Amtrak Texas

Trains Magazine Passenger
1

Financial analysts, corporate planners, etc. look at trends as opposed to one-offs. So I decided to look at the longer terms trends of the Amtrak trains that serve Texas, i.e. Texas Eagle, Sunset Limited, and Heartland Flyer. I am calling it Amtrak Texas.

The data was compiled from the 2009 – 2013 Amtrak Monthly Operating reports, as well as the corresponding annual reports for 2009 – 2012. The FY13 Annual Report is not available on-line.

Between 2009 and 2013 Texas Eagle revenues increased 40.2 per cent, whilst the number of riders increased 30.6 per cent. Sleeping car passengers increased 31.8 per cent, while the percentage of Eagle passengers booking sleeping car accommodations stayed steady at 11.8 per cent. The average load factor increased from 60.1 per cent to 75.0 per cent. Total costs before OPEBS increased 32.7, whilst OPEBS increased 20 per cent. These costs were before depreciation, interest, and miscellaneous charges. Unfortunately, because of a larger cost basis, the losses on the Eagle, before depreciation and interest, increased from $25.6 million in FY9 to $32.2 million in FY13. Thus, despite the increase in riders and revenues, the loss increased by $6.6 million or $4.3 million in constant dollars.

From 2009 through 2013 Sunset Limited revenues increased 45.3 per cent, and the number of riders increased 30.7 per cent. Sleeping car passengers increased 21.4 per cent, but the percentage of passengers booking sleeping car space declined from 19.5 per cent to 18.4 per cent. The average load factor increased from 40.2 per cent to 51.9 per cent. Total costs before OPEBS increased 19.0, whilst OPEBS increased 7.1 per cent. These costs were before depreciation, interest, and miscellaneous charges. Again, because of a larger cost basis, the losses on the Limited, before depreciation and interest, increased from $30.6 million in FY9 to $40.9 million in FY13. Thus, despite the incre

2

Isn’t it just a bit suspicious that the Total Costs increased that much with no additional equipment being run but instead seemingly in relation to increases in revenue? Diesel cost inflation wouldn’t explain it. Cost assignment by formula might. This goes to my question as to why, even though legislative statue requires it, NRPC is still not reporting short and long term variable costs at the route level.

3

In FY13 salaries, wages, and benefits chewed up 49.8 per cent of Amtrak’s expenses and 69.6 per cent of its revenues. Approximately 85 per cent of Amtrak’s labor force is unionized, which means most of the labor charges associated with a particular product line is direct labor. Some of it, of course, would be indirect labor expense and would be allocated.

The long distance trains are amongst the most labor intensive of Amtrak’s offerings. Thus, if I had to guess, I would conclude that labor is the single biggest expense for Amtrak Texas - my moniker. And it is the major factor driving the run-up in total costs.

Here is a small example of labor on Amtrak Texas. It is approximately 90 miles from San Antonio to Austin. The engineer on Number 22, which departs San Antonio at 7:00 a.m., takes the train as far as Austin, where he is replaced by another engineer, who takes it to Fort Worth.

The San Antonio based engineer is off duty shortly after arrival in Austin at 9:30 a.m., assuming the train is on-time. He then goes to a hotel in Austin, where he camps out until it is time to take Number 21 from Austin to San Antonio. It is scheduled out at 6:30 p.m. He gets paid eight hours to bring the train from San Antonio to Austin and another eight hours to pilot it back to San Antonio. Of course, the hotel and meals in Austin are covered by Amtrak.

I know of an engineer who used his time in Austin to take classes at the University of Texas. Nice work if you can get it. Most businesses, however, could not afford such an arrangement.

4

And that is a major problem for Amtrak: absurd, archaic work (or non-work) agreements. I am all for folks getting paid well for their labor, but that is ridiculous. Since that engineer is being paid by us taxpayers, we should be outraged.

5

While I would probably give more credence to an IG Auditors report than what I read in this forum. To me it would make sense that if your operating within the parameters of:

  1. Amtrak supplied Locomotive Engineer.

  2. One Amtrak train a day in each direction.

  3. Quasi-Government Corporation.

There would be ineffciencies in operations. It’s really a no brainer and one does not have to write a series of posts to prove it. I am not going to slam the union on this one however as I would NOT want a non-union employee driving a passenger train as I consider that a position along with most of the train operations crew of HIGH IMPORTANCE). Given my experience with Herzog in Dallas on TRE and seeing what happened on Metro Link in LA with texting…non union is not necessarily the best way to go.

As a 50% private company, Amtrak can raise prices to cover labor costs or charge other fees (another reason why I would not blame the union). Amtrak can also control it’s labor costs better in some circumstances via better management.

I would like to see Amtrak become more efficient as I think most people would. The lack of yield management on ticket prices in the Chicago-Milwaukee corridor is one area i think needs addressing as well.

However, the bottom line is Amtrak has to spend money in order to save money in a lot of cases. Without a surplus of funds I don’t see how Amtrak can become more efficient.

6

Amtrak negotiated a work contract for the engineer to work 2.5 or 3 hours, but gets paid for 8 and then he gets to do it again the same day. That, along with a preposterously slow (2.5 hours in the year 2014 for a passenger train to cover 90 miles!!) schedule is the problem, not the union. The whole thing is laughable as well as a real waste of money. And that is just one example, even if not in the IG report (it should be).

7

Article out yesterday on the FEC all aboard America train. Note the number of frequencies a trully private company tends to make with a rail passenger startup…

http://articles.sun-sentinel.com/2014-05-21/news/fl-all-aboard-economic-impact-20140521_1_aboard-florida-passenger-rail-rail-line

Can’t wait for the TEXAS CENTRAL line proposal to start construction between Dallas and Houston.

8

“Here is a small example of labor on Amtrak Texas…”

But hasn’t that labor arrangement remained relatively stable in inflation adjusted terms. The real cost of Diesel has not increased, the equipment is the same, I seem to recall the trackage fees went up slightly, no stations or staff have been added, no extra food service.

So what is driving the inflation adjusted runups in the Total Cost over the period if it is not just a assignment formula that matches costs to revenues?

9

In 2009 Amtrak’s average cost per gallon of diesel was $1.85. In 2013 its average cost of diesel was $3.32 per gallon. This is an average increase of 79.5 per cent over the period covered. Over the same period of time the CPI increased by approximately nine per cent. Amtrak uses fuel hedges to smooth the cost of its fuel, where it can, and does not pay the rack rates. The dramatic run-up in its fuel costs is explained in part because several of its advantageous fuel hedges expired. The same thing happened to Southwest Airlines, as well as a number of other transport companies.

10

You may be right on the diesel as I did not look the number up for what they paid after the hedge, but since they run on the Federal fiscal year (FY09 starts in 2008) I figured the figures would include the high diesel prices right before the collapse. Where did you get the number for FY09?

11

Page A-2.2, FY10 September Monthly Operating Report, which covers FY10 and FY09. FY09 began October 1, 2008, and closed on September 30, 2009. Without access to Amtrak’s fuel hedge contracts, there is no telling what impact the 2008 rack rates had on the hedge. Some of our fuel hedges ran for more than 10 years, which meant that the short term rack rates had practically no impact on whether the contract was in or out of the money at maturity.

12

Except that the locomotives for the Heartland Flyer do not burn Diesel Fuel they burn a tallow fat by product from a Cattle Slaughtering firm in Ft. Worth.

Further, isn’t most of this equipment past it’s Accounting recognized “useful life”. If so, why do you keep mentioning Depreciation?

13

The numbers re: diesel were a rebuttal to a comment made by Payne re: Amtrak’s diesel costs. I did not say anything about diesel in the Amtrak Texas analysis.

Presumably Amtrak is paying for the tallow fat by-product. In any case, Amtrak does not set out the fuel cost per train.

Irrespective of what its two P42 locomotives burn, in FY13 the Hearland Flyer lost 24 cents per passenger mile, compared to 15.3 cents per passenger mile in FY09. Restated in constant dollars, the loss in FY09 was 16.7 cents per passenger mile. It had the fifth highest loss per passenger mile of the 28 short distance trains, which had an average loss per passenger mile of 8.9 cents before capital charges.

Amtrak uses straight line depreciation for all of its assets. Locomotives, cars, and other rolling stock are depreciated up to 42 years. It appears that the three Amtrak trains serving Texas still wear some capital charges (depreciation and interest),

14

According to an Article in BIODIESEL Magazine dated November 7, 2011, Amtrak reported on the use of B20 during a year long trial on the Heartland Flyer. Apparently the use of B20 was for a one year experiment, and it has not been repeated.

Amtrak launched the one year trial on Earth Day in 2010. According to the article, it was concluded on May 15, 2011. More than 175,000 gallons of B20 fuel were used in the experiment. The fuel resulted in no more wear than straight ULSD diesel, with no reduction in performance or reliability. Overall emissions were below the levels observed from the use of diesel.

The fuel was used in a GE P32-8 locomotive. No deterioration of performance or wear on the locomotive was noted. According to Amtrak the cost of the biodiesel fuel was 13 cents a gallon more than the cost of diesel during the experiment. The fuel was provided by Direct Fuels, which is based in Euless. It still provides the fuel for the Heartland Flyer and Texas Eagle, both of which take on fuel at Forth Worth. The cost of the experiment ($274,000) was worn by the Federal Rail

15

In a previous post I observed that labor costs for Amtrak Texas probably are a significant factor in the run-up of the total costs between 2009 and 2013 for the trains serving Texas. Here is a supporting excerpt from an excellent article on the Coast Starlight, which appears in the latest issue of Trains.

"Yet labor costs remain a significant challenge, as they are for all long-distance trains. In addition to the three lead service attendants and two chefs, each Coast Starlight has three sleeping car, three coach and at least two dining-car attendants when the trains is running a full summer consist. These Los Angeles-based employees generally make upwards of $20 an hour, non including the cost of benefits. They are on duty from before breakfast through late evening, away from home for four days straight, and then get six days off before returning to work, so 10 complete on-board service crews are required to keep all departments staffed.

Add the cost of operating crews changing at Portland, Klamath Falls, Sacramento, San Jose (for engineers only), San Luis Obispo; fuel; host railroad payments; plus portions of station salary and facilities, accounting charges from Seattle to Los Angeles, and it is easy to see how expenses can dwarf the $42.9 million of ticket revenue the train generated in fiscal 2013. Although Amtrak will not divulge specifically how other overhead expenses are allocated to long distance trains, the company pegs the Starlight’s total 2013 operating loss at $61.9 million."

The labor and benefits are direct labor expenses traceable to specific employees. They are subject to audit by the Department of Labor(s). One can be sure that they are supported properly. The rents paid to the host railroads are direct expenses and are invoice supported. So too are the layover accommodation expenses for the crews. The depreciation expense is tied to the equipment. The consumables in the food service cars are invoice supported. Advertising and m

16

On occasion Amtrak does report the real Avoidable Cost for the individual routes even though they are required to do so by statue frequently. Below are the Avoidable Costs from the 2010 PRIIA report. The rightmost column would be after a future daily Sunset Limited. For reference the avoidable loss for the Texas Eagle is less than the financial cross-subsidy from taxes on the local road system, Medicaid spending, etc to Interstate users.

Also, I just found my archived version of the 2008 Route reports. I figure using the standard 2.2 gallons a trainmile (which might be high for a single unit run), I get about 1.6 million gallons of diesel a year. When I get a chance I am going to normalize real reported costs with diesel variations accounted for the period 2005 to 2013. But remember the accounting has changed twice, which is my main point. The disclaimer for 2009 is below, check the Notes once you click on it to enlage. Before the SRI methods, NRPC had a FRA Defined Cost method as well.

17

According to Quarterly Report on the Performance and Service Quality of Intercity Passenger Train Operations, Covering the Quarter Ended September, 2013 (Fourth Quarter of Fiscal Year 2013), which you referenced, Federal Railroad Administration, United States Department of Transportation, Table 1 (A/B): Short-Term Avoidable Operating Costs, and Table 3 (A/B): Long-Term Avoidable Operating Loss, Amtrak does not know the avoidable costs of its trains. As per Note 1, Data for tables 1 and 3 will not be available until the avoidable costing methodology for the Amtrak Performance Tracking (APT) System has been completed.

Although it would be difficult for a government employee to understand, an aggressive, competitive business would be able to shed most of the costs associated with a discontinued product line, i.e. the long distance trains. Been there, done that! Politics, however, is a different matter.

The long distance trains are a political statement. They are used by less than one per cent of intercity travelers. Amtrak has had more than 40 years to get them to just break even, and it has never come close. How anyone with any business sense believes that they are going to turn a dismissal failure around after 40 years escapes me.

But lets take your un-audited avoidable cost numbers for a minute, noting that they have not been broken out by short and long term costs. Invested at the current Treasury Note rate of return, the $58.3 million in avoidable costs, i.e. savings, would grown to $76.7 million in 10 years and $101 million in 20 years. That’s how competitive business people look at recouping the avoidable costs associated with a losing product line.

The numbers in the PRIIA reports are ancient history. Moreover, they were cobbled together by Amtrak employees, who are hardly independent of the organization that employs them. There is no evidence that they were subjected to an independent audit. Without access to Amtra

18

Here is a further thought regarding avoidable costs. If the Federal Railroad Administration does not know Amtrak’s avoidable costs, which is to say it cannot get the information from Amtrak, how did the PRIIA teams determine the avoidable costs associated with the Texas Eagle and Sunset Limited?

19

The Avoidable Cost in the PRIIA reports were calculated at one point in time on a one off basis. I believe the gentleman has since retired. The FRA actually developed a separate methodology that was used in the early 2000’s since they felt they could not trust the numbers. For a worked example see my most recent post in the Hoosier State thread illustrating the difference in Total Costs numbers and the real costs of a route.

Here is one example of a estimate of the costs of motor vehicle crashes in the US from NHTSA.

I completely agree that Highways have economic benefits as well as financial costs to society.

Could it be that passenger trains in the heartland do as well and they should be compared on incremental measures such as person miles of travel?

20

Passengers trains have value anywhere where the cost of expanding the highways and airways is prohibitive, i.e. high density corridors.

In Texas the I-35 corridor is shaping up as a high density corridor that could support quick, frequent, comfortable, passenger rail service, although it would require a significant investment to make it feasible. A 110 to 125 mph train along the I-35 corridor would be able to service Fort Worth, Cleburne, Waco, Temple, Austin, San Marcos, and San Antonio. This makes more sense to me than a high speed choo choo between Dallas and Houston that does not serve any intermediate points.

The long distance trains make no sense. They are not a serious transportation option in Texas. They could go away tomorrow, and very few people would even know that they are gone. They are just throwing good money after bad.

The Texas Eagle, prior to the Great Recession, ran so late, as a rule, that those of us who rode it joked that we would not get to San Antonio before the bars closed. With the coming of the Great Recession, however, the on-time performance improved. The reason is clear. Freight traffic diminished in response to the downturn in the economy. Now, of course, the economy has come back. And so too has the freight traffic. And the Eagle is again running late more often than not.

Most people that I know realize that motor vehicle accidents happen, and there are costs associated with them. However, you reference does not include an estimated cost to Medicare and Medicaid, which was one of your estimates, if I remember correctly. This appears to be the operative paragraph:

"The economic toll of motor vehicle crashes is borne by society through a variety of payment mechanisms. The most common of these are private insurance plans such as Blue Cross-Blue Shield, HMOs, commercial insurance policies, or worker’s compensation. Medicare is the primary payer for people