Stopping the Runaway Train: The Case for Privatizing Amtrak, Cato Policy Analysis No. 712

7/31/2019 Stopping the Runaway Train: The Case for Privatizing Amtrak, Cato Policy Analysis No. 712

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Executive Summary

When Congress created Amtrak in 1970,passenger-rail advocates hoped that it wouldbecome an efficient and attractive mode oftravel. More than 40 years of Amtrak operationshave disappointed them, as Amtrak has becomethe highest-cost mode of intercity travel andremains an insignificant player in the nationstransportation system. Nationally, average Am-trak fares are more than twice as much, per pas-

senger mile, as airfares. Despite these high fares,per-passenger-mile subsidies to Amtrak arenearly nine times as much as subsidies to air-lines, and more than 20 times as much as sub-sidies to driving. When fares and subsidies arecombined, Amtraks costs per passenger mileare nearly four times as great as airline costs.

Partly because of these high costs, Amtrakis an insignificant mode of travel. The averageAmerican flies close to 2,000 miles a year andtravels by car around 15,000 miles a year butrides Amtrak only about 20 miles a year.

Nor do the environmental benefits of pas-senger trains justify Amtraks subsidies. Busesuse far less energy per passenger mile than Am-trak. Cars in intercity travel are typically as en-ergy efficient as Amtrak. While Amtrak is cur-rently more energy efficient than flying, airlineenergy efficiency is improving faster than Am-

traks, and by 2025 air travel is likely to use lessenergy per passenger mile than trains.

Recent efforts to reform Amtrak have provenfutile as entrenched interests, ranging from la-bor unions to local activists, have kept Amtrakan inefficient carrier heavily dependent on gov-ernment subsidies. No amount of reform willovercome the fundamental problem that, solong as Amtrak is politically funded, it will ex-

tend service to politically powerful states even ifthose states provide few riders.

Budgetarily, Amtrak has become a runawaytrain, consuming huge subsidies and providinglittle or no return. Four decades of subsidies topassenger trains that are many times greaterthan subsidies to airlines and highways havefailed to significantly alter American travel hab-its. Simple justice to Amtraks competitors aswell as to taxpayers demands an end to thosesubsidies.

The only real solution for Amtrak is priva-

tization. Private operators would enjoy sub-stantial cost savings over Amtrak and would befree to serve those routes that attract the mostpassengers rather than the ones that are backedby the most political muscle. Private railroadswould also be more likely to develop innova-tions that will attract new riders.

Stopping the Runaway TrainThe Case for Privatizing Amtrak

by Randal OToole

No. 712 November 13, 2012

Randal OToole is a senior fellow with the Cato Institute and author of Gridlock: Why Were Stuck inTraffic and What to Do about It andAmerican Nightmare: How Government Undermines theDream of Homeownership.


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Before Amtraktook over

the nationspassenger trains,

rail travel costconsiderably

less than flying.Today, averageper-passenger-

mile rail fares aremore than twiceaverage airfares.

Introduction

When Congress passed legislation cre-ating Amtrak in 1970, passenger-train ad-vocates hoped that a national network of

passenger trains would be operationallyprofitable and attractive to travelers. Instead,it has required continuous federal subsidiesfor operations and repeated injections of fed-eral dollars for maintenance.

In fact, Amtraks appetite for federal fundsappears to be insatiable. Its budget requestfor 2013 was 55 percent more than Congressgave it in 2012. In 2010 Amtrak proposed tospend $117 billion upgrading its 457-mileNortheast Corridor line, a plan whose costballooned to $151 billion by 2012. For com-

parison, the inflation-adjusted cost of build-ing the entire Interstate Highway System wasonly about three times this much, yet it ismore than 100 times as long as the NortheastCorridor andunlike Amtrakit was paidfor entirely out of user fees.

Despite its growing cost, Amtraks con-tribution to the nations transportation istruly miniscule. The average American travelsabout 15,000 miles a year by autowell over3,000 of them on interstate highwaysand1,800 to 2,000 miles a year by air, but only

about 20 miles a year by Amtrak. Even in theNortheast, the average resident of the Boston,New York, Washington, and intermediate ur-ban areas travels little more than 40 miles ayear in Amtraks Northeast Corridor trains.

In short, budgetarily Amtrak has becomea runaway train, eating up huge subsidies andproviding little or no return. Over the pastfour decades, subsidies for every passengermile carried by Amtrak have averaged close to10 times as much as federal, state, and localsubsidies to airlines and more than 20 times

as much as subsidies to auto drivers.This has made Amtrak a continuing puz-

zle for legislators, budget cutters, and policyanalysts. On one hand, federal subsidies toAmtrak are considerably smaller than fed-eral subsidies to airlines or local subsidies tohighways, leading rail passenger advocatesto argue that Amtrak deserves more. On the

other hand, Amtrak carries only about 1 per-cent as many passenger miles as the airlinesand a fraction of a percent of the passengermiles that intercity highways carry, leadingcritics to argue that it is a waste of money.

A close look at the data reveal that Amtrak has failed for two primary reasons. First,in most markets passenger trains are simplynot competitive against airline or highwaytravel. Even in the 100- to 500-mile rangesthat rail advocates often say are optimal forpassenger trains, buses are far less expensive(and far more energy efficient) than trainsSecond, government control of Amtrak hassaddled it with numerous inefficiencies, in-cluding unsustainably expensive labor con-tracts and political pressure to maintain

service on routes that attract few passengersRecent years have seen several attempts

to reform Amtrak in order to reduce its costsand streamline its operations. But these ef-forts have proven futile as entrenched in-terests, ranging from labor unions to localactivists demanding that government sub-sidize trains they rarely ride, have kept Am-trak an inefficient carrier heavily dependenton huge government subsidies. No amountof reform will overcome the fundamentalproblem that, so long as Amtrak is politically

funded, members of Congress will pressure itto provide service to almost every state evenif trains attract few riders in some of thosestates.

The only real solution for Amtrak is priva-tization. Private operators would enjoy sub-stantial cost savings over Amtrak and wouldbe free to serve those routes that attract themost passengers rather than the ones thatare backed by the most political muscle. Pri-vate railroads would also be more likely todevelop innovations that will attract new

riders.

The Highest-Cost Mode

Before Amtrak took over the nations pas-senger trains, rail travel cost a little more thanbuses but considerably less than flying. It thus


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Buses are lessexpensivethan Amtrakoften far lessexpensivefor alengths of trips.

offered people of all incomes a genuine alter-native mode of transportation. Today, thanksto Amtrak management, trains have become

the highest-cost mode of intercity travel, andmany of them are patronized mainly by thewell-to-do who can afford the extra time re-quired for trains rather than flying.

In 1970, the year before Amtrak took overthe nations passenger trains, average railfares were about one-third less than aver-age airfaresabout 18 cents (in todays pen-nies) versus 27 cents per passenger mile.1Four decades of Amtrak management havereversed this ratio and more: by 2011, aver-age rail fares were 110 percent greater than

airfaresabout 28.5 cents versus 13.8 centsper passenger mile (see Figure 1).2

Part of this change was due to a 50 percentdecline in inflation-adjusted airline fares,which is beyond Amtraks control. But partis due to a 70 percent increase in average railfares, which Amtrak says was necessary duein part to pressure from Congress to reduce

the companys operating losses. During anera when most private transportation costssignificantly declined, Amtraks dramatic in-

crease in fares was stunning.Not all of Amtraks trains collect fares av-

eraging 31 cents per passenger mile. Amtrakdivides its trains into three groups:NortheastCorridor trains that connect Boston, NewYork, and Washington;short-distance corridortrains that generally serve cities in one ortwo states, usually with state support; andlong-distance trains that travel through sev-eral states.

In 2011 Amtrak collected more than 75cents per passenger mile on the Acela trains

in the Northeast Corridor and 42 cents apassenger mile on other Northeast Corridortrains. Short-distance corridor trains col-lect an average of 22 cents a passenger mile,while long-distance trains collect an averageof 17 cents a passenger mile. These averagesare still greater than average airfares; only4 of the 46 trains in Amtraks accounting

0

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15

20

25

30

35

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1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Air Rail Bus

Figure 1Average Airline, Rail, and Bus Fares per Passenger Mile

Source:2010 National Transportation Stati stics, table 3-16, Average Passenger Revenue per Passenger-Mile.Note: As inflation-adjusted airfares declined by 50 percent, Amtrak fares grew by 70 percent. As a result, Amtrakis now the highest-cost mode of intercity travel.

CentsPerPassengerMile


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On numerousroutes, buses

are not only lessexpensive but are

faster and morefrequent than

Amtrak.

charged fares less than the airline average of13.8 cents per passenger mile.3

To be fair to Amtrak, airline trips tend tobe longer than rail trips and, since much of

the cost happens at the terminuses, longertrips cost less per passenger mile. In 2001 theaverage airline trip was 1,500 miles, while theaverage rail trip was 250 miles.4 As shown in

Table 1Comparative Fares between Various City Pairs

Air Miles Air Amtrak Bus

New York-Seattle 2,400 142 266 139

Chicago-Oakland 1,830 170 205 119

Chicago-Los Angeles 1,740 135 156 119

Chicago-Seattle 1,710 126 159 119

Denver-Oakland 954 90 130 99

New York-Orlando 950 96 127 59Chicago-Denver 885 74 138 99

Chicago-New Orleans 838 105 117 89

Chicago-New York 731 90 97 55

Oakland-Seattle 670 100 100 70

Atlanta-Washington 547 104 108 49

Oakland-Portland 544 71 80 78

Chicago-Memphis 492 159 99 16

Atlanta-New Orleans 424 79 110 9Oklahoma City-San Antonio 409 87 59 76

Cincinnati-Washington 409 69 70 11

Boston-Washington 398 65 70 16

Denver-Salt Lake City 390 96 75 69

Chicago-Minneapolis 333 54 102 9

Chicago-St. Louis 258 94 25 13

Chicago-Detroit 234 94 32 6

Houston-San Antonio 192 54 33 8

Portland-Seattle 129 83 32 10

Source: Fares gathered on September 24, 2012, for one-way air and rail trips taken on February 12, 2013, andone-way bus trips taken on October 23, 2012 (most bus fares were unobtainable for February). Airline fares collected from kayak.com; Amtrak fares from Amtrak.com; bus fares gathered from megabus.com, boltbus.comand greyhound.com; air miles from webflyer.com.Note: Bus companies charge lower fares than Amtrak in almost every market, and are often more frequent andfaster than Amtrak trains. Airline fares are also lower than Amtrak on longer routes.


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Domestic airroutes carrynearly 100times as manypassenger milesas Amtrak,while intercityhighwayscarry some 300

times as manypassenger milesas Amtrak.

Table 1, for trips of more than about 800 airmiles, airlines tend to be significantly less ex-pensive than Amtrak; for trips of 400 to 800air miles, the prices are about the same; andfor trips under 400 miles, Amtrak tends to

be significantly less expensive than air travel.While Amtrak may be less expensive thanair travel for relatively short trips, buses areless expensive than Amtrakoften far lessexpensivefor all lengths of trips. In 2001(the last year for which comprehensive dataare available), bus fares averaged just under13 cents a passenger mile compared with justover 13 cents for airfares and 25 cents forAmtrak. Today, the new model of bus ser-vice pioneered by Megabus costs significant-ly less than that.5 At 217 miles, the average

bus trip is only a little shorter than the av-erage Amtrak trip, so there is no trip lengthover which Amtrak has a real competitive ad-vantage.6

On numerous shorter routes, includingNew YorkBuffalo, New YorkToronto, NewYorkRaleigh, WashingtonRichmond, Ra-leighCharlotte, ChicagoMinneapolis, andChicagoIndianapolis, buses are not only lessexpensive but are faster and more frequentthan Amtrak. On most longer routes, airlinesare also more frequent and, of course, faster

than Amtrak. Amtraks only advantage isthat it provides a slightly different quality ofservice from buses or air, giving passengersmore legroom and greater opportunities tomove around the vehicle. But both buses andplanes can easily match this; for example, Li-moLiner, a Boston-to-New York bus, containsjust 27 seats on a vehicle that would normallyhold around 55 and offers videos, on-boardfood service, WiFi, and other amenities.7

The Highest-Subsidy Mode

Fares are just part of the cost of trans-portation, as most modes of passengertransport receive some government subsi-dies. Amtrak supporters are quick to pointout that subsidies to air and highway travelare greater than subsidies to Amtrak. But

domestic air routes carry nearly 100 timesas many passenger miles as Amtrak, whileintercity highways carry some 300 timesas many passenger miles as Amtrak.8 Thismeans per-passenger-mile subsidies to Am-

trak are far greater than subsidies to its com-petitors.According to the U.S. Bureau of Trans-

portation Statistics, after adjusting for in-flation to 2011 dollars, subsidies to domes-tic air travel averaged about $14 billion ayear between 1995 and 2007. Consideringthat the airlines carried an average of morethan 500 billion passenger miles a year dur-ing those years, average subsidies work outto about 2.8 cents per passenger mile (seeFigure 2).9

Using Bureau of Transportation Statis-tics numbers, highway subsidies over thesame time period averaged about $48 billiona year. Highways carried about 4.1 trillionpassenger miles per year, for an average sub-sidy of 1.1 cents per passenger mile.10 While95 percent of the airline subsidies came fromthe federal government, all of the highwaysubsidies came from state and local govern-ments.

By comparison, federal Amtrak subsidiesover the same time period averaged 25 cents

per passenger mile.11 State subsidies aver-aged another 2.8 cents. Per-passenger-milesubsidies to Amtrak were nearly 9 times sub-sidies to air travel and nearly 22 times subsi-dies to highway travel.

In response to concerns about its largesubsidies, Amtrak claims that its fareboxrecovery, i.e., the portion of operating costsdirectly covered by ticket revenue, was 79%in fiscal year 2011, compared with 76% infiscal year 2010.12 However, it reaches thisconclusion only with a very liberal defini-

tion of farebox revenues and a very conser-vative definition of operating costs.

Actual fares collected by Amtrak in 2011totaled $1.851 billion, which was 79 percentof $2.344 billion.13 But $2.344 billion isntenough to cover Amtraks labor, operations,and fuel costs, much less materials, facilities,advertising, or other operating costs.14 Rev-


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In 2011 theaverage Americaflew 1,800 milestraveled 15,000

miles by car, androde Amtrak jus21 miles.

fectively admitting that most of its capitalimprovements in recent years were actuallymaintenance.16 Even true capital improve-ments designed to increase rather than justmaintain service must eventually be repaid,

preferably by service revenues.When counting all costs, including faresand subsidies, Amtrak spends 60 cents perpassenger mile, compared with about 16cents for airline fares plus subsidies to airtravel. When amortized capital and mainte-nance costs are included, even trains with thelowest fares per passenger mile are a consid-erably more expensive mode of travel thanflying when subsidies are included.

The Insignificant ModeAmtrak brags that its ridership has

reached record levels in recent years. Yet, forthe vast majority of Americans, Amtrak re-

mains an insignificant if not a completely ir-relevant mode of travel. In 2007 domestic airtravel peaked at more than 2,000 miles perperson. At about the same time, per capitahighway travel peaked at about 15,600 miles

per year, about a third of which was intercitytravel. Amtrak, meanwhile, carried Ameri-cans an average of just 19 miles per person.17

Since then, because of the recession, percapita airline travel has declined by about 10percent, or about 200 miles per person, whilehighway travel declined by about 500 milesper person. Amtrak travel has increased sincethen, but not enough to take up the slack: asof 2011, the average American rode Amtrak21 miles a year, or 2 miles more than in 2007(see Figure 3). Even this is lower than in the

early 1990s, when Amtrak carried the averageAmerican 24 miles per year.

Even in the Northeast Corridor, whereAmtrak has the greatest presence, it remainsan unimportant form of travel. The 43.5

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400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Air Rail

Figure 3Per Capita Passenger Miles of Travel by Air and Rail

Source: 2012 National Transportation Statistics, table 1-40, U.S. Passenger Miles.Note: The average American travels close to 2,000 miles a year by air but only about 20 a year by Amtrak. Notshown is per capita intercity highway travel, which averages about 5,000 miles per year.

PassengerMilesPerCapita


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At averageintercity

occupancy ratesof 2.4 people per

car, cars are moreenergy efficient

than Amtrak.

million people living in this corridor rodeAmtrak Northeast Corridor trains an aver-age of about 42 miles each in 2011, or about0.2 percent of the miles of mechanized traveltaken by the average American every year.

Even adding associated trains between NewYork and Albany, New Haven and Spring-field, Philadelphia and Harrisburg, and Bos-ton and Portland brings the total to less than50 miles per capita.18

Amtrak brags that it carries more pas-sengers in the Northeast corridor than theairlines, but it admits that it only has about6 percent of the corridors total intercitytravel market, with highways carrying 89percent.19 The truth is that if Amtrak disap-peared tomorrow, autos, buses, and planes

could easily take up the slack without any-one noticing any significant increase in con-gestion on highways or at the airports.

Passenger-train advocates claim that, be-cause the Northeast Corridor is so denselypopulated, rail lines that carry the averageresident less than 50 miles per year are some-how vital to the economic health of the re-gion. Yet they also make the seemingly con-tradictory claim that rail passenger service isequally critical to the health of rural areas.Amtraks long-distance trains, says the Na-

tional Association of Railroad Passengers,bring economically viable mobility to ruralareas and small towns.20

Any proposal to eliminate or reducetrain service to small towns brings out criesof protest from people who claim this ser-vice is vital to their community. Yet Am-traks twice-daily (once in each direction)passenger trains stopping in towns such asBrookhaven, Mississippi; Las Vegas, NewMexico; Libby, Montana; Sandpoint, Idaho;and Winslow, Arizona pick up or drop off an

average of fewer than eight passengers pertrain (which means fewer than eight roundtrips per day to or from each of these cities).

The notion that rural areas need or de-serve subsidized passenger trains is basedon the idea that all Americans, regardless ofwhere they live, should have equal access toall goods and services. The Postal Service, ru-

ral electrification, rural Internet access proj-ects, the Rural Transit Assistance Program,and the Essential Air Service program are allbased on this same idea. Ironically, the samepeople who advocate these ideas are often

the first to decry government subsidized ur-ban sprawl.The cost of actually providing everyone

with equal access to any of these services isprohibitive. Even the Postal Service doesntdeliver mail to the door of every rural home.The Census Bureau estimates there are morethan 3,500 urban clusters of more than2,500 people in the United States, and Am-trak stops at only about 500 of them.

Nor do Americans expect that they willhave ready access to all possible services no

matter where they live. Peoples decisions tolocate in various places recognize tradeoffslocating close to jobs often means sacrific-ing good schools or quiet neighborhoods;locating in a big city may mean higher-pay-ing jobs but less affordable housing. Ameri-cans move an average of nearly a dozentimes during their lifetimes as their prefer-ences and needs change.21 Taxpayers shouldnot have to subsidize people who choose tolive in areas that do not support every pos-sible transportation service.

Amtraks DisappearingEnergy Advantage

Passenger-train advocates tout the energysavings offered by trains over planes and au-tomobiles. It is true that Amtrak uses about20 percent less energy per passenger milethan flying. However, Amtraks claims ofenergy savings over autos is more question-able, while buses have a clear energy-saving

advantage over Amtrak. Moreover, undercurrent trends, even flying will be more en-ergy-efficient than trains in a few years.

According to the Department of EnergysTransportation Energy Data Book, Amtrak usedan average of 2,271 British thermal units(BTUs) per passenger mile in 2010, the latestyear for which data are available. Commer-


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Scheduledintercity busesuse 60 percentless energy perpassenger milethan Amtrak.

cial airlines used 2,852 BTUs per passengermile. However, theData Book also notes thatairline energy efficiency has been growing at3.1 percent per year, while Amtraks energyefficiency has grown by only 1.3 percent peryear (see Figure 4).22 If this trend continues,airlines will be more energy efficient thanAmtrak by 2023.

Aircraft energy efficiency is likely to con-tinue to grow faster than rails. Boeing saysthat its new 787, for example, uses about 20

percent less energy per seat mile than theplanes it replaces.23 By comparison, GeneralElectric estimates that its latest locomotivesaves just 3 to 5 percent of the energy re-quired by its predecessors.24

According to the Data Book, the aver-age car used 5,342 BTUs per vehicle mile in2010. The data book uses an occupancy rate

of 1.55 people per car to calculate BTUs perpassenger mile.25 However, the 1.55 num-ber is based on urban travel. According toa study commissioned by the CaliforniaHigh-Speed Rail Authority, cars in intercitytravel tend to carry more people, an averageof 2.4.26 At 2.4 people per car, the averagecar used 2,226 BTUs per passenger mile inintercity travel in 2010, which makes inter-city driving more energy efficient than Am-trak today. Using an occupancy rate of 2.19

for trips over 75 miles, a Congressional Re-search Service study also found that cars useslightly less energy than Amtrak.27

This doesnt include light trucks (pick-ups, SUVs, full-sized vans), which consumed7,225 BTUs per vehicle mile or (at 2.4 peopleper vehicle) 3,010 BTUs per passenger milein 2010.28 However, the latest federal fuel

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10,000

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Air Cars Amtrak

Figure 4Air, Rail, and Car Energy Consumption per Passenger Mile

BTUsPerPassengerMile

Source: Transportation Energy Data Book, 31st Edition, table 2.13, Energy Intensities of Highway PassengerModes, and table 2-14, Energy Intensities of Nonhighway Passenger Modes.Note: Amtrak uses as much energy per passenger mile as intercity driving when intercity auto occupancies of 2.4people per car are used. Meanwhile, Amtrak uses less energy per passenger mile than airlines, but given a likelycontinuation of recent trends the airlines will be more energy efficient than Amtrak by 2023.


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Even at their non-wartime peak in

1920, intercitytrains carried

the averageAmerican fewer

than 400 milesper year, or less

than 3 percentas many milesas the average

American travelsby automobile

today.

economy standard requires that the averageof all cars and light trucks sold in 2025 get54.5 miles per gallon, which is about 2,300BTUs per vehicle mile.29

If auto manufacturers reach this stan-

dard on a straight-line path from the currentaverage, and if the American auto fleet con-tinues to be replaced at the historic averageof about 5.5 percent per year, then by 2015the average automobile, including both carsand light trucks, will use less energy per pas-senger mile in intercity travel than Amtrakuses today. Between now and 2025, the av-erage energy efficiency of autos will grow at3.2 percent per year, or more than twice asfast as Amtraks has grown.

Scheduled intercity buses already use far

less energy per passenger mile than Amtrak.According to a 2008 study commissioned bythe American Bus Association, intercity busesuse about 60 percent fewer BTUs per passen-ger mile than Amtrak.30 The same conclu-sion was independently reached by the Con-gressional Research Service in 1996 and theNational Surface Transportation Revenueand Policy Commission, a group commis-sioned by Congress to evaluate federal trans-portation policy, in 2007.31 If Congress wantsto save energy, it should stop subsidizing Am-

trak, which would encourage an expansion ofintercity bus service along Amtrak corridors.

The above energy data considers only theenergy costs of operating planes, trains, bus-es, and autos. When full life-cycle costs areconsidered, including manufacturing, infra-structure construction, and disposal, railsare even less efficient than other modes. Alifecycle analysis by researchers at the Uni-versity of California found that, because raillines carry so few passenger miles relative tohighways or airlines, construction, manu-

facture, and disposal consumed many moreBTUs per passenger mile. Specifically, theanalysis concluded that, over their completelifecycle, passenger rail lines used about 2.5times as much energy as they used in justoperations, while highway users consumedonly about 1.6 times as much energy as inoperations.32

Who Shot thePassenger Train?

Passenger-rail advocates often blame thedecline of American passenger trains on

federal construction of the Interstate High-way System.33 But a review of history showsthat trains began to decline decades beforethat time. Passenger trains reached their ze-nith in 1920, when more than 20,000 trainsper day traveled over the land connectingalmost every city and town in the UnitedStates.34 The railroads carried more than 41billion intercity passenger miles that year,plus another 6 billion passenger miles oncommuter trains.35

Many consider the 1920s to be the gold-

en age of passenger trains, but it was a gold-en age only for those who had the gold topay to ride the trains. While 41 billion pas-senger miles may sound like a lot, it repre-sented less than 400 miles per capita, or lessthan 3 percent as many miles as the averageAmericans travels by automobile today. Raifares averaged 2.75 cents per passenger milein 1920, which is well over 30 cents in 2012pennies.36 In terms of worker pay, which waslower relative to costs in 1920 than it is to-day, such fares would be a dollar or more per

passenger mile at todays wages.37 Such highfares meant that frequent rail patronage wasconfined to the upper and middle classes;the vast majority of Americans in 1920 weremembers of rural or urban working classeswho rarely, if ever, traveled by train.

As shown in Figure 5, competition fromautos in the 1920s led to a slow decline to 24billion passenger miles in 1929 (less than 200miles per capita), and a more rapid declinebecause of the Depression to as low as 12billion passenger miles (less than 100 miles

per capita) in 1932 and 1933. Some railroadsresponded to these declines by introducingflashy new trains that carried travelers atmuch higher speeds than ever before.

By 1939 trains operated by the Burling-ton, Milwaukee Road, Northwestern, Penn-sylvania, Santa Fe, Union Pacific, and severalother railroads routinely exceeded 100 mph


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In 1959 Trains

magazineargued thatthe passengertrain was nottechnologicallyobsolete butwas shot inthe back bygovernment

regulators,subsidies tocompetitors,unfair taxation,and obsoletelabor rules.

and sometimes reached 120 mph. These rail-roads along with the New Haven, New YorkCentral, Reading, Rock Island, and othersscheduled trains with average speeds from

terminus to terminus greater than 60 mphincluding the time required for all stopsalong the way.38 This was more than twicethe average speed of trains prior to this era,and many of the railroads reported a large in-crease in ridership in response to the higherspeeds.

By 1940 ridership was up to nearly 20 bil-lion passenger miles, or 150 miles per capita.Gas rationing during World War II led to ahuge increase in intercity rail travel, reach-ing 90 billion in 1944, or more than 650

miles per capita.Eager to serve travelers, railroads invested

hundreds of millions of dollarsbillions intodays dollarsin new fleets of locomotivesand passenger trains after the war. But rid-ership crashed immediately following thewar, falling below 300 passenger miles percapita by 1947, 200 miles in 1949, 150 miles

in 1954, and 100 miles in 1959. Populationgrowth failed to compensate for this decline,and by 1955 total intercity rail passengermiles had fallen well below the lowest levels

of the 1920s.No end to this decline appeared to be in

sight when, in 1959, Trains magazine pub-lished an incisive, 38-page report titled, WhoShot the Passenger Train? Written by themagazines pithy editor, David P. Morgan,the report was the longest and most impor-tant article in the publications 50-plus-yearhistory.39

Morgan argued that the passenger trainwas not technologically obsolete, but thatit was shot in the back.40 Like Agatha

Christies Murder on the Orient Express, thevillain was not a single assailant but several.In particular, Morgan blamed the passengertrains decline on

Unions that insisted on antiquatedwork rules, such as a 1919 rule re-quiring railroads to pay crews for a

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1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970

Figure 5Rail Passenger Miles per Capita before Amtrak

Source:Historical Stat istics of the United States : Colonial Times to 1970Part 2, series Q307_Q308.Note: Claims that federal construction of the Interstate Highway System killed the passenger train are contra-dicted by the rapid decline in per capita rail riders during the 1920s and after World War II.

IntercityRailMilesPerCapita


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Trainsmagazinesuggested that

passenger trainscould compete

only if they couldrun 25 percent

faster thanhighways, buta 1947 federal

regulation madethis infeasible bylimiting trains to

79 mph.

full days pay for every 100 miles theyworked (and to pay overtime for anyadditional miles), which was still in ef-fect in 1959 even though average trainspeeds had doubled.41

Government regulators whose workmay have been appropriate when rail-roads were monopolies but was unnec-essary now that competition existed.Morgan cited an example of one statepublic utility commission that denieda full fare increase requested by a rail-roads because it has been generallyrecognized that railroad passenger ser-vice, as presently conducted, has notand cannot be operated at a profit.42

Subsidies to competition including

highway subsidies and the predecessorof what is today called the EssentialAir Service program.43

Unfair taxationof the railroads whenpublicly owned airports and highwayspaid no taxes.44

Railroad managers who found it eas-ier to deal with freight (which Morgandescribed as a wholesale business) thanpassenger transport (which Morgancalled a retail business). Morgan didntthink that many rail managers were de-

liberately trying to kill potentially prof-itable passenger trains to make roomfor even more profitable freight trains(which some passenger-train advocatesat the time believed), but he did thinkthat most rail managers didnt reallyunderstand the passenger business.45

Morgan admitted that all but the last ofthese culprits hindered rail freight opera-tions as much as they did passenger trains,yet most railroads were able to earn a profit

on their freight business. Still, Morgan ar-gued that fixing these problems would bringmany, if not all, passenger trains closer toprofitability. Certainly the resurgence in railfreight after the 1980 deregulation suggestedthat many rail lines that were once thoughtmarginal could in fact be profitable oncesome of the above issues were addressed.

Nobody is being asked to bail out thepassenger train in the sense of making ita Federal ward, said Morgan. All that isasked is simple justice. Just eight yearslater, an Arizona attorney named Anthony

Haswell formed the National Association ofRailroad Passengers specifically to lobby tomake the passenger train a federal ward.

At least one regulation had a much big-ger impact on passenger trains than freightsIn 1951 an Interstate Commerce Commis-sion (ICC) rule went into effect requiringrailroads to either install expensive signalingequipment or to limit the speeds of passen-ger trains to 79 mph (see shaded box). A fewrailroads, including the Santa Fe, installedthe equipment, but most judged that the

high cost could not be justified by a smallincrement in passenger ridership, so theyslowed their trains down, limiting their abil-ity to compete with auto travel.

The ICCs 79-mph speed rule did moreharm than good to passenger trains. Freightcars spend most of their travel time beingsorted in yards, so there is virtually no ben-efit gained by speeding up freight trainsabove 79 mph. Railroads could only justifythe multimillion-dollar cost of installing theICC-mandated signals by the returns from

passenger revenues. Since these returns wererapidly declining in the 1950s, few railroadsthat did not already have the signals madethe effort.

A few railroads, such as the Burlingtonand Illinois Central, were able to compensatefor the slowing of passenger trains where theyhad previously exceeded 79 mph by speedingthem up in other locations where they hadpreviously traveled at well below 79 mphthus allowing them to maintain the sameoverall times between major cities. Others,

such as the Union Pacific and Atlantic CoastLine, were forced to add time to their sched-ules, making them less competitive with au-tos. When manufacturers introduced newtechnologies, such as General Motors light-weight Aerotrain or the Spanish tilting Talgotrain, railroads that were already up againstthe 79-mph limit were unable to take advan-


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14

A 2008 AmtrakInspector General

Report foundthat virtuallyall European

passenger trainoperations

require

significant publicsubsidies, but

those subsidiesare often

disguised innational budgets.

moved, it is likely that passenger service could

have remained profitable on many routes formany years.

Morgan argued that there were threemarkets for intercity passenger trains. First,on routes of 100 to 500 miles, trains couldcompete with other modes if they were atleast 25 percent faster than the highway.The ICC rule made it nearly impossible toachieve this goal profitably. Second, Morganthought that business travelers would still beattracted to overnight trains between cities500 to 1,000 miles apart. However, he noted

this business was marginal because sleepingcar passengers cost the railroads more thantwice as much as coach passengers, yet paidless than twice the fares. Finally, Morganthought that longer routes could sell onlyon a cruise basis whereby getting there ishalf the fun.48 Whether these markets arestill viable today can only be determined by

reforming federal transportation policy.

The European Experience

American rail advocates often point togovernment support of passenger trains inEurope and lament that the same supportisnt provided in the United States. Yet a closelook at European data reveals that passengertrains in these countries require large publicsubsidies that produce negligible benefits.

Contrary to claims that many European

rail operations break even or earn a profit,a 2008 Amtrak inspector generals reportfound that virtually all European passen-ger train operations require significantpublic subsidies. These subsidies are oftendisguised in rail budgets. For example, Eu-ropean rail operations are typically orga-nized into two separate business entities,

0

5

10

15

20

25

30

35

Figure 6Rail Subsidies per Passenger Mile

CentsPerPassengerMile

Source: Public Funding Levels of European Passenger Railroads, Amtrak inspector general, 2008, p. 7.Note: Amtrak subsidies per passenger mile are about the same as typical subsidies in Europe. Only Britain hasignificantly lower subsidies than the average for other European countries.


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Spain hasinvested more inhigh-speed trainthan any other

European nationyet since it beganbuilding high-speed rail, railsshare of Spanishpassenger traveldeclined from6.9 percent to5.4 percent.

one to manage the infrastructure and oneto operate the trains. The train operatorsmay report a profit, but only because theycan ignore the heavy losses experienced bythe infrastructure managers. Even the prof-

its reported by the train operators are oftenexaggerated by including government subsi-dies among their revenues.49

The inspector general report estimated thegovernment contributions to passenger op-erations for each of nine European nations,plus the United States, from 1995 through2003.50 Comparing these subsidies with pas-senger miles of rail ridership during thoseyears reveals that the subsidies in most ofthese countries are between 20 and 30 centsper passenger mile, with the United States

being right in the middle (see Figure 6). Theonly major exception is the United Kingdom,where subsidies are well under 15 cents perpassenger mile, partly because it privatizedits rail operations in the mid-1990s. This sug-gests that there are no economies of scale thatwould allow Amtrak to reduce its per passen-ger subsidies by expanding to a much greatersize. The total subsidies in the nine countriesduring the years studied averaged $38 billionper year, while annual subsidies to Amtrak inthose years averaged only about $1 billion.

The average resident in these nine countriesrode trains about 34 times as many miles asthe average American, suggesting that thereare diminishing returns to passenger rail sub-sidies: a doubling of subsidies will produceless than a doubling of ridership.

Together, the nine countries studied bythe inspector general have a slightly greaterpopulation than that of the United States,but less than one-fourth the land area, re-sulting in an average population density thatis 4.5 times greater than the United States.

But this higher density has minimal effecton European travel choices, which are moreinfluenced by the high taxes European gov-ernments impose on motor fuel, which effec-tively suppress European mobility.

In 2006 the average resident of the EU-15the 15 Western European nations thatmade up the European Union before the fall

of communismtraveled 6,459 miles by car,compared with 14,510 for the average Ameri-can. European subsidies to rail made up foronly a small fraction of this gap: while in 2006the average American traveled only 18 miles

by intercity rail and 35 miles by commuterrail, the average Western European travelled533 miles by intercity and commuter rail. Theextra miles of rail travel made up for less than6 percent of the auto travel gap.51

Americans actually made up for most ofthe rail gap with greater bus travel. While theaverage EU-15 resident rode buses 665 milesin 2006, the average American rode them997 miles, including airport buses, tour bus-es, and school buses, as well as urban tran-sit and intercity buses. Europeans also flew

less than Americans. While separate dataare not available for the EU-15, the averageresidents of the EU-27 (which includes theoriginal EU-15 as well as Cyprus, Malta, and10 former communist countries) flew about700 miles in 2006, compared with 1,970miles by Americans.52

Americas greater mobility is not due tothe nations large land area or low popula-tion densities. The second-most mobile na-tion in the world, after the United States, isIceland, which has only 1 percent of the land

area of the United States.53 A comparison ofWestern European nations reveals almostno correlation between population densitiesand miles of per capita travel.54

Nor is European spending on trains dra-matically increasing rails share of Europeantravel. According to the European Union, in1980 76.4 percent of European travel was byauto, 2.5 percent was by air, while 8.2 percentwas by intercity train.55 By 2006 autos sharewas still 76.4 percent, while airs share hadgrown to 8.3 percent and rails share had de-

clined to 7.9 percent. The big loser was buses,whose share declined from 11.9 percent to6.3 percent.56

Spain has invested more in high-speed railthan any other European nation and now hasmore miles of high-speed rail than any coun-try in the world except China. In 1990, beforethe nations first high-speed line opened, rails


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Britains systemof contracting

passengertrains to private

operators ledto a 60 percentincrease in railtravel between1996 and 2010,

far more thanin any other

Europeancountry.

share of surface passenger travel in Spain was6.9 percent. By 2010, after a total of four ma-jor high-speed rail lines had opened, railsshare had declined to 5.4 percent.57

The most interesting passenger-rail ac-

tion in Europe has been the British attemptto reform its rail system. This reform is of-ten described as privatization, but it reallyended up being a form of contracting. Ini-tially, Britain sold its rail infrastructure to aprivate company, called Railtrack, that wassupposed to maintain the rail lines and allowany operator to use them provided they paidan access fee. The government determinedwhere passenger trains should run and invit-ed private operators to bid on those routes.

The Railtrack portion of the program

proved to be a failure. In an effort to savemoney, it deferred maintenance, resulting ina poor on-time record as well as three seri-ous accidents that killed 42 people between1997 and 2000. As a result, the governmentbought out Railtrack and now operates therail infrastructure through a quasi-govern-mental organization called Network Rail.58

Private contractors were allowed to bidon various routes, and if the bids were nega-tivethat is, if the contractors would requiresubsidies to operate the routesthen the

government would provide those subsidies.The private companies own their own loco-motives and railcars, but they operate underfranchise to the government.

Some reviewers consider the British sys-tem a failure.59 Yet in one important wayridershipit has been a huge success. From1996, when private takeover was largely com-pleted, to 2010, British rail passenger milesgrew by 60 percent, far more than in any oth-er European country, and more than twice asmuch as in the EU-15 as a whole.60

Rails share of British passenger travelgrew by 70 percent from 4.4 percent in 1995to 7.5 percent in 2010. Again, this was morethan that of any other European country;rails share of travel in the EU-15, minusBritain, grew by only 10 percent in the sametime period.61 During the same years, privateoperations also increase rails share of freight

transport by nearly 50 percent, while railsshare declined in the rest of the EU-15.62 Theprivate operators accomplished this growthwith less than 60 percent of the average sub-sidy per passenger mile of the eight other

national rail systems studied by the Amtrakinspector general in 2008.Three major complaints about the Brit-

ish railway program had to do with safetyreliability, and cost to taxpayers. Howeversince Network Rail replaced Railtracks, bothsafety and on-time performance have im-proved. In 2010, 92 percent of trains wereon time, and surveys show that 83 percentof customers are satisfied with rail servicesThe private operating companies have pur-chased new equipment, reducing the aver-

age age of rolling stock by 23 percent.63

The biggest complaint about the British

program was that subsidies, which were sup-posed to decline, actually increased. Adjust-ing for inflation, subsidies averaged about 2billion pounds per year before privatizationThese subsidies actually did decline slightlyunder Railtracks, but since Network Railtook over the infrastructure, they have grownto more than 4 billion pounds per year. Thebiggest increase in costs was infrastructurerenewals, an increase partly required by

Railtracks deferral of maintenance.64 Sinceoverall costs per passenger mile remainedconstant, much of the increased subsidy canbe attributed to the growth in rail ridership.

Some argue that the government re-purchase of rail infrastructure proves thatprivatization doesnt work. But a more validinterpretation is that the British system con-tinued to rely too much on central planningand regulation. Instead of letting the marketdetermine where passenger service wouldbe by rail, bus, or another mode, the Brit-

ish government politically determined railroutes and agreed to subsidize the suppos-edly privatized rail operators. The division ofthe system between an infrastructure com-pany and operating companies failed to cre-ate the proper incentives, which contributedto safety and reliability problems. Despitethese failings, no other country, no matter


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Completeprivatizationof Amtrak isthe only way to

avoid the wastethat resultsfrom politicaldeterminationof routes andservices.

how much it invested in high-speed rail orother rail improvements, has come close to a70 percent increase in rails share of passen-ger travel.

While not attempting widespread privati-

zation, other European countries are savingmoney by contracting out selected routes.Contracting has saved 20 to 50 percent ofcosts on routes in the Netherlands, 20 to 30percent in Sweden, and 20 percent in Ger-many.65

Privatization orContracting?

Amtrak is supposed to be a corporation,

not a government agency, and Amtrak presi-dent Joseph Boardman says that it is his goalto run Amtrak like a business. But there arethree obstacles to running a government-funded organization like a business.

First, an organization that can draw ontax dollars to cover losses has little incentiveto operate efficiently. Everyone in the organi-zation, from top managers on down, knowsthat they can fall back on tax dollars to makeup for any inefficiencies in their operations.

Second, an organization that is beholden

to government to fund its operations mustdo things that are pleasing to government.Since Amtrak gets a third to half its fundsfrom tax dollars, it must please appropria-tors as much as its customers. Among otherthings, this means running trains that car-ry few passengers simply because they gothrough the states or districts of powerfulmembers of Congress.

Third, Amtrak faces the same labor prob-lem as other public agencies in that nego-tiations with labor unions are asymmetric.

When private companies negotiate withunions, the negotiators clearly representeach side of any dispute. But when publicagencies negotiate, the agency negotiatorshave a conflict of interest as they representboth taxpayers, who have to pay for what-ever the two sides agree to, and union mem-bers, who are also voters.

To reform Amtrak, some Republicanshave proposed to have it contract out its op-erations to private companies such as Veoliaand Stagecoach, both of which operate ur-ban rail transit lines in the United States and

elsewhere. Contracting out might help solvethe labor problem, except that the same pro-posal calls for a requirement that contractorspay employees as much as Amtrak is payingthem. Contracting out could also encourageoperators to be efficient, especially so longas there was competition for such contracts.However, contracting out would not end theinefficiencies that result from political deter-mination of routes and services.

Many American transit agencies contractout their operations at considerable savings

to taxpayers. The Denver Regional Tran-sit District (RTD) is a good example, as theColorado legislature required the agency tocontract out half of its bus routes. The com-panies that operate the routes maintain andfuel their buses, pay taxes on their fuel andproperty that RTD is exempt from, and payworkers roughly the same amount as RTD.One of the companies is even unionized.Despite higher fuel costs (when taxes are in-cluded) and comparable labor costs, in 2010the private contractors cost 49 percent as

much per bus-revenue mile and 52 percent asmuch per bus-revenue hour than the busesoperated by RTD.66

Judging from experiences in Europe,contracting out Amtraks operations mightreduce per-passenger-mile subsidies by 20to 50 percent. This would allow Congressto reduce Amtraks appropriations withoutthreatening Amtraks routes or allow Am-trak to operate more trains on the same an-nual appropriation.

Contracting out remains an imperfect

solution because Amtraks route map wouldstill be politically drawn rather than focusedon the most suitable markets for passengertrains. Amtrak would still need to persuadeCongress to subsidize most routes, and to doso it would need to extend service into moststates even if some provided few customers.In the long run, both Amtrak and the pri-


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vate operators would lack market incentivesto provide the most cost-effective transpor-tation service. The proposal to require con-tractors to pay workers as much as Amtrakpays also represents an inefficient and inap-

propriate meddling with the market.Complete privatization of Amtrak is theonly way to avoid these problems. Suchprivatization could be part of a compre-hensive transportation reform package thateliminates subsidies to rail competitors,reduces whatever regulatory constraints re-main on private operators, and provides forfair taxation of all modes of transportation.

Privatization would mean selling Am-traks assets: 623 route miles between Bostonand Washington, New Haven and Spring-

field, Philadelphia and Harrisburg, and inMichigan; 105 rail stations; maintenancefacilities; and roughly 2,300 locomotives,passenger cars, and other rolling stock. Am-trak estimates that these and other assets areworth about $11.1 billion, while its liabilitiesare about $5.3 billion.67

These numbers, however, represent thecosts to Amtrak of purchasing right of way,infrastructure, and rolling stock, minus de-preciation. Just because Amtrak paid theseamounts to provide trains that lose money,

however, doesnt mean they are worth thatmuch on the open market. Privatization willprobably produce net revenues that are lessthan the $5.8 billion Amtrak claims is its netasset value.

Privatization should be done with a mini-mum of restrictions or regulation. Whoeverbuys Amtraks routes should not be requiredto open those routes to any train operator.Other than meeting basic safety require-ments, operators should not be required tomeet any particular frequency or level of ser-

vice. Passenger trains, like buses and planes,should respond to the market, not to politi-cians.

To be fair, such privatization should takeplace in the context of reforming other partsof the transportation system as well. Con-gress should end the Essential Air Servicesubsidies and requirements that airlines

serve remote communities. It should alsoencourage state and local governments tofind ways to fund highways entirely out ofuser fees rather than general tax dollars.

Though privatization might result in

an end to passenger trains on some routesmany routes could survive. Table 2, whichshows data for the 44 routes in Amtraks sys-tem, provides some clues as to what routesthose would be. The table shows the op-erating profit for each route in 2011; thisincludes state subsidies on the revenue sidebut does not include depreciation, interestcapital improvements, or maintenance onthe cost side. Cost per passenger mile isequal to the revenue per passenger mile (notshown) minus the profit per passenger mile

The table shows only four routes thatmade an operating profit in 2011: the Acelaand regional trains in the Northeast Corridor;the New York-Montreal Adirondack; and theWashington-Lynchburg trains (which are anextension of the Northeast Corridor). Thesetrains earned an operating profit either by at-tracting patrons willing to pay high fares (asin the Northeast Corridor trains) or keepingcosts low (as in the other two trains). Keepin mind that when capital improvementsand maintenance are included, none of these

trains made a profit, and those costs are prob-ably higher in the Northeast Corridor (whichis owned and must be maintained by Amtrak)than on most other routes, where Amtrakpays private railroads an access fee (which isincluded in operating costs) and need onlymaintain its rolling stock and stations.

The table reveals a very wide range of op-erating profits and costs per passenger mileas well as occupancy rates (that is, the averagepercentage of seats filled by revenue custom-ers). Operating profits range from 25 cents

per passenger mile for the Acela to minus 47cents per passenger mile for the Los Angeles-New Orleans Sunset Limited. (The even greaterloss of 80 cents a passenger mile on the Chi-cago-Indianapolis train is mitigated by thefact that Amtrak uses this train primarily asa hospital train to transfer cars in need ofservice from its Chicago hub to its shops in

To be fair,Amtrak

privatizationshould take place

in the context ofreforming other

transportationprograms, such

as ending federalsubsidies toairlines and

encouragingstate and local

governments tofund highwaysout of user fees

rather thangeneral tax

dollars.


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Table 22011 Amtrak Operating Profits, Passenger Miles, and Occupancies

Route

OperatingProfit

(millions)

PassengerMiles

(millions)

Profit perPassenger Mile

(cents/pm)

Cost perPassenger Mile

(cents/pm)Occupancy

(%)

Northeast Corridor (NEC)

Boston-Washington (Acela) 165.8 650.2 25.5 50.1 64

Boston-Washington (Regional) 15.2 1,169.2 1.3 40.7 46

Total/average NEC trains 179.5 1,813.1 9.9 44.3 52

Short-Distance/State Corridor Trains

Albany-Toronto -6.6 124.5 -5.3 24.1 57

Boston-Portland -1.4 45.2 -3.1 18.9 39

Charlotte-Raleigh -2.0 15.7 -12.7 28.6 46

Chicago-Carbondale -4.9 60.5 -8.1 22.7 38Chicago-Grand Rapids -1.0 16.7 -6.0 25.2 62

Chicago-Indianapolis -4.7 5.9 -79.6 93.8 47

Chicago-Milwaukee -2.8 66.7 -4.2 26.6 38

Chicago-Pontiac -17.8 109.9 -16.2 33.3 51

Chicago-Port Huron -2.6 38.8 -6.7 21.6 45

Chicago-Quincy -2.7 37.5 -7.2 22.1 39

Chicago-St. Louis -4.0 97.6 -4.1 16.7 46

Eugene-Vancouver -16.7 138.0 -12.1 33.9 57

Kansas City-St. Louis -0.6 40.0 -1.5 13.4 47

New Haven-Springfield -13.9 35.5 -39.1 70.6 51

New York-Buffalo -32.7 127.2 -25.7 57.2 34

New York-Charlotte -1.5 93.8 -1.6 20.5 81

New York-Harrisburg -11.0 117.0 -9.4 34.5 40

New York-Montreal 1.1 40.7 2.7 12.8 81

New York-Pittsburgh -7.8 49.4 -15.8 33.7 62

New York-Rutland -2.6 9.3 -28.0 55.0 41

Oakland-Bakersfield -7.9 161.2 -4.9 27.0 41

Oklahoma City-Ft. Worth -2.9 14.9 -19.5 32.4 45

Sacramento-San Jose -15.2 109.4 -13.9 37.4 29

San Diego-San Luis Obispo -33.9 249.3 -13.6 35.8 35

Washington-Burlington -2.1 20.8 -10.1 29.2 53

Washington-Lynchburg 3.2 40.0 8.0 16.6 65

Continued next pa


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Beech Grove, Indiana.) An efficient operatorwould try to find routes and frequencies that

return a much narrower range of profits, ei-ther by investing more in the more profitableroutes or reducing service on the less profit-able ones.

Similarly, costs per passenger mile rangewidely from 13 cents on theAdirondack to 60cents on the Sunset Limited. One reason rev-enues and costs range so widely is that oc-

cupancy rates vary from 29 percent on theSacramento-San Jose Capital corridor to 81

percent on the Adirondack and New York-CharlottePiedmont.

Based on these data, it seems likely thatNortheast Corridor trains could be profit-ably operated by a private party. If the pri-vate operator could reduce operating coststo around 25 or 30 cents per passenger milewhich is typical of many other trains, then it

Table 2 Continued

Route

OperatingProfit

(millions)

PassengerMiles

(millions)

Profit perPassenger Mile

(cents/pm)

Cost perPassenger Mile

(cents/pm)Occupancy

(%)

Washington-Newport News -1.0 111.1 -0.9 27.6 56

Total/average corridor trains -194.9 1,988.8 -9.8 31.3 44

Long-Distance (LD) Trains

Chicago-Los Angeles -68.0 323.8 -21.0 34.6 68

Chicago-New Orleans -23.4 108.8 -21.5 37.8 65

Chicago-Oakland -64.2 287.9 -22.3 37.8 59

Chicago-San Antonio-LA -30.9 177.6 -17.4 31.2 71

Chicago-Seattle -57.0 327.6 -17.4 33.8 57

Lorton-Sanford (AutoTrain) -32.6 223.3 -14.6 45.3 68

Los Angeles-New Orleans -39.8 84.7 -47.0 60.2 51

Los Angeles-Seattle -55.5 219.4 -25.3 43.5 61

New York-Chicago (Cardinal) -19.1 45.7 -41.8 57.3 57

New York-Chicago (Lake Shore) -38.7 202.6 -19.1 34.3 64

New York-Miami (Meteor) -45.4 234.0 -19.4 36.1 66

New York-Miami (Star) -52.2 219.3 -23.8 38.8 66

New York-New Orleans -46.1 168.2 -27.4 45.2 58

New York-Savannah -17.2 85.6 -20.1 39.3 48

Washington-Chicago -25.2 115.6 -21.8 39.4 69

Total/average LD trains -615.4 2,822.9 -21.8 38.8 62

Total/average all trains -630.7 6,638.9 -9.5 38.0 53

Source: Calculated from Monthly Performance Report for September 2011, Amtrak, Washington, 2012, p. C-1.Note: Per-passenger-mile costs and occupancy rates vary widely among Amtrak trains, indicating that Amtrak is not efficiently managing its systemOperating profits count state subsidies to corridor trains as revenues but dont count maintenance, capital improvements, depreciation, or interesas costs. Add the cost per passenger mile to the profit per passenger mile to get the overall revenues per passenger mile, which includes food servicrevenues and state subsidies as well as rail fares.


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State-supportedroutes inCalifornia notonly lose moreand cost moreper passengermile than theaverage corridortrains, they

have the lowestoccupancy ratesof any Amtrakroutes.

should earn a sufficient operating profit topay for maintenance and improvements ofthe route.

Among the short-distance corridors, itis likely that the New York-Montreal Ad-

irondack could also be profitably operated.It already has the lowest operating cost perpassenger mile of any Amtrak route and tieswith the New York-Charlotte train in fillingthe highest percentage of seats.

Many of the state-supported routes aremore questionable. The Sacramento-SanJose and San Diego-San Luis Obispo trainsin California are particularly likely to be sub-marginal. Even counting state subsidies asrevenues, these not only lose more and costmore per passenger mile than the average cor-

ridor trains, they have the lowest occupancyrates of any Amtrak routes, which suggeststhat Amtrak and the state are supplying aservice that is well in excess of demand. Thesetrains might be more successful at reducedfrequencies, but since Greyhound operatesbuses on the same routes at roughly twicethe frequency, lower fares, and often as fastor faster than Amtrak, the rail service seemsunnecessary.

The Chicago-St. Louis and Chicago-Pontiac (Detroit) routes are in-between. The

federal and state governments are invest-ing heavily in these routes to increase trainspeeds, which may make them more viable.Private operators are not likely to pay thefull cost of those investmentswhen Japanprivatized its high-speed rail lines, the pri-vate purchasers paid less than a penny forevery dollar the lines costbut if offered theroutes they would be likely to operate themat a profit for many years. The long-runquestion is whether they would be able toearn enough to maintain the improvements,

especially in the Michigan corridor whereAmtrak owns (and would sell to the privateoperator) 95 miles of track. If the operatorcould spread the cost to more users by us-ing this track for freight as well as passengertrains, it would be more likely to keep thepassenger trains running in the long run.

Part or all of some of the long-distance

routes, such as Chicago-Oakland or Chica-go-Seattle, might survive as cruise trains.The classic cruise train was the pre-AmtrakCaliforniaZephyr, a popular train that wasscheduled not to be fast (when introduced

in 1949, it was almost 11 hours slower thanits competitor, the City of San Francisco) butto pass through the best scenery during day-light hours.

The modern cruise train is best repre-sented by the Rocky Mountaineer, a privatetrain that entered Vancouver-Calgary servicewhen VIA (Canadas version of Amtrak) can-celed service on that route in 1990. In orderto maximize scenic viewing, the train oper-ates only in daylight hours, and passengersstay at hotels midway through the journey if

the trip takes longer than one day. The com-pany now offers four different routes, threeof which require overnight stays: Vancouver-Calgary, Vancouver-Jasper, Vancouver-Whis-tler, and Whistler-Jasper.68

Amtraks most scenic route is arguablythe Denver-Oakland portion of the Chicago-Oakland Amtrak California Zephyr. If no pri-vate company decided to operate the com-plete Chicago-Oakland route, it seems likelythat a company such as the one that owns theRocky Mountaineer would operate the Den-

ver-Oakland portion as a cruise train. Otherhighly scenic routes that could be cruisetrains include Portland to Los Angeles; Port-land to Salt Lake City; Seattle to Glacier Park;and Los Angeles to Albuquerque.

Other long-distance routes might surviveas overnight trains. The New York-to-Flori-da trains have higher-than-average occupan-cy rates, and the AutoTrain actually earneda profit when it was privately owned. (Am-trak took over after the private owners wentbankrupt when they bet the company in

an unsuccessful expansion from Louisvilleto Florida.)

Conclusions

In 1967 Anthony Haswell, who describeshimself as a lifelong rail buff, created the


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Anthony Haswellis known as

the father ofAmtrak, but

by 2001 he wasso disappointed

in Amtraks

performancethat he wrote, I

am personallyembarrassed by

what I helped tocreate.

National Association of Railroad Passengersto argue that a national network of passen-ger trains could be a cost-effective and reli-able mode of transportation. His successhas led many to call him the father of Am-

trak. Three decades after Amtrak was cre-ated, however, Haswell was discouraged byAmtraks slow, unreliable, and costly trains.Amtrak today ranks among such legend-ary boondoggles as the Tweed Courthouseof 1870, wrote Haswell, who sadly conclud-ed, I am personally embarrassed by what Ihelped to create.69

Joseph Vranich was one of the early exec-utive directors of the National Associationof Railroad Passengers, a position he tookafter working for Amtraks public relations

office. He later became a strong advocate forhigh-speed trains. Today, however, Vranichagrees with Haswell that Amtraks perfor-mance has been dismal. Both former Am-trak advocates support privatization of theAmtrak system.70

If passenger trains are in the red becausetheyre technologically obsolete, becauseAmericans prefer the convenience of a caror the speed of a jet, then these trains mustbe given a decent burial and left to the histo-rians, said Trains magazine editor David P.

Morgan in 1959. Neither Trains nor anyoneelse can intelligently or morally plead thetrains cause on the grounds of nostalgia orjob protection.71

The only way to find out whether passen-ger trains make sense or are mere boondog-gles is to privatize Amtrak in the context ofreform of the nations transportation infra-structure so that all modes are unsubsidizedand treated equally by regulators and tax au-thorities. Congress can do much of this whenthe surface transportation reauthorization

law expires in 2014 and the federal aviationreauthorization law expires in 2015.72

In 1959 Morgan argued that simplejustice demanded a leveling of the playingfield between the passenger train and itscompetitors. Today, after four decades ofper-passenger-mile subsidies to Amtrak thatare many times greater than subsidies to air-

lines or highways, simple justice to Amtrakscompetitors and to taxpayers demands anend to those subsidies. Privatizing Amtrak isthe best way to achieve that justice.

The passenger train is a beloved institu-

tion that has been a part of American his-tory for more than 180 years. But for mostpurposes, it is an obsolete form of travel thatcannot compete with buses, cars, and air-planes. Privatizing Amtrak will not end allpassenger-rail service, but it will lead to suchservice being offered where it can providea significant contribution to the nationseconomy while it will also encourage privateoperators to innovate and find new and cre-ative ways to make passenger trains relevantto American travelers.

Notes1. National Transportation Statistics (WashingtonBureau of Transportation Statistics, 2010), table3-16, Average Passenger Revenue per Passenger-Mile.

2. Monthly Performance Report for Septem-ber 2011, Amtrak, Washington, 2012, pp. A-1.2C-1.

3. Ibid., p. C-1.

4. National Transportation Statistics, table 1-42Long-Distance Travel in the United States by Se-lected Trip Characteristics: 2001.

5. Randal OToole, Intercity Bus: The Forgot-ten Mode, Cato Institute Policy Analysis no. 680

June 29, 2011, p. 5.

6. National Transportation Statistics, table 1-42.

7. LimoLiner, www.limoliner.com.

8. National Transportation Statistics, table 1-40Highway Statistics 2008 (Washington: FederalHighway Administration, 2009), table VM-1 (ru-ral travel used as a proxy for intercity travel).

9. Calculated fromNational Transportation Statistics, tables 1-40 (Passenger Miles), 3-33 (Trans-portation Revenues by Mode and Level of Govern-ment), and 3-37 (Transportation Expendituresby Mode and Level of Government); adjusted to2011 dollars using gross domestic product defla-tors calculated from Current Dollar and RealGDP spreadsheet published by the Bureau of


23/24

23

Economic Analysis (bea.gov).

10. Calculated from National Transportation Sta-tistics, tables 1-40, 3-33, and 3-37; passenger milesbased on light-duty vehicles, motorcycles, andbuses from table 1-40.

11. Based on Amtrak annual reports for theyears indicated.

12. Annual Report Fiscal Year 2011, Amtrak,Washington, 2012, p. 41.

13. Ibid., p. 42.

14. Ibid., p. 67.

15. David Randall Peterman, Amtrak: Overviewand Options, Congressional Research Servicereport RL30659, January 25, 2001, p. 5, tinyurl.com/8jvqf2w.

16. Amtrak, Amtrak Requests Less Federal Op-erating Support, news release, February 3, 2012,pp. 12.

17. National Transportation Statistics, table 1-40,Passenger Miles.

18. Passenger miles per route calculated fromMonthly Performance Report for September2011, p. C-1; Northeast Corridor populationestimated by adding together the Census Bureauestimates of the 2011 populations of the metro-politan areas between Boston and Washington.

19. A Vision for High-Speed Rail in the North-east Corridor, Amtrak, September 2010, p. 4.

20. Long Distance Trains: Multipurpose Mo-bility Machines, National Association of Rail-road Passengers, Washington, DC, 2012, p. 1.

21. Calculating Migration Expectancy UsingACS Data, Census Bureau, 2009, tinyurl.com/929y4yb.

22. Transportation Energy Data Book, Edition 31(Oak Ridge, TN: Department of Energy, 2012),table 2-14.

23. Boeing 787 Dreamliner to Cut Fuel 20%,Environmental Leader, September 27, 2011, tinyurl.com/cw8pzjj.

24. Rail, General Electric, 2012, tinyurl.com/ycv2yte.

25. Transportation Energy Data Book, Edition 31,table 2-13.

26. California High-Speed Rail Final Program EIR/

EIS (Sacramento, CA: California High-Speed RailAuthority, 2005), appendix 2-F, p. 2-F-1.

27. Stephen J. Thompson, Amtrak and EnergyConservation in Intercity Passenger Transporta-tion, Congressional Research Service report 96-22E, September 3, 1996, p. 1.

28. Transportation Energy Data Book, Edition 31,table 2-13.

29. The White House, Administration Final-izes Historic 54.5 MPG Fuel Efficiency Stan-dards, news release, August 28, 2012, tinyurl.com/94v3e2a.

30. Comparison of Energy Use and CO2 Emis-sions from Different Transportation Modes, M.

J. Bradley & Associates for the American Bus As-sociation, Washington, 2007, p. 4.

31. Thompson, p. 1; Transportation for Tomor-

row: Report of the National Surface TransportationRevenue and Policy Study Commission (Washington:Department of Transporation, 2007), p. 3-20.

32. Mikhail V. Chester and Arpad Horvath, En-vironmental Assessment of Passenger Transpor-tation Should Include Infrastructure and SupplyChains, Environmental Research Letters 4, no. 2(2009): p. 1, tinyurl.com/njz4vt.

33. Life at the Speed of Rail, Van Alen Insti-tute, tinyurl.com/8rpagye.

34. Peterman, p. 5.

35. Historical Statistics of the United States: ColonialTimes to 1970Part 2 (Washington: Census Bu-reau, 1975), series Q307308.

36. Ibid.

37. Measuringworth.com, using the labor valueof a commodity.

38. Report on Streamline, Light-Weight, High-Speed Passenger Trains, Coverdale and Colpitts,New York, 1938, pp. 1050.

39. David P. Morgan, Who Shot the Passenger

Train? Trains, April 1959, pp. 1451.

40. Ibid, p. 14.

41. Ibid, p. 21.

42. Ibid, p. 22.

43. Ibid, p. 23.

44. Ibid, p. 24.


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45. Ibid, p. 25.

46. Chuck Spinner, The Tragedy of the Loomis StreetCrossing(Bloomington, IN: AuthorHouse, 2012),pp. 5354.

47. Donald M. Steffee, Those New Trains: More

Splash Than Speed? Trains, May 1956, p. 43.

48. Morgan, pp. 40, 44, 48.

49. Public Funding Levels of European Passen-ger Railroads, Amtrak Office of Inspector Gen-eral, 2008, p. ii.

50. Ibid., p. 7.

51. European data from Panorama of Trans-port: 2009 Edition, Eurostat, Brussels, 2009, ti-nyurl.com/ykks2bu, pp. 103, 104, 105, 108; pop-ulation data based on Population at 1 January2006, Eurostat, tinyurl.com/99lhsc5; U.S. data

from National Transportation Statistics, table 1-40(Passenger Miles).

52. Panorama of Transport: 2009 Edition, p.101;National Transportation Statistics, table 1-40.

53. Ibid, pp. 103, 104, 105, 108.

54. The correlation coefficient between popu-lation density and per capita miles of travel forthe EU-15 is 0.11, which is little better than ran-dom.

55. Key Facts and Figures about the European Union(Brussels: European Union, 2004), p. 52.

56. Panorama of Transport: 2009 Edition, pp.101, 103, 104, 105, 108.

57. Modal Split of Passenger Transport, Euro-stat, Brussels, 2012, tinyurl.com/c2nrbpy.

58. Brendan Martin, The High Public Price ofBritains Private Railway,Public World, November2010, pp. 23, 7, tinyurl.com/9t4g7dn.

59. Christian Wolmar, Broken Rails: How Privati-zation Wrecked Britains Railways (London: AurumPress, 2001).

60. Realizing the Potential of GB Rail, Depart-ment for Transport, London, 2011, p. 15, tinyurlcom/9njfbae; EU data from Panorama of Trans-port: 2009 Edition, pp. 104.

61. Modal Split of Passenger Transport: Trains,Eurostat, Brussels, 2012, tinyurl.com/9y6rkmg.

62. Modal Split of Freight Transport: Rail-ways, Eurostat, Brussels, 2012, tinyurl.com/9ug37v5.

63. Realizing the Potential of GB Rail, pp1314.

64. Ibid., pp. 19, 23.

65. Ibid., p. 34.

66. National Transit Database 2010, Federal Tran-sit Administration, 2012, operating expenseand service spreadsheets.

67. Amtrak Annual Report Fiscal Year 2011,pp. 8, 66.

68. See rockymountaineer.com. In a hearingbefore the House Transportation and Infrastruc-ture Committee on September 20, 2012, Amtrakpresident Joseph Boardman told the committeethat the Rocky Mountaineer is actually operatedby Amtrak. A telephone call to the Rocky Moun-taineers head office confirmed that Mr. Board-man was mistaken.

69. Anthony Haswell, Amtrak: The Reality Tarnishes the Crusade,Journal of Commerce, January7, 2000, tinyurl.com/9u9z8k7.

70. Joseph Vranich, Derailed: What Went Wrongand What to Do About Americas Passenger Trains(New York: St. Martins Press, 1997), pp. 56, 172221.

71. Morgan, p. 14.

72. For recommendations on reforming federalsurface transportation laws, see Randal OTooleProposals for the Next Transportation Reautho-rization, Cato Institute Policy Analysis no. 644September 15, 2009.

Documents

Stopping the Runaway Train: The Case for Privatizing Amtrak, Cato Policy Analysis No. 712