Amtrak Concerns About Competition

[Anderson]

One of the more darkly amusing lines in an Amtrak report, in many regards, was in the equipment plan where they went on about concerns that someone could buy up ex-Amtrak equipment and use it to set up a competing service. I'd like to know where this concern is coming from for a couple of reasons:

1) Any "other" service, with few exceptions, would likely take losses off of Amtrak's books. With only a few exceptions (the Lynchburger, the NEC services, etc.), very few Amtrak trains even come close to making money after state subsidies. Before subsidies, many lines are big losers...and the exceptions tend to be the lesser losers.

2) Any services covering lines that Amtrak does not would likely provide interchange business. An example here would be if a private operator fired up a train that ran Madison-Milwaukee, Scott Walker be damned. Such a train, even extended to Chicago, would likely not poach that much business from Amtrak's Hiawathas (though it might screw the Thruway connection)...but it would provide passengers going Madison-Chicago-[insert destination here]. Even more stark would be any LAX-Las Vegas train: Amtrak would get added Surfliner, etc. business from interchanging passengers. And of course, "tourist" trains would either be their own sort of thing operating somewhere "off the system" or likely provide interchange business a la the Grand Canyon RR.

3) Most services along Amtrak-served lines would likely be "tack-on" services as opposed to pure competition (i.e. an operator offering a "luxury" train from NYP/WAS-ORL or Fort Lauderdale would likely want to hitch their cars onto Amtrak's trains rather than work out their own slots with CSX). In cases like this, Amtrak could probably negotiate favorably for those slots, ensuring that they get a batch of extra revenue without having to pay much at all for the costs of that (mostly just fuel).

Basically, the 20-odd failures to operate more than a tourist train suggests that this concern is somewhat paranoid; and that in a lot of cases, even a successful operator wouldn't be "competing" in many regards and might well help Amtrak's bottom line.

 

[railiner]

The rules or laws perhaps have changed over the decades, but originally, no one could legally 'compete' with Amtrak over so-called Amtrak 'member railroads'.

When a railroad joined the Amtrak system in order to be relieved of their responsibility as a common carrier to provide passenger service, the agreement also stated that only Amtrak could provide passenger service over that particular carrier. Not sure if this is still in existance...

 

[Texan Eagle]

The rules or laws perhaps have changed over the decades, but originally, no one could legally 'compete' with Amtrak over so-called Amtrak 'member railroads'.

When a railroad joined the Amtrak system in order to be relieved of their responsibility as a common carrier to provide passenger service, the agreement also stated that only Amtrak could provide passenger service over that particular carrier. Not sure if this is still in existance...

Well if its not, bring out the Super Chief. Santa Fe...All The Way!

 

[cirdan]

When a railroad joined the Amtrak system in order to be relieved of their responsibility as a common carrier to provide passenger service, the agreement also stated that only Amtrak could provide passenger service over that particular carrier. Not sure if this is still in existance...

How do commuter services fit in with that?

Does Amtrak have to approve those?

 

[cirdan]

Basically, the 20-odd failures to operate more than a tourist train suggests that this concern is somewhat paranoid; and that in a lot of cases, even a successful operator wouldn't be "competing" in many regards and might well help Amtrak's bottom line.

I think they are more concerned about other people competing for state-supported services

So suppose somebody collected some surplus Amtrak equipment, did a refurbishment job and went to a state like NC and offered to run the same service that Amtrak is now running but for a lower subsidy.

Maybe that isn't the best example seeing that NCDOT actually owns much of the equipment anyway (is there any legal requirement that Amtrak has to run that service, or how difficult would it be to transfer it to another operator?)

Or consider the Heartland Flyer. The train basically wouldn't exist if it wasn't for support from the states. Now if another operator moved in and undercut Amtrak's subsidy demand or strarted doing extra stuff for the same price, that would put Amtrak in a predicament.

Also, if different operators started running their own trains, those trains probably wouldn't be available in the Amtrak information or booking system and so the system would be more fragemented for the customer.

 

[trainviews]

Basically, the 20-odd failures to operate more than a tourist train suggests that this concern is somewhat paranoid; and that in a lot of cases, even a successful operator wouldn't be "competing" in many regards and might well help Amtrak's bottom line.

I think they are more concerned about other people competing for state-supported services

So suppose somebody collected some surplus Amtrak equipment, did a refurbishment job and went to a state like NC and offered to run the same service that Amtrak is now running but for a lower subsidy.

Maybe that isn't the best example seeing that NCDOT actually owns much of the equipment anyway (is there any legal requirement that Amtrak has to run that service, or how difficult would it be to transfer it to another operator?)

Or consider the Heartland Flyer. The train basically wouldn't exist if it wasn't for support from the states. Now if another operator moved in and undercut Amtrak's subsidy demand or strarted doing extra stuff for the same price, that would put Amtrak in a predicament.

Also, if different operators started running their own trains, those trains probably wouldn't be available in the Amtrak information or booking system and so the system would be more fragemented for the customer.

Actually I don't think it would be so bad if a few of the state supported corridors like the Heartland Flyer could be picked up by a bidder for a lower subsidy. Either the states could save a few bucks or the money could be used for better service, like an extension to Tulsa.

Now, I am nowhere near the "privatize it all" bandwagon. A subsidized Amtrak is needed to guarantee a basic network. But getting other operators (most likely Veolia, Arriva or one of the other European entities, or one of the present tourist RR's moving that way) in on individual routes might get America more train service for the same money, get it cheaper or might get Amtrak to take a closer look at their cost structure in order to compete (which is needed IMHO). Unsubsidized commercial services is pretty unlikely, as I don't see anyone being able to make money on that, but if someone want to try, even competing on one of the current routes, fine.

I have no idea what the current legal status is, but a decent legal framework has to be in place first. As a government owned company I actually think Amtrak should have an obligation to leave space for competition as well as making bookings through their booking system possible etc. A decent framwork for guaranteed connections etc. should be possible too. Of course this still depends on whether the host RR's will leave space on the tracks, and I also think an exception or at least a special arrangement also has to be made for the NEC as attractive slots are so scarce. It is also the only corridor that would have consequences for the whole Amtrak construction if tampered with.

For the rest of the network this is not too different from various commuter rails today, and while private operators are inherently no better or worse than Amtrak, in general this has worked OK. And even if no private operator feels compelled to enter the market, just having the framework in place would shoot down one of the arguments of the "kill Amtrak" crowd.

 

[cirdan]

Actually I don't think it would be so bad if a few of the state supported corridors like the Heartland Flyer could be picked up by a bidder for a lower subsidy. Either the states could save a few bucks or the money could be used for better service, like an extension to Tulsa.

Now, I am nowhere near the "privatize it all" bandwagon. A subsidized Amtrak is needed to guarantee a basic network. But getting other operators (most likely Veolia, Arriva or one of the other European entities, or one of the present tourist RR's moving that way) in on individual routes might get America more train service for the same money, get it cheaper or might get Amtrak to take a closer look at their cost structure in order to compete (which is needed IMHO). Unsubsidized commercial services is pretty unlikely, as I don't see anyone being able to make money on that, but if someone want to try, even competing on one of the current routes, fine.

I have no idea what the current legal status is, but a decent legal framework has to be in place first. As a government owned company I actually think Amtrak should have an obligation to leave space for competition as well as making bookings through their booking system possible etc. A decent framwork for guaranteed connections etc. should be possible too. Of course this still depends on whether the host RR's will leave space on the tracks, and I also think an exception or at least a special arrangement also has to be made for the NEC as attractive slots are so scarce. It is also the only corridor that would have consequences for the whole Amtrak construction if tampered with.

For the rest of the network this is not too different from various commuter rails today, and while private operators are inherently no better or worse than Amtrak, in general this has worked OK. And even if no private operator feels compelled to enter the market, just having the framework in place would shoot down one of the arguments of the "kill Amtrak" crowd.

Some competition or at least another operator for comparison purposes wouldn't be at all a bad thing.

Sonme negative consequences that I can see though is that a cheaper = better philosophy would be encouraged (as so often happens when publicly supported services are handed over to the private sector) with agressive low cost operators undercutting Amtrak using ancient, decrepit and undermaintained trains, poorly trained staff etc and so provide a service that at first glance to somebody in government may appear to be the same as what Amtrak was offering, but in reality is compromising the growth that Amtrak has been building up over the years on these corridors.

A definite condition would have to be that bookings would continue to be possible through Amtrak and the Amtrak website and that the routes would continue to be shown on the Amtrak maps and in the timetables etc, so that to the end customer it wouldn't really matter who was actually running the service. Maybe it could even be done in the form of a franchise, with the trains carrying Amtrak colours and the staff wearing Amtrak uniforms but some private operator handling it. Nothing is so destructive to customer confidence as a fragmented system.

And while they're at it, why not offer seamless timetable enquiries (if not seamless tickets) to existing commuter rail systems, so increasing the number of possible destinations without actually having to run any additional services?

 

[jis]

I suspect that the usual cream skimming would be a significant issue, wherein, all profitable or close to profitable operations would be picked up by others and Amtrak would be left holding the bag for the highest loss making routes. Then the next step will be to say things that require that much subsidy should probably not be run at all, and that will be the end of most LD trains, notwithstanding all the claims to the contrary by URPA and the likes.

The other thing lost will be the convenience of a unified ticketing system, unless like was done in the UK, it is made a requirement that any passenger common carrier must be able to accept standard paper or e-Tickets issued by a common authority. Even with Amtrak this transparency is sadly lacking in the US, something that is available in most other countries. To get from Short Hills NJ to Sharon MA, I still have to deal with 3 different outfits issuing me three different tickets covering different parts of the journey that I have to collect from three different machines or ticket windows.

 

[transit54]

Would you be able to provide reference to the report in question?

I believe you are referring to the Amtrak fleet strategy plan, specifically page 49.

The report never indicates that Amtrak is concerned that private companies would purchase the equipment and compete against them. The concern was that states would buy the equipment and try and get Amtrak to operate service using it. Verbatim, "Moreover, Amtrak does not wish to operate this equipment once it is retired." (last line of page 49)

Maybe there's another report I'm unaware of that deals with this issue. But my understanding that it was a concern about states purchasing the equipment, not private companies.

 

[cirdan]

Would you be able to provide reference to the report in question?

I believe you are referring to the Amtrak fleet strategy plan, specifically page 49.

The report never indicates that Amtrak is concerned that private companies would purchase the equipment and compete against them. The concern was that states would buy the equipment and try and get Amtrak to operate service using it. Verbatim, "Moreover, Amtrak does not wish to operate this equipment once it is retired." (last line of page 49)

Maybe there's another report I'm unaware of that deals with this issue. But my understanding that it was a concern about states purchasing the equipment, not private companies.

Why should Amtrak be concerned about having to operate it?

If maintenance is genuinely more expensive or difficult then surely Amtrak can bill for that and maybe the state can change its mind (either about the choice of equipment or about Amtrak).

If it isn't, the why should they care?

 

[jis]

Would you be able to provide reference to the report in question?

I believe you are referring to the Amtrak fleet strategy plan, specifically page 49.

The report never indicates that Amtrak is concerned that private companies would purchase the equipment and compete against them. The concern was that states would buy the equipment and try and get Amtrak to operate service using it. Verbatim, "Moreover, Amtrak does not wish to operate this equipment once it is retired." (last line of page 49)

Maybe there's another report I'm unaware of that deals with this issue. But my understanding that it was a concern about states purchasing the equipment, not private companies.

Why should Amtrak be concerned about having to operate it?

If maintenance is genuinely more expensive or difficult then surely Amtrak can bill for that and maybe the state can change its mind (either about the choice of equipment or about Amtrak).

If it isn't, the why should they care?

I can understand why they might care. Afterall, they remain the customer facing part of the operation, and their desire to avoid frequently failing clunky equipment is quite understandable IMHO. That's why they may want to care.

 

[NEW RIVER GEORGE]

I couldn't figure this out either. Amtrak, like any public entity, is required to get the best return on any item declared as surplus. In most cases, with the high scrap prices today, a scrapper is going to be the high bidder on any surplus passenger cars. But, if an operator such as a state government, regional commuter line, or even a private company, is willing to pay more than scrap, then there are normally regulations that require the high bid be the accepted one. In any event, the cars don't sell for much when they do come on the market, just peanuts in the scheme of things. Still, there is no reason to tie the hands of the property management people when they do have something to dispose of.

An example of this thinking running amok a few years ago were big city police departments auctioning off surplus firearms, or trading the old ones in for new. Without exception, the bidders were dealers, who in turn resold the stuff and put it out on the street. The same thing happened with confiscated weapons. It took some special laws to be passed to get around the bidding requirements, to finally force the used equipment to be melted down. Note that this just happened in a few notorious big cities...in other places it is still going on. Nothing like a police officer being shot at with his old service weapon. Does Amtrak seriously think that a criminal evil-doer like a dinner train operator is going to get a hold of one of their old cars and take pot shots at Amtrak with it?

Now I don't expect anybody to go into business against Amtrak with old equipment. Their cars are so far gone that once they are released from service, it costs up to a million bucks or more to rebuild them (still not bad though, considering the multi-million dollar cost of a new rail vehicle today). And they aren't going to have the amenities that riders in the future are going to want, or be compliant with current and forthcoming laws...they are 100 year old technology. Note that Amtrak is running equipment today that, if it was owned by anyone else, they would condemn and refuse to run. As an earlier poster pointed out, Amtrak still has a monopoly on intercity passenger rail service in the US, and unless some of the railroad companies want to start up passenger services again, there aren't going to be any competitors who have the rights to run on anything but intrastate short lines or dinner train spurs.

As for commuter operators, most of them are grandfathered in operations with rights to run their lines inherited from pre-Amtrak days. Few that I can think of run across state lines, although SEPTA, NJT and MetroNorth are examples that do. They picked up their territories the same way Amtrak did, when the Pennsy bellied up. Some new entrants like MARC and VRE have rehabbed older equipment, but their druthers, if they had the money, would have been to go with all-new. And Amtrak's intercity coaches generally have to be reconfigured to run on commuter lines, as the seating arrangements and other aspects have to be changed. I don't see Amtrak worrying too much about commuter lines that stop at every station like MARC and VRE do, Amtrak has more to worry about from Megabus, that only runs between the big city pairs, and doesn't have to invest in any kind of station facilities. Now, if public money was used to build train stations on the scale that it has been to build airports, Amtrak might benefit, as there are many, particularly the disabled, who don't like lining up outside in the rain to fight for a seat on a Megabus. But that is a different story.

In short, there is no rational expanation that I can think of for why Amtrak would have put that clause about equipment disposal in its report or even spent the ink on mentioning the subject. It was a dumb digression from an otherwise important project.

 

[Anderson]

Would you be able to provide reference to the report in question?

I believe you are referring to the Amtrak fleet strategy plan, specifically page 49.

The report never indicates that Amtrak is concerned that private companies would purchase the equipment and compete against them. The concern was that states would buy the equipment and try and get Amtrak to operate service using it. Verbatim, "Moreover, Amtrak does not wish to operate this equipment once it is retired." (last line of page 49)

Maybe there's another report I'm unaware of that deals with this issue. But my understanding that it was a concern about states purchasing the equipment, not private companies.

Actually, I'm referring to another paragraph on that page:

"Part of our strategy is to sustain and develop the supplier base for intercity passenger rail equipment in the United States. Providing aged equipment to third parties at low cost would undermine that strategy. If others are interested in acquiring equipment or starting new service, Amtrak will be willing to work with those parties to achieve their goals using existing or new equipment, but in accordance with the overall fleet strategy."

There's an earlier bit about museums and operators of individual private cars. I would, in this vein, point out that the LIRR at one point looked at buying old Amtrak cars for their parlor car service but ultimately declined due to the inability of the Amtrak cars to make some turns on the side lines in Long Island. However, when I look at some of the oddball commuter operations in the NEC (Metro North and NJ Transit sort of stand out like sore thumbs here, and Shoreline East does as well; the MBTA is getting there, too), I can see some places that older Amtrak equipment, even with fewer years in service, might be desirable for some of the longer-haul commuter lines (let's not forget that Conrail ran commuter lines to Allentown at one time, nor that there is something in the works linking NYP to Hartford, CT with a commuter line).

Finally...if the equipment belongs to someone else who then tries to put it back in circulation (you know, what Amtrak tried to get IL to do back in the late 1990s), Amtrak could probably put in place a policy saying (in so many words) that the old Heritage baggage and diner cars must be maintained by the third party on a separate contract, or that the third party must be wholly liable for maintaining the equipment.

 

[buck1108]

The rules or laws perhaps have changed over the decades, but originally, no one could legally 'compete' with Amtrak over so-called Amtrak 'member railroads'.

When a railroad joined the Amtrak system in order to be relieved of their responsibility as a common carrier to provide passenger service, the agreement also stated that only Amtrak could provide passenger service over that particular carrier. Not sure if this is still in existance...

Well if its not, bring out the Super Chief. Santa Fe...All The Way!

Oh boy...now my juices are salivatin'! LOL

Has anyone seen that episode of the Jack Benny Show when he travels from Calif to NYC on the Super Chief? Priceless.

Here's a great page on the Southern's Crescent (and Southern Crescent):

http://www.american-rails.com/crescent.html

I sure wish I'd gotten to ride the Southern rails back when Southern was at its peak (1981, according to some sources!).

 

[TWA904]

See page 49 of the Amtrak Fleet Strategy Plan. It says they plan to hold several cars in reserve for a while but

will scrap other equipment. They do not want anyone undermining their growth strategy by buying equipment from them

then starting new services with them. However, it does say that if someone wants to start new services, Amtrak will work with them for equipment based on Amtrak's fleet plans.

 

[PaulM]

Here's a great page on the Southern's Crescent (and Southern Crescent):

http://www.american-rails.com/crescent.html

The following from the link

Prior to the Southern gaining its own lines between Washington, D.C. and New Orleans the Vestibule reached the two destinations via connections with railroads Atlanta & West Point, Western Railway of Alabama (both railroads were part of the West Point Route, and the Louisville & Nashville.

is somewhat misleading, To the best of my knowledge, the Crescent continued to run via Montgomery and Mobile on the West Point Route and L&N long after the Southern RR made it to NO. It was the Southerner that took the current Crescent's route via Birmingham.

 

[eagle628]

Some competition or at least another operator for comparison purposes wouldn't be at all a bad thing.

Sonme negative consequences that I can see though is that a cheaper = better philosophy would be encouraged (as so often happens when publicly supported services are handed over to the private sector) with agressive low cost operators undercutting Amtrak using ancient, decrepit and undermaintained trains, poorly trained staff etc and so provide a service that at first glance to somebody in government may appear to be the same as what Amtrak was offering, but in reality is compromising the growth that Amtrak has been building up over the years on these corridors.

A definite condition would have to be that bookings would continue to be possible through Amtrak and the Amtrak website and that the routes would continue to be shown on the Amtrak maps and in the timetables etc, so that to the end customer it wouldn't really matter who was actually running the service. Maybe it could even be done in the form of a franchise, with the trains carrying Amtrak colours and the staff wearing Amtrak uniforms but some private operator handling it. Nothing is so destructive to customer confidence as a fragmented system.

And while they're at it, why not offer seamless timetable enquiries (if not seamless tickets) to existing commuter rail systems, so increasing the number of possible destinations without actually having to run any additional services?

So essentially you're talking about duplicating the regional airlines/mainline airlines relation with rail transport.

 

[Anderson]

Some competition or at least another operator for comparison purposes wouldn't be at all a bad thing.

Sonme negative consequences that I can see though is that a cheaper = better philosophy would be encouraged (as so often happens when publicly supported services are handed over to the private sector) with agressive low cost operators undercutting Amtrak using ancient, decrepit and undermaintained trains, poorly trained staff etc and so provide a service that at first glance to somebody in government may appear to be the same as what Amtrak was offering, but in reality is compromising the growth that Amtrak has been building up over the years on these corridors.

A definite condition would have to be that bookings would continue to be possible through Amtrak and the Amtrak website and that the routes would continue to be shown on the Amtrak maps and in the timetables etc, so that to the end customer it wouldn't really matter who was actually running the service. Maybe it could even be done in the form of a franchise, with the trains carrying Amtrak colours and the staff wearing Amtrak uniforms but some private operator handling it. Nothing is so destructive to customer confidence as a fragmented system.

And while they're at it, why not offer seamless timetable enquiries (if not seamless tickets) to existing commuter rail systems, so increasing the number of possible destinations without actually having to run any additional services?

So essentially you're talking about duplicating the regional airlines/mainline airlines relation with rail transport.

Actually, that's not a bad way to put it. I would note that "ancient" and "decrepit" are not synonymous: You can have lousy-but-relatively-new equipment (the Penn Central "roach coaches" that Amtrak inherited...most would have been less than 30 years old, if I had to guess) and you can have ancient-but-solid equipment (Heritage diners or NCDOT cars both leap to mind). Truth be told, I'd consider it to be a positive if this were attempted (since the states can probably work some things out a little better for themselves on the management side), and Amtrak could just demand certain baseline standards to include them in their system (or, if they chose to, to lend them joint branding).

The truth of the matter is that Amtrak is going to have to acquire most or all of the new equipment in the system unless it manages to "piggyback" some state orders onto its own order. If they manage respectable resale prices to states (and I have no idea what that number would be compared to the initial costs), then they can book that as a net gain and use it to expand the next order/offset the costs while getting added connections somewhere (say, on the FEC if Florida goes with that option, or if some semi-private operator started up elsewhere, wherever that might be). I know what Amtrak is saying about their strategy, but aside from "piggyback" deals, working out deals with states to use older equipment for 5-20 years (depending on useful life at the time, etc.) would seem to be a way to entice them into actually doing passenger rail by shaving the startup costs marginally. I think it would be fair for Amtrak to limit this to some extent, but if Amtrak could whack $20 million off the cost of starting up a new, reasonably extensive service somewhere that linked into the national system (say, Chicago-Des Moines or Minneapolis-Duluth) and also get states into things a bit more quickly than forcing the states to go with entirely new equipment (which can add several years to the process), it wouldn't be a bad thing, I wouldn't think.

To think of the idea here, have Amtrak keep (in minimal maintenance status) a few trains' worth of Amfleets that are a few years "too old" and that have been replaced. When a state decides they want to pursue passenger rail on a route, assuming that the timings are half-decent, it certainly speeds the process up (and cuts down on the startup costs) if Amtrak can offer them a fair share of the necessary equipment (likely for a given cost plus the cost of restoring the equipment) and save them what is, at the present, a nasty logistical hurdle and time waiting in the queue. Not everyone is going to be able to do what NCDOT has managed, after all.

 

[cirdan]

In short, there is no rational expanation that I can think of for why Amtrak would have put that clause about equipment disposal in its report or even spent the ink on mentioning the subject. It was a dumb digression from an otherwise important project.

Not really comparable, but in Europe there have been a few cases of start-up operators in the freight scene making trouble for the big national railroads. In Holland, there was a company called ACTS who bought 50 year old locomotives at scrap value (or in some cases borrowed them from museums), leaed the corresponding cars and using open-access rights starting competing against the incumbent freight operator on its most profitable routes while systematically undercutting prices. Because the purchase and book value of the equipment was virtually zero there was little capital and and not much risk involved. Something similar happened in the UK when DRS bought a collection of locomotives from the early 1960s from failed museum projects, fixed them up and started competing on prime routes. The result is that many railroads now no longer sell surplus equipment to museums but loan it to them on the condition that they can at any point in the future dictate what it can nad cannot be used for.

 

[Ryan]

Actually, I'm referring to another paragraph on that page:

"Part of our strategy is to sustain and develop the supplier base for intercity passenger rail equipment in the United States. Providing aged equipment to third parties at low cost would undermine that strategy. If others are interested in acquiring equipment or starting new service, Amtrak will be willing to work with those parties to achieve their goals using existing or new equipment, but in accordance with the overall fleet strategy."

I'm still not seeing where that statement indicates that Amtrak is in any way concerned about competing services being started up. The point of that passage is that Amtrak wants to do what it can to build up the industrial base of car manufacturers here in the US. Amtrak "providing aged equipment to third parties" would in essence be taking business away from their car supplier, which takes away from their goal of creating demand so that a car manufacturer could build a factory and sustain a long term business here in the US. In that paradigm, someone starting up competing service (or expanding an already existing service would be a good thing, as they would provide more business (and hence more stability and hopefully lower prices) for whomever is going to start building all these railcars.