why is the Delta is a financial powerhouse today.

You don't think massive fortress hubs, de facto regional partitioning, and vast market consolidation has anything to do with it?

Braniff > Bankruptcy

Eastern Airlines > Bankruptcy

Pan Am > Bankruptcy

TWA > American Airlines

America West > US Airways

Northwest > Delta

Continental > United

US Airways > American Airlines

AirTran > Southwest

I happen to like Delta, and I believe they probably represent the best domestic product as we head toward the vaguely adversarial post-loyalty era, but Delta's current situation is not the result of any one person.

Arguably it's the reason Delta is the most profitable. WN has a model which limits certain upside potential but otherwise works well. UA and AA have issues (UA's appearing to be management-related in at least some part)...

...and there's a reason that more than a few frequent flyers have opted for status and earning with foreign carriers (I have accounts with SQ and VS instead of UA and DL; I've got one with AS by default as well).

 

[tricia]

Just a warning, because I've seen this before. Suppose Anderson does a great job and Amtrak becomes (barely) profitable. (Not likely but possible).

The right-wingers in Congress will immediately push to sell Amtrak off to private industry, because they cannot *stand* the idea of the government making a profit on *anything*.

And at the same time, they can't stand the reality of government NOT making a profit on its services or functions. (Dining cars that don't turn a profit, for example.)

 

[frequentflyer]

@Devil's Advocate (for some reason my quote function does not work). Former Delta CEOs got them in the position of bankruptcy by their decisions (looking at you Mullin) so yes, one CEO can have a major effect on a corporation's financial performance.

Mergers have made capacity control easier to manage along with a new group think. Airlines are no longer addicted to market share and more so to profitability. Limit the number of seats makes it easier to raise fares and have them stick. And before anyone starts complaining about yields, Amtrak is doing the same with Acela and sleeper rooms. Running smaller consists allows Amtrak to do the same.

 

[tommylicious]

Gonna be a disaster. He will cut to the bone, get paid huge personally, and then serve up Amtrak on a platter to its ultimate Congressional executioners.

 

[jis]

And before anyone starts complaining about yields, Amtrak is doing the same with Acela and sleeper rooms. Running smaller consists allows Amtrak to do the same.

It is not like Amtrak could run longer consists even if it wanted to do so. Arguably airlines actually have been able to rightsize to match demand with inventory way better than Amtrak ever will be able to, because Amtrak is unlikely to ever have the equipment to deploy to actually meet demand to the fullest in places like the NEC, There are two barriers. one is simple shortage of equipment and the other is shortage of slots north of New York due to bizarre agreements with communities along the route and the Coast Guard, just as an example.

 

[frequentflyer]

@JIS, what you stated is true, especially with traffic restrictions. However, do you remember when NEC trains routinely ran 10 car Amfleet consists? Now a lot of the regionals run 8 car consists. The Acela may not have the capacity to handle peak loads turning away business but Amtrak was smart enough to raise the fares to increase revenue on the seats they do have.

It will be interesting to see how Anderson tries to extract more revenues for Amtrak. Not much more can be cut from Amtrak services, though I am a lost on why food service numbers look so negative on a spreadsheet.

My question is why did Moorman take a job that he knew would be so short? What exactly did he accomplish or stabilized?

 

[jis]

Also remember the period when Regionals were four and five cars during Gunn's time, when half the Amfleet fleet was parked in Wilmington and Bear due to lack of funds to get them through their various FRA designated inspections. There was no amount of raising fares that was going to recover the lost revenue of lost seat inventory, since while there is some elasticity there is not that much elasticity in far5es.

Amtrak's primary problem is insufficient of total inventory, and no obvious way to mitigate, and even Acela fares are at a point of negative returns if they are raised to much more. The original plan was to acquire significantly more units of Acelas, but it was pared back due to lack of funding. Incidentally, addition of the Acelas was a net significant growth in overall inventory on the NEC, since no Amfleets were withdrawn from the NEC except in periods of inadequate funding to keep all the available cars running in service. Today Regionals are 8 cars because there are more of them than when they had ten cars. The total number of available Amfleet Is has not changed significantly, with a net loss of maybe half a dozen to accidents.

 

[A Voice]

Also remember the period when Regionals were four and five cars during Gunn's time, when half the Amfleet fleet was parked in Wilmington and Bear due to lack of funds to get them through their various FRA designated inspections. There was no amount of raising fares that was going to recover the lost revenue of lost seat inventory, since while there is some elasticity there is not that much elasticity in far5es.

Amtrak's primary problem is insufficient of total inventory, and no obvious way to mitigate, and even Acela fares are at a point of negative returns if they are raised to much more. The original plan was to acquire significantly more units of Acelas, but it was pared back due to lack of funding. Incidentally, addition of the Acelas was a net significant growth in overall inventory on the NEC, since no Amfleets were withdrawn from the NEC except in periods of inadequate funding to keep all the available cars running in service. Today Regionals are 8 cars because there are more of them than when they had ten cars. The total number of available Amfleet Is has not changed significantly, with a net loss of maybe half a dozen to accidents.

Absolutely correct, well said.

We talk a lot about presumed replacement of the Amfleet I cars in a few years, but overlook the fact that even a ~500 car order (little more than 1:1 replacement) does nothing to address greater capacity. Amtrak potentially would still have a use for much of the Amfleet I equipment (assumes you could add trains or cars, of course, on an already congested corridor).

 

[WoodyinNYC]

The new Avelia Liberty High Speed trains should add at least 30% more capacity to that service, and probably a little more than that to revenue. Better revenue will be thanks to new and shiny cars, with some real upgrades, which will allow fare increases; costs will be reduced due to much lighter weight and better reliability.

But most of that additional revenue is pledged to back the RIFF loan that's paying for the new rolling stock. Amtrak will benefit from the political and marketing value of reporting increasing ridership and revenues (and probably better metrics like a teeny bit higher average speed, and better On Time Performance).

But the new trains will not help much to get money for the overall system. Well, wait a minute. If the Avelias generate enuff success above the rails, then the NEC can take on more of the allocated overhead and lighten the burden on other trains a wee bit.

Meanwhile, investing any extra operating profits from the NEC trains into the dilapidated NEC infrastructure will help in ways often overlooked. The new tunnels at Baltimore are projected to save 2 1/2 minutes for the Avelias; they will save 2 1/2 minutes for the Regional and LD trains on the NEC as well. Add tiny time savings from better tracks and station facilities at BWI and Newark, Delaware. The new Susquehanna bridge will shave at least a minute, maybe two. Four-tracking the main line thru all of Maryland will be a biggie. So all trains on the NEC could go 8 or 10 minutes faster south of the Delaware (plus something in PA, NJ, and NYC, of course).

The Regionals and the Amtrak Virginia trains, as well as the Palmetto, Silver Meteor, Silver Star, Carolinian, Crescent, and Cardinal would all benefit from run times faster by even a few minutes.

Add in time savings coming D.C.-Richmond and then Richmond-Raleigh down the road to see some real impact on the Star, the Carolinian, and the phantom Day Train to Atlanta, NYC-D.C-Richmond-Raleigh-Greensboro-Charlotte-Greenville, S.C.-ATL.

(Obviously I believe the Acelas/Avelias and the Regional trains on the NEC, along with the other corridor routes, and the LD trains have common interests that far outweigh any rivalries.)

++++++++++++++++++++++

One a quibble: "... during Gunn's time, when half the Amfleet fleet was parked in Wilmington and Bear due to lack of funds ..."

Why blame Gunn for any lack of funds, what power did he have? More correct to say, "... during Bush's time ... due to lack of funds ..."

 

[Anderson]

The Acela IIs (I'm sorry, I just don't feel like using the new term) should add about 30% to BOS-NYP, but they should actually add somewhere around 100-160% to NYP-WAS since enough sets were ordered to allow twice-hourly service.

As to Gunn, I'd also point out that he inherited the mess that Downs and Warrington gave him. I know that Warrington had reasons for doing what he did (Downs may be another story), but let's not forget that when Gunn took over from Warrington, Amtrak was almost insolvent with a massive debt pile and he had to accept the bailout loan from Congress that imposed all of those no-new-LD-trains conditions just to keep operating. He may well have made lousy calls on that front but he didn't exactly have a lot of good choices.

 

[Thirdrail7]

@JIS, what you stated is true, especially with traffic restrictions. However, do you remember when NEC trains routinely ran 10 car Amfleet consists? Now a lot of the regionals run 8 car consists. The Acela may not have the capacity to handle peak loads turning away business but Amtrak was smart enough to raise the fares to increase revenue on the seats they do have.

Also remember the period when Regionals were four and five cars during Gunn's time, when half the Amfleet fleet was parked in Wilmington and Bear due to lack of funds to get them through their various FRA designated inspections. There was no amount of raising fares that was going to recover the lost revenue of lost seat inventory, since while there is some elasticity there is not that much elasticity in far5es.

Amtrak's primary problem is insufficient of total inventory, and no obvious way to mitigate, and even Acela fares are at a point of negative returns if they are raised to much more. The original plan was to acquire significantly more units of Acelas, but it was pared back due to lack of funding. Incidentally, addition of the Acelas was a net significant growth in overall inventory on the NEC, since no Amfleets were withdrawn from the NEC except in periods of inadequate funding to keep all the available cars running in service. Today Regionals are 8 cars because there are more of them than when they had ten cars. The total number of available Amfleet Is has not changed significantly, with a net loss of maybe half a dozen to accidents.

To expand on this, not only are there more trains now, the equipment on the certain trains are often traveling greater distances. A lot of the trains were confined on the NEC proper. Trains are increasingly leaving the NEC, meaning those coaches are often unavailable until the next day. Previously, you could turn them right back.

Additionally, with ridership increases, the usage had increased. The Albany pool lost the Turboliners and Heritage fleet that was rebuilt for the Adirondack. The Amfleets picked up the slack, The Keystones used to operate with two or three cars with very little exception (e.g. the Keystone State Express had 5 or 6 cars). Now, there are a few more sets and they have 4 amfleets and a cab car. Additionally, the vast majority travel to NYP where as most of them stayed between HAR-PHL.

My question is why did Moorman take a job that he knew would be so short? What exactly did he accomplish or stabilized?

He took the job on an interim basis because no one else was interested. He wanted to set up an organizational structure that would improve safety, create focus and attract candidates.