First link is for the written statements of the witnesses. Second link is to the video of the long 3 and half hour hearing.
I watched most of it live earlier. Lots of interesting details about the NEC projects, Amtrak LD, CA HSR, and Brightline. One important item, without LD trains Amtrak cannot maintain NEC operations in the long term. Amtrak needs the ability to spread the costs of certain shared assets such as the reservation system over all trains, LD, corridor, and NEC.
Brightline/AAF stressed the issue of the length of time required to obtain permits and approvals and how they impact the ability to obtain financing/investors.
CHSRA leader Dan Richard got grilled by fellow Californian Denham throughout the hearing.
This statement is simply not true. Operating the reservation system is entirely a variable cost. The fixed cost portion, the computer and the programming is sunk, that is already paid for. In addition the entire function could be outsourced to any of dozens, if not hundreds, of call center operators.
Off the top of my head I can not think of any significant fixed cost assests that are shared across the lines of business. As to cars, the NEC would simply keep what it wanted and the rest would be sold off. Diesel locos would probably go to scrap.
Corporate overhead below the Presidential level would be cut since corporate “services” for LD and corridor would no longer be requred. If ATK is not that ignorant maybe they think congress is, and they could be correct in that.
Mac: You are right about that. Also, Moorman claimed 60% of ridership on Amtrak was “National” whatever that is. The statement appears to be misleading, by combining state-supported corridors with LD routes.
A statement to the effect that if LD trains went away, the overhead costs would fall more heavily on the remaining services (or lines of business) is true by definition. If the only thing ATK runs is the NEC, then the NEC has to absorb all the overhead.
It does NOT follow however that the of overheads charged to the remaining line(s) of business would necessarily increase in significant dollar amount. The “therefore” part of the statement is not true and Wick knows it. The reason it is untrue is that most of the overheads he is talking about are what railroad accountants call Long Run Variable costs.
There are three types of railroad costs. Short Run Variable costs are those which vary directly with the activity. Diesel fuel varies directly with whether or not you run the train today.
Long run variable costs are those that vary in the long run, more than a day less than forever. Commisary costs might be a good example. ATK incurs commisary costs strictly for LD, strictly for the NEC, and perhaps some that serve both lines of business. I
An outsider does not know whether the Amtrak’s cost accounting system, including its cost allocation processes, is appropriate. She does not have access to the company’s books.
All costs are variable in the long run. If the long distance trains were discontinued, most of the costs would melt away. Some of the fixed costs would have to be re-allocated to surviving operations. If the company were managed effectively, they would be minimal.
Amtrak’s largest single operating expense is labor. In FY16 salaries, wages, and benefits were 49 percent of its operating expenses and 64.4 percent of its revenues. The labor expenses associated with the long distance trains probably are higher than for the system as a whole. Among other things long distance labor has to be housed and fed while away from home.
During the first or second year following discontinuance labor expenses probably would increase because of severance package provisions. But eventually these expenses would go away.
Every calculation that I have seen regarding the discontinuance of the long distance trains has been performed by Amtrak’s employees. They have a vested interest in keeping the empire as large as possible. Moreover, the CEO knows that discontinuing the long distance trains would create a political firestorm, so he has a vested interest in playing down the long term savings and playing up the costs.
The long distance trains are not going to be discontinued unless the United States hits a
If you eliminated the LD trains you have the shut down costs of LD which would take several years to disappear. Among the largest would be the labor protection costs, second largest would be the write downs or payoffs of LD equipment purchases or disposition of the excess equipment. Other things to consider would be contract termination fees. Then there would be the unavoidable National debate that if Amtrak is only regioinal in the NEC, shouldn’t it be subsidized regionally instead of via the Federal Budget? The debt Amtrak owes would be allocated over a much smaller pool of assets and a dramatically smaller company and it would take a long time to pay that down.
NEC cannot support itself in it’s current form and the reallocation of costs from the LD trains over to the NEC would make the NEC look like a huge money loser for at least 4-5 years while the costs of the LD trains were handled. During that 4-5 year timeframe likely that added cost structure would be used politically to pull the plug on the NEC as well or at least move it to some sort of regional or state compact.
I would not say the costs would “melt away” because Amtrak would still need to maintain a website of some sort, 800 reservations number and staffing (not cheap), some of the technical overhead is scaled for a National system and downsizing it to a Regional system also would take time and a good portion would still exist in smaller form.
To understand this argument better we need to know the number of revenue passenger miles carried by LD and NEC trains. It has appeared to some that costs are allocated based on revenue passenger miles. ( Or revenue seat miles ? ) A figure of those and state supported trains is really needed.
If you eliminated the LD trains you have the shut down costs of LD which would take several years to disappear. Among the largest would be the labor protection costs, second largest would be the write downs or payoffs of LD equipment purchases or disposition of the excess equipment. Other things to consider would be contract termination fees. Then there would be the unavoidable National debate that if Amtrak is only regioinal in the NEC, shouldn’t it be subsidized regionally instead of via the Federal Budget? The debt Amtrak owes would be allocated over a much smaller pool of assets and a dramatically smaller company and it would take a long time to pay that down.
So many claims in one paragraph. Congress created the labor protection scheme, probably to buy labor’s support for something. Congress can take away what congress gives. Equipment debt is a sunk cost. It is what it is and will NOT change with the shutdown of the LD network. It is irrelevant to the decision. What contract termination fees? The freight railroads would be so happy to see ATK quit stealing their capacity that the bosses would dance a jig! If ATK was cut back to the one market where it makes sense, and the rest of the country figured out it was a regional subsidy to the northeast and congress gave ATK to the affected states, I and everyone outside the NEC would count that as a good thing.
NEC cannot support itself in it’s current form and the reallocation of costs from the LD trains over to the NEC would make the NEC look like a huge money loser for at least 4-5 years while the costs of the LD trains were handled. During that 4-5 year timeframe likely that added cost structure would be used politically to pull the plug on the NEC as well or at least move it to some sort of regional or state compact.
What happened to the vaunted operating surplus?? Your statemen
I would ever ride a LD train ever again without Full Dining Car and sleeping Car to sleep in Bed at night. I can’t take ride in coaches for few days. I would go Nuts in coaches. I am only 39 years old too.[2c]
[quote user=“PNWRMNM”]
CMStPnP If you eliminated the LD trains you have the shut down costs of LD which would take several years to disappear. Among the largest would be the labor protection costs, second largest would be the write downs or payoffs of LD equipment purchases or disposition of the excess equipment. Other things to consider would be contract termination fees. Then there would be the unavoidable National debate that if Amtrak is only regioinal in the NEC, shouldn’t it be subsidized regionally instead of via the Federal Budget? The debt Amtrak owes would be allocated over a much smaller pool of assets and a dramatically smaller company and it would take a long time to pay that down. So many claims in one paragraph. Congress created the labor protection scheme, probably to buy labor’s support for something. Congress can take away what congress gives. Equipment debt is a sunk cost. It is what it is and will NOT change with the shutdown of the LD network. It is irrelevant to the decision. What contract termination fees? The freight railroads would be so happy to see ATK quit stealing their capacity that the bosses would dance a jig! If ATK was cut back to the one market where it makes sense, and the rest of the country figured out it was a regional subsidy to the northeast and congress gave ATK to the affected states, I and everyone outside the NEC would count that as a good thing. NEC cannot support itself in it’s current form and the reallocation of costs from the LD trains over to the NEC would make the NEC look like a huge money loser for at least 4-5 years while the costs of the LD trains were handled. During that 4-5 year timeframe likely that added cost structure would be used politically to pull the plug on the NEC as well or at least move it to some sort of regional or state compact. What happened to the vaunted operating surplus?? Your statement accepts the premise that ATK is misa
One more comment on labor and labor protection. In the State of Texas the employer pays child support via withholding from the employee’s paycheck. The employer is held equally accountable for that child support payment reaching the kid on time. It’s easy in a discussion forum to say “cut them off” when it comes to labor protection issues…quite a different story in real life when it involves kids that had nothing to do with the current set of circumstances of their Parents that you employed. Same deal with pregnant employees a few months away from their birthing date. Tear-jerking stories BUT also real life vs a discussion forum. You owe these people something if they worked for you.
A line by line breakout of the expenses associated with the long distance trains, which would be necessary to determine the savings from discontinuing them, would require access to Amtrak’s books. It is not going to happen. But here is one scenario, as an example, of the possible labor savings over time.
In 2016 the long distance trains accounted for 38 percent of Amtrak’s operating expenses. In the same year Amtrak’s salaries, wages, and benefits were $2,087 million. If the percentage of salaries, wages, and benefits associated with the long distance trains were equal to the overall operating expense ratio, Amtrak would eventually save approximately $793 million per year in labor expenses by discontinuing the long distance trains. This assumes that the pension fund and OPEBs are funded properly, which appears to be the case.
The managers and supervisors associated with the long distance operations could be terminated quickly. Many of them probably would find other Amtrak jobs. Those not able to find another Amtrak job probably would receive a generous severance package.
In 2016 the long distance trains carried 14.9 percent of Amtrak’s system passengers. The State Supported and Other Short-Distance Corridor trains carried 47 percent. The two add to 61.9 percent, which can be rounded to 60 percent without causing too much heartburn.
The percentage of passengers on the long distance trains has hovered around 15 percent for at least the last five years. In 2012 it was 15.2 percent.
In 2016 15 percent of the long distance passengers booked a sleeping. In 2012 it was 14.6 percent. Sleeping car passengers make up approximately 2.2 percent of the system total.