Holy Hypocrisy Batman! Ex-Delta CEO Rails Against Subsidies, Takes Over State Railroad

When Richard Anderson resigned as Delta’s Chairman — suddenly in October, without notice, and without waiting for the airline to be ready to name his successor as CEO the new Chairman — I said that it would be interesting to see what the then-61 year old did next.

Now we know. He’s the new CEO of Amtrak. Hold onto those Guest Rewards points, folks.


Copyright: tdezenzio / 123RF Stock Photo

Anderson spent his tenure at Delta playing hardball with customers, suppliers, and politicians — always seeking the best deal for Delta.

Under his leadership Delta lobbied for fuel tax subsidies and air traffic control subsidies, and handed out elite status to high level politicians in Georgia — while blaming the big Gulf airlines for 9/11 (when Delta partners with Saudia, whose government was at least complicit in the attacks).


    Richard Anderson

He did this because he wanted to make lower airfares illegal. The 9/11 comment should go on his tombstone, like the late Marion Barry’s line about the woman with whom he was videotaped smoking crack.

Anderson claimed offloading his airline’s pensions on the federal Pension Benefit Guaranty Corporation wasn’t a subsidy. Given a bit of time we’re likely to hear from Anderson than Amtrak isn’t subsidized either — Amtrak is currently subsidized at around $1.4 billion annually (although they asked for $1.8 billion).

The airline CEO most nominally opposed to (everyone else’s) government subsidies will now run the National Railroad Passenger Corporation created by the Rail Passenger Service Act of 1970.

Amtrak, by the way, competes with airlines including Delta especially in the Northeast corridor (Washington – New York – Boston) and has even sought to keep Delta from advertising in DC’s Union Station. (Update: the dispute between Amtrak and Delta and Anderson receiving over $70 million in Delta stock last year creates an interesting conflict.)

Anderson’s boss at Delta’s government-backed competitor will be a 7 member board of directors appointed to 5 year terms by the President and confirmed by the Senate. His ‘company’ will receive federal grants from the Federal Railroad Administration. He’ll now be charged with growing subsidies for this travel provider.

He’s not likely to make Amtrak — which takes 7 months to respond to a woman trapped in one of their elevators — worse although we might have to watch for densification (more seats, less legroom) and unbundling (more fees).

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. AGR was significantly devalued a couple of years ago, but I expect Anderson will further reduce the ROI. Pity, the points were a good way to get people on those money-losing long-haul routes.

    The best thing Amtrak could do is add high speed LA to Vegas service. Might be more profitable now that casinos have implemented parking charges (not to mention the weekend traffic). This would also be a better investment than Jerry Brown’s train-to-nowhere vanity project.

  2. I guess amtrak was looking for someone with experience on making an already bad experience even worse….they certainly found him

  3. Amtrak has a lot of problems but the main one is politicians requiring service in middle America where Amtrak has no business operating. Often fares are only twice a much to go NY to Seattle than NY to DC. By most accounts, if Amtrak simply operated between Boston and DC and maybe in California it would be profitable. Any business person would take one look at the costs and fares and say no more long distance trains. They are absolutely insane.

    Maybe Anderson was just brought on board for his negotiating skills. When, for example, Sen. Inhofe won’t let Amtrak cut service to OKC, Anderson can extract additional subsidies for maintaining ridiculously unprofitable service.

    Amtrak just grinds my gears since we don’t hear small government people complaining much about it since it is spending on middle america versus the coasts. It’s not a fairness argument either, since the Northeast corridor trains are self-sufficient and do not require a subsidy.

  4. To those that are saying get rid of Amtrak’s long distance trains:

    Do you expect people that refuse to fly to take Greyhound?

    I love flying, but my mom refuses to fly. We took Greyhound from Baton Rouge to New Orleans. We took Amtrak on City of New Orleans to Chicago and then took the Empire Builder to Seattle for an Alaska cruise. We took the same trip in reverse to get back.
    There is no way in hell that either of us would have taken Greyhound that far.

    The country needs alternatives to flying for long distance transportation. It may not be profitable, but Amtrak satisfies that need.

    Amtrak is a great experience. The coach seats are better than any economy seat on a plane. The tray table is still usable when the person in front of you reclines their seat.

    Try taking in the scenery from a roomette on the Empire Builder from Chicago to Seattle(2:15pm Day 1 – 10:25am Day 3). Meals in the dining car are included in the price of a roomette.
    There is a turn down service each day. You can lie down the entire time if you want. There is one toilet on the upper level and a shower and four toilets on the lower level of each sleeper car.

    Amtrak is a very good value when paying cash.

  5. @sara
    Its nice
    Becausemits subsidized
    You would probably not be willing to pay the real price of those trips….more than double
    You would be on southwest very fast in that case

  6. Doug, I refuse to fly Southwest due to their boarding procedure. I like their product otherwise.

    Yes I would be willing to pay because Amtrak would still be the only option. I would just have to factor that higher fare into the cost of a trip.

  7. Dan — Amtrak’s service to OKC, like all of its short-distance (<750 miles) routes outside the Northeast Corridor is fully subsidized by state governments.

    Also, the Northeast Corridor is not self-sufficient. It may be self-sufficient on an operating basis (however, Amtrak's accounting spreads many operating costs across its network, which benefits the financials of the NEC at the expense of long-distance trains), but its capital expenses are highly subsidized.

  8. Rail is never going to make economic sense vis a vis flying. Ever. Let’s please acknowledge that.

    However – If we want to use it as a tool to help certain regions and their economic development, okay fine, that’s a separate discussion. Although look at LA and the train line into Santa Monica if you want to see what a waste of $4 billion looks like.

    As far as subsidizing it into the trillions so that:
    a) somebody’s mom who refuses to believe in the immutable laws of physics and math does not have to drive themselves ( or have a family member do it) from Red Stick to Seattle;
    b) a bunch of drunk jerks can keep drinking between LA and Las Vegas

    F all that.

  9. Steve, it isn’t about believing in the immutable laws of physics and math. She gets claustrophobic when they turn off the AC after landing.

    She has never liked driving long distances or driving in big cities. Baton Rouge is her limit in terms of the size of the city. She didn’t have a choice about driving here.
    She had to get to work and bring me wherever I needed to go. Her 2010 car has almost 100,000 miles on it. I don’t have a license. The trip was just the two of us, so there was no one that could drive us there.

  10. Thank god! He’s back in action again. Can’t wait for him to give it to Gulf airlines, again. He will get to the bottom of it. They must be the cause of bad service and no profits. After all, Americans don’t screw up railroads. It’s those damn foreigners!

  11. @Steve

    I think you are conveniently forgetting that all modes of transportation, including roads and flying, don’t pay their full cost – i.e. they are subsidized.

    I think there are plenty of places you can go to see where rail does make economic sense vis a vis flying. NE Corridor, MAD-BCN, just about anywhere the TGV goes, ICE in Germany, etc.

    As for the train to Santa Monica, there’s 15-20k passengers in downtown SM coming on the Expo line today. The 10 is at capacity pretty much all day. Do you have a more cost effective solution to bring them there? Do you have any idea how expensive it is to widen a freeway? See the costs for the 405 across Sepulveda Pass for a hint.

  12. “Rail is never going to make economic sense vis a vis flying.” Completely untrue.

    I live in the Bay Area and my work takes me to LA at least twice a month. With the eventual advent of train service between downtown SF and downtown LA with an estimated station-to-station time of about 2 and a half hours, that makes way more economic sense for professionals like me than fighting out to SFO, OAK, or SJC, and flying down to BUR or (gulp) LAX. At present, there is no earthly way that you are getting from city center to city center in that amount of time, especially at peak travel times. Heck, I have to bill my travel time, and I’ve often logged more than five hours on basic trips like that.

    A friend of mine works in DC and often travels to New York for work. Similar concept. He recently told me about a trip he had taken along that route and I asked him whether he flew or took the train, and he scoffed in response – of course he took the train, he replied, because “it is way more convenient.”

    Time, as they say, is money, and for regional business travel, high-speed rail makes a ton of sense. See also the proposals for high-speed rail between Houston and Dallas and in Florida, which I understand will largely be private ventures. For longer-distance travel, it time starts to become an issue, but with the ability to go at higher speeds, you may find an increasing market of people willing to pay to stay on the ground, enjoy scenery, and have a far-less-hectic travel experience for their leisure trips.

  13. For all the blather, I think it’s fantastic that Anderson is willing to serve at Amtrak. That railroad could use all the managerial help it can get. It will be especially useful if he can get them to be more efficient.

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