Sunday, August 10, 2014

Will 2015 be the year that Amtrak turns a profit?

Nine months in to Amtrak’s fiscal year and it is clear that 2014 is going to be Amtrak’s best year ever financially. Indeed, not only is it set to post the lowest loss in inflation adjusted dollars in its history, but the lowest loss in nominal dollars. In three of the months this year; October, December, and June; Amtrak has posted an operational profit, that is to say that it’s revenues have exceeded the costs of providing the service (but not accounting for items such as depreciation). These revenues were sufficiently great that, even with November showing a loss, Amtrak managed to eke out a profitable first quarter.

For the year to date, Amtrak has posted a loss of $128.4 million and is currently projecting a total loss for the year of $233.3 million. However, to do this, it would need to lose $35 million each month during its best performing time of year. Last year, between all three months combined, it lost only $34 million, posting a slight profit in July of $3 million. For it to show a loss of over a hundred million dollars instead would require that some truly amazing feats of accounting over the previous year. That’s not to say that that hasn’t happened: There is currently a $40.4 million in Auto Train expenses that appear to have vanished into the ether. Should it reappear, it will pose a rather significant impact to Amtrak’s bottom line. If, however, it truly has disappeared, and Amtrak’s performance in the fourth quarter matches that of the rest of the year, we should see operating profits in July and August both, with a small loss in September bringing Amtrak to a total operational loss for the year of only $95 million compared to last year’s $355 million loss.

What accounts for this dramatic change in fortunes? Some of it is the result of increased state payments, but this would be the smallest change. There is so far only a $35.6 million increase in revenue credited to state supported train revenue and $62.9 million expected for the whole year. This is dwarfed by the $79.2 million in increased ticket revenues and the $72.2 million reduction in expenses compared to 2013.

Will Amtrak be able to match this performance next year and thus post a small operating profit? It’s possible. This year has shown a net drop in ridership, even with adjustments to represent more accurate counting (multi-pass ridership was significantly overestimated), and revenue has been mostly stagnant outside of the Acela. If Amtrak can manage to grow ridership and revenue in its other segments next year, it should have a fairly strong chance of meeting that goal. Even if 2015 turns out not to be the year that Amtrak makes an operating profit, we should see it by the end of the decade as new equipment, especially the Acela replacement, comes online and expands Amtrak’s capacity.

Thursday, July 10, 2014

Capitol Corridor launches plans to increase Roseville frequencies

The Capitol Corridor is looking at spending $200 million to increase service from one round trip to ten

The project involves building a third rail line on the Union Pacific Railroad right-of-way. Officials with Union Pacific, which would own the line, say the project would free up space for their freight train operations, which are expected to increase over time. UP would own the new tracks and pay to maintain them, but would not help pay to build them. Instead, it would grant Capitol Corridor the right to run 10 round-trip trains a day on the line.
The line would require construction of 11 overcrossings, including a train bridge over the American River adjacent to the existing rail bridge just west of the Capital City Freeway, and a new passenger platform at the Roseville Amtrak station.
Capitol Corridor officials say the new trains could be up and running by 2018 if the agency lands state and federal funding for the project. Most of the trains would continue on to the Bay Area after stopping in Sacramento. Trains would run from the downtown Roseville Amtrak station to the Sacramento Valley Station at Fifth and I streets in downtown Sacramento, a half-hour ride.
Although the project’s upfront construction costs are large, operational costs are likely to be minimal, according to Capitol Corridor planning manager Jim Allison. The extended service would use existing trains and crews. Allison said his agency’s research suggests south Placer County is a growth area for train ridership. “The whole Placer County area is a growing community, and they are open to the transit options.”
It seems a bit silly, I must admit, not to go whole hog and spend whatever is necessary to send these trains the additional 18 miles to Auburn. That said, the increased train frequencies should do a very good job of boosting ridership from Roseville. Right now the only Capitol Corridor train comes leaves at 7:03 in the morning and returns at 5:48 in the evening. That doesn't work for commuting, which is fairly common on the Capitols, and works even more poorly for attracting the leisure market which is the bread and butter of intercity rail (and 58% of Capitol Corridor ridership, page 13 of the ridership profile survey). These increased frequencies to Roseville should help to arrest the declining ridership that has been plaguing the Capitol Corridor for the past year.

Tuesday, June 17, 2014

All Aboard Florida is taking out a rather pricey loan for construction

From Bloomberg comes the news that All Aboard Florida wants a five-year $405 million dollar loan at 12%.

While such a bond offering certainly does help show that All Aboard Florida is indeed a serious concern, that high of an interest rate is absolutely ruinous for any plans to run a profitable rail line; even at their best, the margins are not terribly high. My personal supposition is that this is intended merely to get the ball rolling while they continue to seek an RRIF loan from the Federal government; part of that loan would then be used to refinance this loan into something rather more reasonable. Without the low interest rates of a Federal RRIF loan, however, I do not believe that this line can be profitably constructed, even with the potential revenue from their hotel and convention center plans.

A modest proposal for RailPac

Lately, it feels like almost every single update from RailPac has to do with the long distance train network. To a certain degree this makes sense; there is a question of interconnection with the national network and the long distance Coast Starlight is currently the only passenger train between Northern and Southern California (though not at terribly good times for anyone wishing to actually make such a journey), and of course the long distance trains are always under attack when Congress is putting together a budget. But the emphasis has gotten quite out of hand with so many messages and calls to action regarding the long distance trains: It calls into question whether RailPac is actually attempting to represent the rail passengers of California or whether they’re simply advocates for long distance trains who happen to be located in California. 91.7% of all the boardings and alightings within the state of California are on the state supported trains with an additional 4.7% coming from the Coast Starlight; the emphasis shown to the Sunset Limited and to the long distance trains in general is downright unseemly on that basis.

It does not help that they continue to endorse a conspiracy take on the Northeast Corridor, blaming it for all of Amtrak’s financial woes and the occasional claim of cooking the books as regards the long distance trains. That they continue to approvingly quote Andrew Selden is a strong mark against them, given his habit of lying, either by omission or commission, to distort the truth about long distance trains and the Northeast Corridor. Take, for example, RailPac President Paul Dyson’s recent post, in which he uses some figures provided by Andrew Selden to claim that “Amtrak’s early management was able to use its experience to operate at a moderate deficit. That deficit tripled as soon as the NEC was absorbed and has grown ever since.” I’m a bit surprised that he required Selden’s help to find those figures since they’re available a short google search away, but be that as it may, those reports very clearly show Andrew Selden to have deliberately misused numbers and misrepresented the numbers that he did use. Very simply, the numbers used for 1973 are not from the same set of numbers used for 1978 (in fact, Amtrak does not appear to use them again after 1973) and the numbers which are used for 1978 contain with them a breakdown of expenses which makes it clear that the rise in expenses is not due to Amtrak taking over the Northeast Corridor.  Here follow the actual compatible numbers for 1973-1978, followed again by the breakdown of expenses from 1972-1978

Year Revenue Expenses Deficit
1973
$202,093.00
$345,310.00
-$143,217.00
1974
$256,910.00
$497,699.00
-$240,789.00
1975
$252,697.00
$566,983.00
-$314,286.00
1976
$277,769.00
$665,794.00
-$388,025.00
1977
$311,272.00
$784,244.00
-$472,972.00
1978
$313,002.00
$830,132.00
-$517,130.00


1972
1973
1974
1975
1976
1977
1978
Percentage change 1972-1978 Absolute change 1972-1978
Maintenance of Way
$4,958
$4,495
$10,421
$12,185
$21,692
$45,053
$53,054
1,070.07%
$48,096
Maintenance of Equipment
$60,001
$65,515
$98,862
$134,964
$177,102
$216,207
$235,591
392.65%
$175,590
Traffic
$20,142
$26,517
$34,604
$26,480
$35,471
$42,203
$43,332
215.13%
$23,190
Transportation
$129,403
$158,244
$198,151
$224,784
$245,763
$266,340
$289,188
223.48%
$159,785
Dining and buffet
$28,030
$33,285
$52,146
$50,450
$52,599
$60,886
$62,069
221.44%
$34,039
General
$37,038
$30,456
$53,958
$65,272
$68,931
$67,558
$54,202
146.34%
$17,164
Taxes
$15,727
$21,604
$40,782
$46,139
$57,968
$81,557
$89,164
566.95%
$73,437
Equipment rents
$5,798
$5,194
$8,775
$6,349
$6,268
$4,440
$3,532
60.92%
-$2,266

The large increase in expenses was not due to the absorption of the Northeast Corridor and its maintenance costs, though it did have the largest percentage change and was responsible for some increase in expense. It would be rather mind boggling if track maintenance, which, even with the old tunnels and bridges of the Northeast Corridor, is quite cheap, were to be the the cause of such a large increase. Instead, as the 1977 Annual Report notes: "Besides inflation and the ownership and operation of the Northeast Corridor, the increase in expenses, which led to the higher deficit, resulted from addition of new routes and services, and continuing increases in direct labor costs and the cost of equipment maintenance and overhaul." (Emphasis added).

But perhaps it might be too much to ask for that RailPac cease associating with a liar and promoting his distortions of the truth or that it cease to continue spreading what is, I admit, a quite popular, if grievously mistaken, view of Amtrak's finances. Instead, I offer up a modest proposal to RailPac, that they might actually represent the rail passengers of California: Balance.

For every call to legislative action to support the Sunset Limited, there should be a call to legislative action to support the introduction of the Coachella Valley rail service. Already the Thruway route from Indio to Fullerton has 20% of the Sunset Limited's entire ridership. Similarly, for every other call to action on other long distance trains, there should be a call to action for the Coast Daylight, for the San Joaquin extension to Redding, and expansion of the Capitol Corridor. For every post detailing a trip made on a long distance train outside of California, there ought to be a post detailing connections that can be made within California via the Thruway network. From the standpoint of California riders, both actual and potential, Solvang or Yosemite are far more relevant than is Tucson and it is such destinations that RailPac ought to be highlighting.

Tuesday, April 15, 2014

Marginal costs and revenues for Amtrak trains

With the release of the combined FY2014 Budget and Business Plan, FY2015 Budget Request Justification, and FY2014 – 2018 Five Year Financial Plan by Amtrak, we're able to gain a little insight into the marginal expenses of running Amtrak trains according to whether they are long distance, state supported corridor trains, or part of the Northeast Corridor. This counts only fuel, T&E and OBS crew and labor, host railroad maintenance of way, host railroad performance incentives, commissary, car and locomotive maintenance and turnaround, and maintenance of way support. These figures can be found on pages 54 (for NEC), 61 (for state supported corridors), and 69 (for long distance trains). Train mile figures are in the appendix, pages 79-80. It goes without saying that calculations based on these figures are of necessity somewhat crude. These numbers do not, of course, account for expenses which are marginal at the level of the route itself, such as stations, nor for maintenance of engineering support or other such costs.


Train miles Marginal cost per train mile Fuel and power T&E crew labor OBS crew labor and support Host RR MoW Host RR performance incentives Commissary provisions and management Car & Locomotive Maintenance and Turnaround MoW support
Long distance
14,451,000
$47.08
$142,600,000
$136,300,000
$119,900,000
$42,400,000
$14,000,000
$58,400,000
$129,200,000
$37,500,000



$9.87
$9.43
$8.30
$2.93
$0.97
$4.04
$8.94
$2.59
Northeast Corridor
9,042,000
$45.05
$55,300,000
$81,400,000
$24,800,000
$2,700,000
$800,000
$23,600,000
$125,100,000
$93,600,000



$6.12
$9.00
$2.74
$0.30
$0.09
$2.61
$13.84
$10.35
State supported
14,461,000
$30.74
$76,500,000
$120,100,000
$27,300,000
$35,500,000
$28,800,000
$14,600,000
$103,400,000
$38,300,000



$5.29
$8.31
$1.89
$2.45
$1.99
$1.01
$7.15
$2.65


It is completely unsurprising that the long distance trains have a vastly increased onboard services cost compared to the other train services. Staffing on the Northeast Corridor trains is minimal, with only a single OBS crew member on most trains, and not all state supported trains have jobs for OBS personnel. This is in stark contrast to the long distance trains which generally operate with ten or more such crew, except for the Palmetto. Nor is it surprising that the Northeast Corridor, filled with various tunnels, bridges, and half a century of deferred maintenance, has significantly increased maintenance of way expenses. What is surprising is that the fuel cost of the Northeast Corridor, running on rather cheap electricity, is still higher than state supported trains. However, we know that Amtrak's current trains in the Northeast Corridor are incredibly energy inefficient and one source notes that "the very bad aerodynamics of the Amtrak high speed trains (one AEM-7 locomotive with six Amfleet coaches) means that, at higher speeds, the TGV or X-2000 (Swedish technology) actually use half or less the energy per p-km used by Amtrak in their Northeast Corridor" (page 25). With the introduction of the ACS-64 and the NextGen HSR trains, we should see a more appropriate fuel and power cost for the Northeast Corridor.

A grain of salt should be taken when looking at the fuel & power and car & locomotive maintenance figures for the long distance trains; these numbers will be slightly skewed upwards by the Auto Train carrying a lengthy consist consisting mainly of freight cars. Somewhat surprisingly, state supported train costs appear to be lower than those for Metrolink's commuter rail, despite the fact that the Metrolink costs did not include maintenance of way expenses. This may be due to higher operational costs from Metrolink's dispatching center, costs that were not offset in that calculation by the appropriate revenues from freight and Amtrak, as well as the fact that Metrolink has a significantly higher fuel cost. The failure prone old age of the locomotives may also be a major contribution to the higher cost.

With a view of the marginal costs, one that is admittedly quite rough, we can look to the question of which, if any, trains cover their marginal costs. Those trains which cover their marginal costs of operation benefit from increased frequencies since they will help bring down the total required subsidy. This is not to say that routes below that number do not benefit from increased frequencies or that they should not be subsidized (though subsidization expenses should not exceed the social benefits).

Unfortunately, Amtrak does not provide a breakdown of train miles by route, only by the business segment. Thankfully the FRA does provide those numbers, though only to the extent of the nearest ten thousand train-miles. These figures are available in the Quarterly Rail Service Metrics and Performance Reports, specifically in Table 11, located on page 16. Using these figures and Amtrak's 2013 ticket revenue figures, I was able to come up with a rough figure for the revenue of each Amtrak route per train mile.


Revenue per train mile Ticket revenue Train miles
Acela
$159.89
$530,820,821
3,320,000




Northeast Regional
$109.34
$613,406,155
5,610,000
—Richmond/Newport News
$20.97
$32,916,626
1,570,000
—Lynchburg
$28.65
$11,744,966
410,000
—All Other Northeast Regional
$156.68
$568,744,563
3,630,000




New York-Albany
$67.12
$44,299,328
660,000
Pacific Surfliner
$39.36
$62,576,548
1,590,000
Carolinian
$38.16
$19,841,847
520,000
Hiawatha
$37.88
$16,287,184
430,000
Pennsylvanian
$32.60
$10,431,324
320,000
Keystone
$32.34
$44,299,328
1,370,000
Cascades
$31.14
$29,269,205
940,000
San Joaquins
$29.19
$39,401,591
1,350,000
Wolverine
$28.95
$19,398,853
670,000
Pere Marquette
$26.27
$3,152,828
120,000
Adirondack
$26.06
$7,035,147
270,000
Blue Water
$25.95
$6,228,730
240,000
Capitol Corridor
$24.09
$27,699,783
1,150,000
Maple Leaf
$23.56
$23,796,560
1,010,000
Illini/Saluki
$21.73
$9,562,149
440,000
Lincoln Service
$20.23
$16,382,439
810,000
Downeaster
$17.85
$8,211,723
460,000
Ethan Allen Express
$16.62
$2,825,134
170,000
Carl Sandburg/Illinois Zephyr
$15.64
$5,788,619
370,000
Kansas City-St. Louis
$14.04
$5,617,913
400,000
Piedmont
$13.86
$3,325,948
240,000
Heartland Flyer
$12.64
$2,022,956
160,000
Vermonter
$11.43
$5,029,712
440,000
Hoosier State
$11.16
$892,553
80,000
New York-Niagara Falls
$0.00

670,000




Auto Train
$111.37
$73,505,625
660,000
Coast Starlight
$41.95
$42,786,995
1,020,000
Lake Shore Limited
$39.66
$32,919,676
830,000
Silver Meteor
$38.78
$39,558,152
1,020,000
Capitol Limited
$37.50
$21,373,833
570,000
Empire Builder
$36.23
$67,394,779
1,860,000
Crescent
$32.89
$32,233,213
980,000
Silver Star
$31.57
$34,095,273
1,080,000
City of New Orleans
$31.53
$21,440,868
680,000
Texas Eagle
$29.73
$27,650,161
930,000
Palmetto
$29.39
$17,929,176
610,000
California Zephyr
$28.01
$49,864,217
1,780,000
Southwest Chief
$27.02
$45,129,813
1,670,000
Cardinal
$21.48
$7,733,458
360,000
Sunset Limited
$19.18
$12,275,400
640,000



A few explanatory notes are in order. First, the Springfield-New Haven Shuttles are not counted because I could find no separate figure for their train miles in the FRA data. It's possible that they are included with the Northeast Regionals, but, lacking knowledge, I excluded their revenue. Second, though the FRA includes all of the train miles for the Amtrak Virginia trains, such as from Lynchburg to Boston, Amtrak only counts the revenue from passengers who board or depart in Virginia; their actual performance is better than this indicates. Third, some non-Regional trains on the NEC, such as the Vermonter, have their revenue, expenses, and passenger numbers accounted for as Regionals until they leave the NEC; while a perfectly legitimate accounting measure, if their train-miles as reported to the FRA are not similarly adjusted, they will appear worse than reality. Finally, Empire Service trains to Buffalo apparently have their revenue counted under the Maple Leaf; I have added their train miles to those of the Maple Leaf's as a result.

It's worth noting that though the Northeast Corridor and several state supported trains cover their marginal costs of operation, the long distance trains do not, with the probable exception of the Auto Train. The Starlight comes the closest, but has additional expenses relating to the Pacific Parlour Car, I expect that the Lake Shore Limited comes the closest to meeting its actual marginal costs, rather than the rough estimate I can provide. It is also completely unsurprising that the California Zephyr, Southwest Chief, and Sunset Limited do as terribly as they do. While the other long distance trains have a variety of solid markets that they are able to serve across a significant portion of their route, frequently at either end, and many sharing that route with multiple other trains (Starlight with Surfliner, Capitol Corridor, and Cascades; Texas Eagle with Lincoln Service, etc.), these particular trains just have a whole heap of nothing for most of their routes, nothing that is often served at poor times as well, contributing to an outsized percentage of riders who take the trains from end point to end point.