A New Plan to Save 80% of Amtrak – And Make it Kinda Sorta Almost Profitable

The Brookings Institution has a new study on Amtrak financing (.pdf) that’s (fortunately, for the less-wonkish) summarized in the Washington Post‘s WonkBlog.

What Brookings found is not surprising. There are only two routes that do better than break even — New York – DC and New York – Boston — and even those only make money on an operating basis, they don’t cover their capital costs.

Brookings finds that the operating profits (if the federal government subsidizes capital expenses) would cover the top 26 Amtrak routes (which carry 80% of passengers). They recommend having affected states cover the losses of other routes if they want those to survive.

I’m not sure how it would no longer be a subsidy if the states are paying rather than the federal government, but the supposition is billion dollar operating subsidies may no longer be in the cards for Amtrak. So how can they save the service that people actually use, while recognizing that the Chicago – California routes (Chicago Zephyr and Southwest Chief) are unaffordable. Fifteen routes account for over $600 million in annual operating losses.

Put a different way, Amtrak’s long haul operation is bleeding the entire system of the funds it needs to maintain shorter and medium-length routes where the passengers are.

The Hoosier State Line sees about 100 passengers a day on average. Four routes see fewer than 300 per day (one of which loses nearly $40 million per year on an operating basis).

The Brookings report is accompanied by an interactive tool that shows passenger count for each station and for each route, as well as Amtrak’s financial performance by route, so you can see how your favorite Amtrak service fares.

Train aficionados will hate this report, because it’s grist for the argument to kill of Amtrak’s long haul service (or at least that will be their fear, that if the federal government doesn’t subsidize it that affected states won’t pick up the slack).

But it’s at least as fair to characterize it as an argument to ‘save’ Amtrak. By claiming that the federal government should fund capital costs, rather than suggesting that the Northeast corridor’s ‘profits’ should go into its own tracks, they can argue there are enough profits to cover 80% of service — thereby taking the bulk of Amtrak off the table for cuts. I read it as a paper that’s looking for ways to shield Amtrak from a hostile budget environment, but that the technique only goes so far and they can’t credibly protect it all.

And truly, Amtrak’s little-used long haul routes, which meander through towns that were historically important for Congressional reasons rather than ridership purposes, are hard to defend when budget battles are even threatening air travel through major cities.

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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  1. It’d be sad to see routes go… but it makes sense. I am a train aficionado, and I really try to make Amtrak work for me. Unfortunately, most of the routes are really inconvenient. Theoretically, I can use Amtrak to travel all over the Northeast. In practice, the trains leave only on certain days, and at inefficient hours.

  2. The problem is Congress. Amtrak doesn’t maintain those routes because they want to, they maintain them because they are pork barrel for congressmen and congresswomen.

  3. There are infinite good causes that wouldn’t exist without federal subsidies (i.e., force citizens to pay for something they wouldn’t support if left to their own devices), and this per se isn’t a good reason for them to exist. Time to right-size Amtrak along with much else… long overdue.

  4. Perhaps air travel (airport operation, etc.) is subsidized, even in “major cities.” I’m waiting for that new study. Should we cut all the unprofitable airports?

  5. The interactive tool is interesting. Some of these losses on routes are staggering. The Sunset Limited costs $51.7 mil and loses $39.1 mil, implying it gets only $12.6 mil in revenue and state funding.

  6. Obviously, it’s the long distance trains that are completely uneconomical. I’ve taken a few of them over the years in sleeper cars thanks to frequent flyer point transfers. There is zero PRACTICAL reason to take an overnight sleeper train; you’re basically subsidizing a nostalgic vacation. For the folks in the cheap seats, I’ve got to believe there’s a better way for them to get where they’re going. If nothing else worked, taking a bus would probably be almost as comfortable, and could likely be done at a fraction of the real cost.

  7. For every billion of train subsidy there’s umpteen billions of subsidies to highways and air travel.

    On most routes under 200 miles between major cities high speed rail would be much less expensive than air travel, for travelers and taxpayers.

  8. The missing data in any article or study of Amtrak subsidies is “compared to what?” The Federal government and states subsidize the highways that take you to the airport, pay for air traffic control, pay for TSA security (for better or worse), often pay the capex to build the airport (or at least provide for tax exempt municipal bond interest), pass laws forcing passengers to go to an inconvenient airport (I’m looking at you Dulles and DFW) and allows the airlines to shed their debt load every decade or so each by going through Chapter 11.

    The biggest subsidy of all is the US Navy which provides free security for the transport of Mideast and other oil to the US which keeps down the cost of jet fuel and gasoline used to get passengers to the airport. What would jet fuel cost if Exxon had to pay the cost of security for transporting crude oil from Saudi Arabia to Houston/Bayonne?

    Then Congress (and apparently Gary) is shocked that Amtrak can’t compete with the free market airlines. Amtrak may be a white elephant, but so are the major airlines, so let’s compare apples to apples.

  9. @David

    A large part of the cost of the national highway system is paid for with gasoline taxes, and licensing taxes on trucks, rather than by taxes from the general fund. We pay taxes for the FAA with every flight. Perhaps you have forgotten about that?

    “The biggest subsidy of all is the US Navy which provides free security for the transport of Mideast and other oil to the US which keeps down the cost of jet fuel and gasoline used to get passengers to the airport”.

    So then, Amtrak doesn’t use any energy, or diesel fuel for it’s engines? And no Amtrak riders drive or take the bus to Amtrak stations? Of course it does, so the same argument applies against the US Navy protection of energy for Amtrak. But does the Navy only protect oil shipments? Or does it also protect the transport of agricultural products, and manufactured items, and cruise ships, and evacuation of American citizens in time of war, and natural disasters?

    To paraphrase your argument, what would a hotel room cost if Hilton had to pay the costs of providing security from terrorist attacks by al Queda?. What would a cruise vacation cost if Carnival had to pay the cost of security against pirates? How much would coffee cost if Starbucks had to pay to protect the ships transporting it’s beans? What would a candy bar cost if Hershey’s had to pay the cost of protection from the Mafia?

  10. The UK went through a reshaping in the 1960’s as a result of the Beeching Report : http://www.railwaysarchive.co.uk/docsummary.php?docID=13

    The result of the cuts was horrific: Car ownership was still not great and communities were cut off, resulting in mass exodus.

    Rather than mothball the stations and lines, land and property was sold off, ensuring that those routes could never be re-opened (there is huge growth in trains in the UK, and has been for the last two decades)

    This report by the Brookings Institute amounts to the same, short sighted view. Public transports needs to have Govt funding, and may need to be run at a loss. Whilst Intercontinental travel isn’t viable at present, the technology isn’t far off (look at the investment in maglev in the far east) and trains capable of 300mph are poss. The UK is about to start building a 186mph network (at great cost, mind)

    The cost needed to update some trans continental lines to high speed may be high, but might be a great stimulus into job creation (some high tech jobs in signalling / train manufacture).

    However, I’m sure the lobbyists and myopic folk would kill it dead

  11. It is interesting that some people believe that long distance trains will “one day” be viable in the USA. Personally, I think that’s EXTREMELY remote, but nobody can ever perfectly predict the future.

    What that may mean, however, if you combine the “dreamers” with the pork barrel politicians (“your not cutting MY train!”), it would seem like in inefficient national Amtrak network will remain in place. As the Chase credit card signups will give me more free sleeper tickets, at least I’ll take advantage of this largesse.

  12. When I compare the time it takes to get on and off a train and their usual intercity stations to air travel; in favor of train trips its usually a no brainier. When you add up the social costs and the externalities not paid for my air or car travel industries but subsidized by taxpayers the needle moves even more in favor of train travel.

  13. I’m not holding my breath on Gary making a post about whether or not we can afford to subsidize all these roads we build in America. (No don’t say Gas Taxes, they are NOT pay for the entire cost of road construction and maintainence)

  14. @hello – trains can only be environmentally better when they actually are reasonably full. empty trains — 80%+ of Amtrak — are ruinous for the environment.

  15. Do it, or don’t do it. Half-assing Amtrak is a waste. My vote would be to pour more money into it to improve service to a level that it’s actually useful. I’d also reduce Coast-to-Coast to a single train line, but increase it’s frequency.

  16. It’s long past time to take a cleaver to amtrack. We’ve been subsidizing this horse and buggy transport for eay too long.

  17. One big problem is that AmTrak offers obsolete routes based on the population patterns of the late 19th Century. In Atlanta, we don’t need to take the train to Birmingham, AL or Jackson, MS but we would love a route that goes to Chattanooga, Savannah, Orlando or Miami.

  18. No question that short-haul Amtrak service should be improved in frequencies and running times. All the shale oil the world will give us an extra decade or two of cheaper oil, while demand from emerging markets continues to keep the price high. In the long run we need energy efficient transport and trains are far lower in energy use than autos.

    Ignoring capital costs creates some inefficient distortions because the long distance trains and all trains outside the Amtrak-owned lines (which is primarily the Northeast Corridor (Washington-NYC-Boston, which branches to Harrisburg and Hartford) plus some lines in Michigan), outside these lines the Amtrak trains pay a fee to the host railroad on a per-car-mile basis to cover the cost of the tracks, so it’s simply not an apples to apples comparison. The Sunset Limited is a terrible example, exacerbated by the fact that it only runs three days a week and most stations serve no other train. When you have daily service or more frequent, when stations serve multiple trains, this reduces costs. Further, in some parts of the country – and the Empire Builder through Montana and North Dakota is a good example, provide virtually the only transport other than cars. So it can be a lifeline service.

    As for expecting the states to pay for long distance trains, how likely is that. Should we ask Nebraska or North Dakota to pay for the full costs of the interstate highways in their states? It’s really difficult to apportion and almost the best case for federal support. It’s more difficult to justify federal support for trains from NYC to Albany, which really only serve a single state. And the notion that the gas tax pays for federal highways is a fallacy. For years we’ve been transferring general fund revenues to pay for federal highways, even though the gas tax is collected on all gas sales and the vast majority of driving is on local roads, not federal highways. The highways are heavily subsidized and operate at a loss.

    A train system is a viable part of any country’s transportation system. America’s train system is pretty inadequate and if anything we should be making a significantly greater investment. And with the size of our country, a country like Russia might be the best comparison – with a system of dense corridors but also long-distance trains in big open places. I think the Trans Siberia Express takes 7 days from Moscow to Vladivostok and crosses 7 time zones.

    It’s easy to take shots at Amtrak, but much of that is due to historical underinvestment in passenger rail transport in USA. Look at what China and even India are doing.

  19. Have to laugh at the references to China’s high speed train system. It has turned out to be an extremely wasteful and utterly corrupt boondoggle. No one wants to ride them because they necessarily cost far more than the older trains, and the safety record is so atrocious that the government has had to issue orders to slow them down. And that in a country where an authoritarian govenment awash in trade dollars has a free hand to do whatever it wants to “make the trains run on time”.

    High speed rail is a patronage program for well connected developers to make a fortune building a system that even if it works will only be used by the sort of upper income folks who now drive Teslas and Nissan Leafs. Most likely it all ends up, Solyndra like, in abandonned infrastructure and Billions in tax dollars poured down the drain.

    Any country that can’t even get it’s Postal Service to operate at break even shouldn’t be thinking of building something as costly and complex as high speed rail.

  20. @Robert Hanson
    as a chinese i’d like to say the fast train investments are not wasteful. they are really popular now. they are so fast and also affordable. while it produces much corruption & its services are always low level, (while the recent high-speed branded trains are much better) it is still my (and many many chinese’) favourite transportation method in china. it seems to be profitable even after some waste of funds due to corruption. but of course, the case is special because of china’s large population. so every seat and bed is occupied.

  21. There are a lot of frustrating opinions being thrown out here. Trains certainly have their place, but the problem is that they try to address too many things. Public transit and cars are great for short distance. Air is great for long-haul. Trains are great for intermediate trips in densely populated areas. Having trains that go coast-to-coast in this country are asinine. Let’s have Amtrak address our needs with their strengths instead of having them still provide service that is obsolete by a few decades.

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