Here are some key takeaways from an Amtrak White Paper on the impact of the long-distance trains on the company’s FY18 finances:
Revenues were $523.4 million; operating expenses were $1,066.7 million, which resulted in an operating loss of $543.3 million. The cost recovery ratio was approximately 49% compared to 166% for the NEC and 90% for the state supported trains.
Revenues did not cover any of the $297 million in route variable costs (equipment, reservations, and food service) and $243 million in system/fixed costs (share of overhead and corporate expenses),
The average operating subsidy per long-distance passenger was $120 vs. $21 for state supported services (state and federal) and an operating profit of $43 per NEC passenger,
The long-distance trains racked up 38% of Amtrak’s train miles but produced only 20% of passenger revenues and were responsible for 86% of federally subsidized operating losses,
The federal government is the only source to cover the operating losses and capital requirements of the long-distance trains,
Amtrak spent $260 million on capital investments for long-distance service; the largest expenditure was for equipment overhauls,
Passengers traveling to and/or from stations in rural areas accounted for 18% of long-distance ridership,
The Report is easier to read and understand than I feared. It is certainly sobering if not dismaying in its presentation of the facts. Yet as an advocate of LD trains, I recognize an additional set of facts:
These trains will require similar if not larger subsidies to continue being of service; 2. These trains have been dependent on subsidies for 50 years; and 3. The public, through its Congressional representatives, has for half a century shown they want and will support these trains.
To be honest, any long-distance service ‘randomly’ patronized is likely to require socially-based subsidy if it is to run regularly, let alone frequently or to satisfy demand for ‘daylight’ access to many city pairs. The situation is more observable with transit, outside of areas where the whole demand can be satisfied with only a few hours’ completely schedulable service per day.
In addition, even the provision of less-frequent ‘boutique’ LD trains, or even services appended to scheduled LD trains, has not been long-term successful – and that, I think, is true independent of opportunity cost for the capital used on those ventures. It might be interesting to see what ‘social subsidy’ claims could be advanced for private ventures approximating some of Amtrak’s national coverage, or filling ‘obvious’ gaps in that coverage not suitable for some reason to fill with “local political support”.
In very few cases would I expect nonsubsidized ventures to come anywhere near the cost of purchasing and then maintaining new equipment. Heaven knows Ed Ellis had relatively low costs in those areas – and still wound up as he did.
It is sobering. If only 18% of LD train ridership is from small towns and rural areas between end points and larger intermediate cities, that percentage is even less of total Amtrak ridership. Although Amtrak has been around 50 years, any justification for continuing that legacy service has expired with time, other than as an inducement (bribe) to small population Western state senators to pass Amtrak subsidy budgets.
My impression of Ed Ellis was that he was more of carnival barker than rail operator.
Yeaaaahhhh, not sure I would rate Ed in the business man category. Railfan or Rail Enthusiast probably. The fact that his venture had no staying power…at least he tried but I am more taken aback by some of the shortcuts he took vs good business decisions. I think he got emotionally invested in his business and would have done anything to keep the fantasy going instead of having an exit plan and responsibly walking away from it when he should have.
But right there are the weasel words – if LD trains are considered at all a ‘service’ there can be no ‘walking away’ at the slow times, or bad times, or after catastrophe. And the perceived ROI and risks evaluated on that (much scarier!) basis.
Even in the existence of nominal above-the-rail gross profitability, there would need to be enough short-term ‘prequaled’ subsidy or loan guarantee to preserve nominal service – “business interruption” whether insured properly for it or not being no option. I’d need something much better than N-alkylated 4-N-propanoylanilinopiperidine before I’d be expecting that for LD operators … perhaps Amtrak included.
In FY18 the long-distance trains had an operating loss per passenger mile of 19 cents compared to 3 cents for the state supported trains before adjustment for the state subsidies and an operating profit of 28 cents for the NEC.
In FY20 the long-distance trains had an operating loss per passenger mile of 46 cents compared to 7 cents for the state supported trains and 1 cent for the NEC.
On a fully allocated basis, assuming that the NEC wears 80 percent of Amtrak’s capital charges, which is probably conservatively high, the FY18 losses per passenger mile were 23 cents for the long-distance trains vs. 7 cents for the state supported trains and 6 cents for the NEC. In FY20 the respective losses were 53 cents, 16 cents, and 74 cents.
I have these numbers on a spread sheet that I have been keeping for more than 10 years, although I only retain the numbers for the last three to five years depending on the statement. I use the information in the fiscal year ended monthly performance reports and/or the annual audited financial statements. Only the amount of capital charges is speculative.
The numbers are rounded and may be off by half a cent. The state subsidies for the state supported trains add another two or three cents to the operating losses.
And I would like to see further breakdown by ROUTE-mile or between specific origin-destination pairs – things easily derived from the primary data Amtrak can collect.
As far as I know the information is not available in any public documents. You could submit a request for it to the CFO of Amtrak. Or you could file a Freedom of Information request. Good luck with that!
The results shown in Amtrak’s monthly reports and annual financial statements are averages for an entire route or business segment. Averages can be deceptive.
The average loss per passenger, passenger mile, or seat mile on the Texas Eagle, for example, probably is different for the Austin to DFW segment than for the whole route. I ride it five or six times a year. Frequently, the train has had a seemingly high load factor between these two points. But many if not most of the passengers get off in Fort Worth or Dallas, which means the numbers from there on would be different.
The segment numbers would be relevant for someone considering end point to end point passenger service along a segment(s) of a long-distance train’s ro
I forgot to mention (sardonically) that it would be the sunny Friday before I’d actually expect to see that information – just that Amtrak should, or easily could, develop it at small marginal cost.
That was stipulated at the very beginning of this thread, and the argument has never been ‘could they be made profitable’ instead of ‘is the necessary enormous subsidy fairly allocated for social or other externally-desirable purposes’.
Knowing precisely what the actual demand for ‘interstate’ services between locally-subsidized corridors is resolves one of the frustrating ambiguities that have been timeless topics here and elsewhere. Likewise, knowing precisely which sections of a route contribute the least, or cost the most in excess of revenue, will be a much better basis for developing and maintaining a ‘national’ network, or for directing inprovements or cost-cutting more appropriately to a Federal government and perhaps any ‘fair’ organization on a Keynesian basis.
Whether or not I actually see the basis information published is immaterial, and in fact I can see some very good reasons why it should not be. But in the rhetorical sense it would be sound to analyze things that way rather than via excessively averaged statistics that say little if anything of practical planning policy use.
But you have vanishingly small fuel cost, no mentionable distribution difficulties or shortages, no union grievance issues-- in fact no personnel-related difficulties at all – no legal or tax costs, no pensions, no activist investors or bean-counters, no analysts determining your short-term future, no pandemic-related profitability or operations difficulty … and no particular depreciation or mandatory inspection or replacement on your rolling stock.
Well, there is the electricity, and wear and tear on the locomotives. Plus, I have to clean the track periodically, and I’m not getting paid for my labor. [:D]
I think you misunderstood. The majority of Ed Ellis assets and money were invested in shortline railroads in which he was using to subsidize the Pullman Company as a startup. Once the shortlines ran into trouble and/or Ed learned he could not flip the shortlines to someone else after recieving Federal rehab funds, the Pullman company retrenched. Now do I have proof all that took place (nope). However the chronological timeline is very, very suspicious. Also, the bankruptcy proceedings are also revealing where a large chunk of the equipment used by the Pullman company was either leased from someone else or purchased by one of his shortline railroads. He could do that legally as I believe everything was under the SLRG Parent Corporation it seems as the overall holding company, judging from the reporting marks on everything. Can you say the Pullman Company model was ever self-sustaining? I am not so sure with what appears to me to be a tangled web of finance and financial shell games to get there.
Additionally, I can’t quite get my hands around or understand the whole story on the wheel fractures being found on his 40+ year old passenger equipment by a third party after they had been running in revenue service. Why he did not pay to have that equipment more comprehensively checked before he put paying passengers on it. That whole story scares me on how it got past railroad inspection initially.
Also, how much of all this money was under Ed’s name. For example did he take a second mortgage out on
I do not know firsthand. I do know that everything I’ve ever read says that the operations failed to make money long-term, for some combination of reasons or other described as direct cost or profit related, not finance-shenanigan-related. I am very familiar with organizations that run periodic cyclical deficits in one part of ‘company’ and are temporarily bailed out or supported over ‘cash crunches’ by transfers from other parts; I would not be surprised to find the Pullman Company at times either a source or sink of such activity for Mr. Ellis’s other enterprises. On the other hand, I do not know of any skimming from Pullman operations to support some other Ellis thing, and if the whole shebang was intended to subsidize the ‘vanity’ operation of American Orient Express-style “Pullman luxury service” it seems unlikely even very much skimming would take place unless and until a huge amount of the house of cards was in process of collapse … perhaps not then.
I do know fairly intimately how much George Pins spent on Pennsylvania 120, and costs and difficulty of owning such equipment have only mushroomed since then. It is difficult for me to imagine that operation surviving the 2008 recession, the Amtrak cancellation of private haulage even if regularly scheduled, and the current pandemic.
I do give him credit for determining one of the best practicable operational models for the service: regularly appending a relatively small number of private cars to an existing Amtrak train. I can’t think of a model like, say, the AOE or Rocky Mountaineer that could reliably be expanded even into a mere once-a-week transportation option instead of a fancy and even reasonably frequently ‘sailing’ cruise-train. For Ed not to be able to work his minimal model is not, to me, to indicate that less c
The trains Jan 2021 issue has an extreme example of Amtrak’s fake accounting on LD trains. Look at page 23 right hand column 3rd full paragraph down. The Coast Starlight was being charged $3M for depreciation on Superliner-2 cars. That compared with $800,000 if it had used Superliner -1 cars . There was not that much difference in ages. 32 cars for 4 train sets = about $25,000 for -1s and about $93,750 for -2s each. What was going on ?
I cannot recall if the -2s were bought or leased but the whole capital cost allocations for Amtrak needs review.
Amtrak is now buying Acela-2s with a capital grant that is to be paid for by revenues. So should Amtrak charge depreciation for them ? Acela-1s are leased so no depreciation but probably lease payments ?
The amount of depreciation expense chargeable to an activity is a function of the purchase price of the asset plus transportation in, training costs, capitalized interest, and set-up costs, less the estimated salvage value of the asset. Asset classes are usually not comparable, i.e., Superliner I vs. Superliner II because of innumerable cost and salvage differences.
Unless the author of the article has access to Amtrak’s books, specifically the property accounting records, he/she is speculating. This is true of every article in Trains or elsewhere that has been written by someone who professes to know about Amtrak’s cost accounting methods. They don’t have access to the company’s books; they simply don’t know what they are talking about.
How did the author of the article come up with the depreciation expense chargeable to the Coast Starlight? I have never found it in any public records.
For FY20 the Coast Starlight had an operating loss of $55.2 million. An operating loss does not include depreciation, interest, or miscellaneous capitalized items. This information is public. But it was not as bad as the operating loss of $74.5 million for the Empire Builder and $72 million