Amtrak’s Losses… and Abuse of Their Customers

There’s some interesting new data on Amtrak’s tremendous losses.

  • Amtrak loses on average nearly $100 million per year on meal service. Much of Amtrak’s food spoils, and they maintain full dining car staffing even during periods where ridership is extremely low.

  • The federal government has spent an average of over a billion dollars a year in capital expenditures for the Northeast corridor over the past 40 years. That spending isn’t included when Amtrak claims to make a profit (about about one-fifth that amount) on Northeast corridor services. Amtrak projects a need for $151 billion more for Northeast corridor high-speed rail. It turns out that the belief that Amtrak makes money in the Northeast corridor is based on faulty accounting.

  • For critics who say Amtrak is starved for cash, and deserve greater subsidies, it actually gotten 50% more government aid between 2007 and 2011 than it had received in the previous five year period — $8.4 billion.

  • Putting Amtrak’s subsidies in context, before they grew 50%, Amtrak was receiving $186 per 1000 passenger miles — compared to $6 for airlines.

  • Amtrak represents 0.36% of US intercity passenger traffic (one-third of 1%)

Of course, it isn’t just taxpayers that get abused by Amtrak. Customers don’t have it all that great, either — and that’s apart from Amtrak’s on-time performance.

Earlier in the year I wrote about the Brookings Institution’s recommendations on how to save Amtrak.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Gary, your post is mostly rehashed nonsense from die-hard Amtrak opponents of long standing. The sudden changes to AGR are very old news, from when Carlson was still managing their program. Amtrak brought AGR in-house two or three years ago, and things have improved greatly. The program offers much better value than most airline redemptions these days, whether for corridor travel (Northeast Regional or state-supported routes), or for sleeping car travel – which I know you don’t like, but many of us do.

    Amtrak currently gets 88% of its revenue from fares, the highest percentage ever. Amtrak’s president Joe Boardman recently announced a plan to completely eliminate food and beverage losses within five years. Is that noted in your post?

    Recent recovery-related funding is for desperately-needed infrastructure improvements, primarily in the Northeast – which is only a fraction of what’s needed to keep this high speed but 19th-century right-of-way in proper shape. Would you allow airport runways or highways to go to pot? Many of those costs aren’t paid by the operating carriers or by private motorists, but rail improvements for passenger service are charged to Amtrak or local authorities. Apples and oranges, my chum.

    Gary, although I’m hardly an Amtrak management apologist, I’m so irritated by your assault on balanced transportation as practiced in most of the world’s developed countries that I will really have to think twice about attending future Frequent Traveler Universities. In my opinion, there is absolutely no basis for the hatchet job that is this post – especially when directed against a partner of Chase Ultimate Rewards.

    Go home and shut up.

  2. The federal government has spent an average of over a billion dollars a year in capital expenditures for the Northeast corridor over the past 40 years. That spending isn’t included when Amtrak claims to make a profit (about about one-fifth that amount) on Northeast corridor services

    Is the building of airports and the maintenance of air traffic control put into the profit/loss of airlines? If it is, then you have a point. If it isn’t, then you’re mudslinging.

  3. @Explore the 2012 devaluation was certainly after Carlson was out of the picture.

    I end the post linking to a discussion of recommendations towards a way forward for Amtrak. There are some services that may make sense — money-losing and subsidized to be sure, but relatively less so — and other services that really ought not continue (which is the same thing as saying that states ought to fully subsidize them — the routes exist precisely because the costs can be shifted onto other taxpayers).

    I do appreciate the discussion.

    Best,
    Gary

  4. @David – airports charge landing fees and facilities fees, lease gates to the airlines Aviation taxes are dedicated revenue streams as well for air traffic infrastructure. And then there’s still a gap, which I identify in the post. Trains have orders of magnitude greater subsidy per passenger mile.

  5. I should add I’m boarding a flight and though I had hopes of onboard internet early indications are the aircraft may not have it. I expect to be offline for nearly 24 hours but look forward to additional comments once I’m back on the ground (for longer than it takes to shower). Best, Gary

  6. @Gary Road transportation requires funding from general appropriations and is not covered completely by dedicated revenue streams.

  7. Wow, and I thought your blog was good. This kind of half researched, biased, and inaccurate hissy fit against rail travel is terrible.

  8. Remember, transportation and access to services is absolutely fundamental to an advancing society. For example, that’s why NYC and much smaller Dallas get multiple airports. Access and transportation are what we want more of, not less. So don’t be a self hater.

  9. This “argument” is nothing more than a slanted attack on Amtrak that detracts from an otherwise very readable blog. It sounds like a professional hit piece from the auto or airline industries more than reasoned argumentation.

  10. @ James: those Amtrak apologists commenting are likely DC based beauracrats. They’re the only ones left believing in the fallacy of Amtrak.

  11. @Explore, Nate, Will,

    Sorry, but the Northeast corridor does not make a railway. Just because a portion of your network is profitable does make it worthwhile for the ‘public good’ (which IMO is what constitutes where public dollars aka ‘subsidies’ should go). Contrast that to airlines that have learned to cut routes that don’t make them a profit, after years of trying to undercut one another. Amtrak has no competition and feeds off the *BLANK* of the US taxpayer and it needs to stop. If the company can survive by only running the NE corridor service, great! Then cut the rest!

  12. I love how post #4 starts out with a semi-logical argument including decent supporting data. And by the end it’s a personal assault on Gary and a random assault on FTU!

    Heck, I can name plenty of reasons not to attend FTU — in fact I never have — but Gary’s dislike of wasteful Amtrak subsidies certainly wouldn’t make my Top 10 list! LOL.

    So if Amtrak should just be the NEC, does that mean that United should just operate ORD/SFO/EWR-HKG and slash the rest? Oh wait, that maybe what Smisek has in mind!

  13. Rather than looking at Amtrak through the prism of private industry financial metrics, maybe look at it as an essential government service.

    Before you fall over laughing, consider that Amtrak has survived 42 years of shrill annual Congressional attacks on its funding well out of proportion to the significance of its appropriation. Amtrak has survived a constantly changing leadership cadre with ever shifting visions. Amtrak has survived 42 years of often indifferent staff and threadbare equipment. Amtrak has survived the hostility and operational disdain of the freight railroads over which its trains operate. Amtrak continues to draw ever more riders despite these factors.

    Perhaps the lesson is that Americans want a passenger rail system and though I’m sure they would like a better one than Amtrak often provides, Amtrak is better than nothing. It is a transportation option and a public amenity they are content to pay for directly and indirectly.

    Amtrak’s public constituency has kept it operating despite all odds for 42 years. Perhaps that’s because the public wants it.

  14. I like train travel. However the 2 brutal changes Amtrak made to its program-the first cutting off most intra-program transfers and the second further limiting them-both without notice, left many program participants high and dry.

    That was in the past? That just says they haven’t done it lately. Or maybe better put-not yet. .

    Gary’s not always right on his rants, especially when you get the government involved. But he’s on track on this one. Another good topic would be on how much Amtrak has foregone by running a third rate frequent traveler program, instead of a first class plan that attracts even non train travelers.

  15. Gary, thanks for the wonderful, balanced article. I clicked through and read the excellent Brookings Institution article. Keep up the good work…and now I might consider coming to see you at a FTU!

  16. Seems Gary isn’t content to attack the current administration and now feels the need to attack government subsidies. I would say in surprised with the view from the right wing, but I’m not.

  17. @Chase.
    No idea where you live, but I certainly don’t want to pay for your roads. Until they’re profitable and fully paid by user fees (they’re not) you shouldn’t get them either.

    Sounds stupid doesn’t it?

    @Gary, why do you continue to spout this garbage when you obviously don’t understand it?

    Passenger mile is a BS measurement. The ONLY way for a passenger mile measurement to be even is with zero passengers in EVERY SINGLE mode of transportation.

    Roads are NOT fully covered by dedicated revenue streams. Airports are NOT fully covered. But since you use those methods of travel, you don’t attack them.

    Some things in society exist for the greater good. Many people can’t or don’t want to fly. The government provides transportation options for all.

    You realize the entirety of Amtraks subsidy from the government, both cap and operating, over their entire existence (as of sept 2012) was not quite $41B. During the four years before sept 2012, the federal government shelled out subsidies to the Highway fund of 53.3B to cover shortcomings of the so called dedicated revenue streams. That doesn’t even account how much we were taxed with those dedicated streams.

    So you, and others who share your (in my opinion skewed) opinions like Rep Mica, The Cato Institute, etc really need to look at the larger picture of transportation in America.

    If you don’t like government subsidy at all, I am sure I can easily find ones that you gladly take advantage of and don’t rant about.

    This blog is about the mile and point game. You should keep it that way.

  18. What a bunch of poorly-informed claptrap. I’ll be the first one to attack the inefficiencies of some forms of North American mass transit but Amtrak is one of the few mass transit agencies that actually gets good bang for the buck.

    The fact of the matter is that Amtrak’s capital stock was massively underinvested in for about 40 years. The signaling system, rails, consists, etc. are all ancient. Bringing Amtrak capital stock back up to a state of good repair is going to take a long time and extra money on top of the operating money given the disinvestment the US made in rail since the early 1960s. It’s not really a subsidy as it is making up for the fact that the Feds massively underinvested in rail capital stocks for nearly 50 years. You can imagine what state airports and roads would be in if only emergency/safety maintenance was carried out for 50 years.

    Second, food service money losses largely occur on long distance routes, where food is considered part of the ticket price. It’d be like saying SQ “lost” 1 billion (or whatever) on food in 2013 – no one would fly them in business or first if they didn’t offer free food! Moreover, Congressional meddling also accounts for a good portion of the reason there is such a large food expense. In no other corporation do members of congress set the staff levels and demand food procurement procedures and set menu pricing:
    http://www.railwayage.com/index.php/blogs/frank-n-wilner/whats-with-congressman-mica-the-foodie.html

    Third, Amtrak was created by the Federal Government as essentially a jobs/pension program for passenger rail divisions of railways in the 1970s. Amtrak took over the pension liabilities from all the passenger rail division and absorbed many of the employees from these same divisions. As a result, Amtrak’s retirement and benefit obligations are much higher than comparable companies, and this is by design of the US Congress, not due the inherent nature of running a passenger rail service.

    In sum, part of Amtrak’s losses are due to a very long practice of capital underinvestment in rail. Another part is due to continued Congressional meddling into details of Amtrak’s operations. A third part is due to the actual historical design of Amtrak.

    Despite all of this, Amtrak is on track to show an operating profit in the next few years, with a current farebox recovery ratio (as of 2012) of 0.88 – one of the highest in the world for rail services. http://en.wikipedia.org/wiki/Farebox_recovery_ratio

  19. I love these posts. The content is interesting, but I love how it brings out these comments. Any criticism (I would say legitimate, but I dont think these people believe there are any legitimate criticisms) of the government or subsidies brings out the hackneyed ‘View From The Right Wing’! These people must not know any real right wingers…

  20. For better or worse, the issue of Amtrak seems to bring out the worst in people, producing only one-sided arguments with a strong tinge of partisanship. I don’t recall ever seeing a write-up on Amtrak that included both positive and negative facts.
    .
    I quite enjoy train travel (it’s the one kind of travel in which, by the end of the trip, I’m often not ready to de-vehicle). Still, I’d like to see it come as close to standing on its own two feet as other forms of transportation such as air and road.

  21. @Andrew “Second, food service money losses largely occur on long distance routes, where food is considered part of the ticket price.” except that ticket REVENUE is attributed to food service and they still lose nearly $100 million. Cheers from the UAE.

  22. The fact is that the number of U.S. vehicle miles traveled per year crested about 2005 and has been dropping ever since, while U.S. road subsidies derived from non-user fee revenue have gone up by leaps and bounds since that time (Gary is absolutely wrong to suggest road users cover their costs – and living in Virginia he should be well aware of this issue). By contrast, Amtrak’s subsidy per passenger has been dropping substantially as its ridership has increased by more than 50% since 2000.

    People are driving less, taking the train more, and flying about the same amount they did previously (but that could well decline along with motoring).

    This post is such nonsense because it parrots arguments made in the 1990s and before, while the world has moved on. It’s a pity that concerned citizens like myself – whose salaries are not derived from tax revenue – would even need to make them.

  23. @Marcus – we tried that, it didn’t work. That’s the reason that Amtrak exists in the first place.

    I’m amused by your fixation on Amtrak, Gary. We spend FAR more money on roads, airlines and airports (above and beyond the dedicated revenue streams) than we ever have on Amtrak. It does amazingly well, considering what it has to work with and the wild uncertainty in its funding stream. It’s tough to make a long range investment when you never know how much money (if any at all) you’ll get from year to year.

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