03-18-2000

TRANSPORTATION: All Aboard the Profit Limited

Nine hundred and seven million dollars. That's the amount of money Amtrak,
a chartered but federally subsidized corporation, lost last year. Such a
figure would be terrible news for any business, but it's even more
troubling for Amtrak, because Congress has directed the nation's rail
passenger system to cover its operational costs after 2002. If it appears
that Amtrak won't meet that goal, Congress could vote to restructure-or
worse, liquidate-it.


In an effort to make progress toward the goal of operational
self-sufficiency, Amtrak last month unveiled a market-based strategy that
expands and restructures many of its routes. Among other things, it
extends the Crescent service (which links New York City and New Orleans)
to Dallas. It also introduces daily service on the Texas Eagle (which
connects San Antonio and Chicago), and it restructures the Sunset Limited
(which links Orlando, Fla., and Los Angeles).


Amtrak expects its plan to generate a profit of $65 million by 2003, and
the Clinton Administration supports the expansion. "For the first
time, Amtrak has taken a businesslike approach and has analyzed the entire
system," said Jolene Molitoris, the administrator of the Federal
Railroad Administration and a member of Amtrak's board of directors.
"That's what's going to [help] achieve financial health for
Amtrak."


But according to critics, Amtrak's plan pushes the passenger rail service
further off track; instead of expanding, they argue, Amtrak should
jettison many of its unprofitable routes. They point out that Amtrak has
been drowning in red ink in large part because it loses money on all its
long-distance routes except for the Washington, D.C.-New York Metroliner.
In 1998, the General Accounting Office, Congress's auditing arm, reported
that the Sunset Limited lost almost $300 per passenger, the Texas Eagle
lost more than $200, and the Crescent lost more than $150. Overall, the
GAO found that Amtrak's trains lost almost $50 per passenger.


These proposed route changes must first be negotiated with the freight
railroads, which own most of the nation's tracks. But, critics ask, even
if Amtrak gets the changes it wants, how can it improve its finances by
expanding routes that are already losing money? "It's one of the most
backward plans that Amtrak has issued in its 30 years of existence,"
said Joseph Vranich, a staunch Amtrak detractor and a member of the Amtrak
Reform Council, the congressionally created group that will help decide
Amtrak's fate.


Vranich and others contend that Amtrak's plan is designed to curry favor
among the members of Congress and other political leaders who will benefit
from the expanded service. After all, they explain, if Amtrak doesn't
become operationally self-sufficient, it will need all the congressional
help it can get to stay alive. "Their sole purpose is to snooker some
town or state to become an uninformed cheerleader for Amtrak," a
House aide said.


Moreover, critics point out that much of the planned expansion will occur
in states and cities represented by Amtrak supporters. For instance,
adding daily service to the Texas Eagle will benefit Sen. Kay Bailey
Hutchison, R-Texas, who chairs the Senate subcommittee handling rail
issues. Wisconsin Republican Gov. Tommy G. Thompson, the chairman of
Amtrak's board of directors, will see two new trains or route extensions
running through his state. And Meridian, Miss.-whose mayor also sits on
Amtrak's board-will become a hub for the Crescent's expansion to
Dallas.


Amtrak and its supporters, however, defend the expansion. Molitoris notes
that Amtrak eliminated many of its routes several years ago, and that this
approach failed miserably. Amtrak's market-based analysis showed that
savings generated by cutting just one unprofitable route are more than
offset by revenue lost on connecting routes.


These advocates explain that one of Amtrak's more successful services has
been attaching mail and express freight to its passenger trains. And if
Amtrak wants this service to thrive, it must increase the frequency of its
trains, said Gil Carmichael, an Amtrak supporter and the chairman of the
Amtrak Reform Council. "They can't shrink themselves into success.
They are going to have to grow themselves into self-sufficiency," he
said.


Amtrak's defenders also maintain that the GAO's 1998 figures are outdated,
and that the financial situation of its long-distance routes has improved.
In fact, Hutchison has noted that the Texas Eagle's ridership has
increased and that its mail and express service has thrived.


Still, it's difficult to see how this expansion will improve Amtrak's
bottom line. Consider the proposed route between Chicago and Des Moines,
Iowa. Amtrak believes that this service will attract new passengers and
expand its refrigerated express business. Yet this train will face swifter
competition: By airplane, this Chicago-Des Moines trip takes just over an
hour. By car, it takes five hours. But on Amtrak, it will take up to 10
hours-mainly because of poor infrastructure and rail-freight
congestion.


Also, consider the proposed extension of the Hiawatha service (which links
Chicago and Milwaukee) to Fond du Lac, Wis., which is located 60 miles
north of Milwaukee. Amtrak plans to run the Hiawatha-which the GAO in 1998
said lost $50 per passenger-twice a day through this city of 40,000
people, and it hopes that this expansion will increase the number of
passengers as well as its mail and express service.


But Fond du Lac's residents aren't sure that they will take advantage of
this brand-new service. "Right now ... I don't know how many people
will take Amtrak," said Glenn Brill, the executive director of the
Fond du Lac Convention & Visitors Bureau. "I can leave my office
and be in downtown Milwaukee in an hour by car."


Mark Murray

National Journal