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.

Amtrak refuses to subsidize the long distance trains any longer

In today’s release of Amtrak’s grant request for Fiscal Year 2015, President Joseph Boardman notes that, if Amtrak were to continue using revenues from the Northeast Corridor to subsidize the rest of the national train system, the resultant operating grant would be only $333 million, the lowest operating subsidy for Amtrak, in real dollars, since 1973. Yet this is not to be. In a major departure from previous practice, Amtrak is reinvesting the operating profits of the Northeast Corridor back into itself as capital investment and demanding that Congress foot the whole bill for the remainder of the national train system, a bill which is almost entirely composed of the long distance train system.

In terms of numbers, there’s little to no real difference as to whether Amtrak is requesting funds as part of an operating grant or as a capital grant; either way the total request for FY15 comes out to $1,620 million dollars. However, it marks a major difference in Amtrak’s political priorities and its strength versus Congress. Previously, Amtrak has always sought to minimize its operating loss, both for practical and political reasons. Maintenance can be deferred for decades, as the Northeast Corridor bears witness, while operational spending cannot; when funding is on the line, it is the immediate needs of operations which needs to come first. Furthermore, it may be a good deal simpler to pass a capital grant, which may slide under the radar so to speak, than it would be to pass what would otherwise be a larger operational grant.

That Amtrak is now willing to demand that Congress fund the entire cost of the national train system, rather than use revenues from the Northeast Corridor to cross-subsidize it, indicates that they are no longer operating under circumstances where they fear having to fight for every single operational dollar. Improvements in the Northeast Corridor, especially the Acela trains, and legislation which moved the burden of funding short distance routes to the host states, have greatly reduced Amtrak’s financial risk outside of the long distance train network. Indeed, the perennial argument by rail advocates that the long distance trains are necessary in order to maintain political patronage in Congress is no longer valid. If the long distance trains are a sop to Congress, then, in the apparent opinion of Amtrak, it is Congress’ responsibility to provide for them, for it no longer requires them to drum up support to continue Amtrak’s survival. It would be a grim sort of survival, with a continued lack of necessary investment in the Northeast Corridor, but even a completely hostile Congress and Presidency can no longer kill Amtrak; they can only kill the long distance trains.

It is also a recognition that Amtrak must come to grips with the investment needs of the Northeast Corridor sooner, rather than later, and that it cannot rely on a major investment by the Federal government to do so. The operational revenues of the Northeast Corridor, if nothing else, represent a somewhat steady source of income for capital investment. As we’ve seen for the past several years, Congress most certainly does not represent anything that might be described as “steady” nor has it been willing to make the large investments necessary to restore the Northeast Corridor to a state of good repair. Make no mistake, those are massive investments that Amtrak will be making. While the FY15 grant request is only for a total of $735 million in capital spending in the Northeast Corridor ($290 million of which will come from operational profits from the Northeast Corridor), Amtrak forecasts an investment of $1,573 million the next year, $1,692 million in Fiscal Year 2017, and $1,650 in Fiscal Year 2018. For comparison, this is larger than the capital investments of Canadian Pacific, Canadian National, and Kansas City Southern.

It is highly likely, however, that the Federal government will balk at clearly subsidizing the long distance trains. With a combined annual operational and capital subsidy just over $900 million, the demand by Amtrak that Congress clearly pay for the long distance trains will encounter a severe amount of resistance, especially with a Tea Party dominated Republican Party remaining in control of the House through the end of the year and probably past the election as well. Even if funding is granted, it will probably be at a reduced level and we may see route eliminations by legislative fiat. This is not altogether a bad thing; the equipment used on an eliminated route may be spread to other routes where it will perform better and reduce the overall operating deficit of the long distance train network.

To this natural resistance must be added the resistance from lobbying by the various rail advocacy organizations. Especially in states where the rail advocates have not had any success in increasing state funded rail service, I would anticipate a vociferous response against Amtrak’s proposal. Yet it is precisely the irrelevance of these organizations and their grandiose, yet completely impractical, “visions for the future” which will allow Amtrak to prevail on the merits of their plan. I do not think that it is altogether coincidental that it is by approximately nine hundred million dollars that Amtrak proposes to increase capital spending on the Northeast Corridor; they do not need to explicitly state where it is that funds may be found by a parsimonious Congress for increased investment in the Northeast Corridor.

I do not think it likely that the entire long distance train network will be dismantled. Certain routes will and some of them, such as the Sunset Limited, truly deserve a cheerful “Good riddance!” should they be so eliminated. Others, however, will continue to have sufficient patronage as to ensure Federal political support or even some state support. The Coast Starlight, for instance, would probably find itself kept, perhaps in an altered form, by the West Coast. Similarly, the Silver Service trains can probably find themselves assured of continued Federal largesse, possibly with some level of state matching funds.

However, it is quite clear that Amtrak will no longer subsidize these trains on its own and that the provision of long distance intercity rail service, if it is to be a Federal goal, must be a mandate entirely funded by the Federal government. For all the complaints that certain rail advocates may make, Amtrak cannot ignore its responsibilities as owner of the Northeast Corridor. Meanwhile, though Amtrak is a national train service, there is nothing that requires that it provide continuous rail service across the entire nation or, at its own expense, to provide rural transportation for disadvantaged communities. The gauntlet has been thrown down and we shall see if Congress truly believes that the long distance train network is worth the expense that it has laid upon Amtrak.