Amtrak's post-budget cut future, according to Fred Frailey

[eagle628]

http://cs.trains.com/TRCCS/blogs/fred-frailey/archive/2011/10/29/when-push-comes-to-shove-what-will-amtrak-axe.aspx <--Surprise, surprise, long-distance trains are probably in trouble.

 

[Anderson]

This was discussed elsewhere, but some thoughts:

1) The state subsidy situation may take care of itself in at least some regards. I think a few states are "phasing out" their losses so the sticker shock doesn't hit all at once, and in some other cases, deficits are getting taken care of by

2) I agree that the advertising and overhead budgets need to take a hit in a crunch rather than outright train cuts. Bluntly, so do employee benefits...though fat chance there.

3) The budget, from what I can tell, does not take into account the rises in ridership that FY11 saw. That listed $1.767bn in ticket revenue, while FY11 in actuality saw $1.891bn. Now, fuel costs in particular overshot expected costs (diesel was about $1 more expensive than I think Amtrak assumed), but there was at least some closure going on before Amtrak borked their financial system conversion. IIRC, we were about $20 million ahead of budget at midyear...and with cost cuts likely showing up on the EB and CZ in particular (trains that don't run are trains that don't lose money), there's probably some additional savings there, too. So there's some wiggle room in the budget.

4) Likewise, there is probably a bit of "upside" room in the budget, if the last few years are any indication. Granted, the rises are slowing (along with the economy, mind you), but ridership has spiked enough that some routes are near effective capacity, leaving price increases to control demand. You're seeing this on the Zephyr and Builder, to say nothing of the Acela.

5) I'm not going to be surprised to see the Sunset go, but that's the only obvious target for total discontinuation (and only because of decades of poor performance because of both the route and the non-daily status). On the "bright" side, the Sunset will take with it $40+ million in losses.

So, I'm not sure quite what to expect. There's only one train with a target on its rear end at the moment...and that has been coming for years, one suspects. However, there's definitely going to be room for Amtrak to pressure some states to get their new contracts in order in a timely manner, or I could see a few of the "turkey" state routes get zapped.

A point to be addressed: When is the new non-diner Viewliner equipment expected to start coming online? I know that even getting the bag-dorms will help, to say nothing of the sleepers proper. Then again, as I understand it, even the diners should save a decent amount per year.

 

[EB_OBS]

2) I agree that the advertising and overhead budgets need to take a hit in a crunch rather than outright train cuts. Bluntly, so do employee benefits...though fat chance there.

Amtrak employee benefits are not Amtrak's funding problem. I pay more now in medical premiums than I ever have in my entire life and that includes 20 years at non-union jobs. I've been with Amtrak now for six plus years and I've seen my monthly premium increase three times. Our medical / dental plan is an 80/20 plan with $20, $30 & $50 co-pays. I understand that's pretty typical in the private sector whether union or non-union. For a family of four I'm out of pocket several thousand dollars every year in co-pays, deductibles and uncovered expenses.

Amtrak employees pay into Railroad retirement 4% more than you pay into Social Security. Agreement covered, union employees fund their 401K plans 100%. Amtrak makes no matching contribution to it.

I see plenty of waste that Amtrak can bring under control. You'll have to provide more detail and reasoning why you think employee benefits must be cut.

 

[EB_OBS]

As to the article itself, interesting read. Since I work, at this time, exclusively for a long distance service, I'm extremely concerned as to where the cuts might come from. I know people who've been with Amtrak for 20 to 30 years and they all agree that while Amtrak has suffered cuts and been nickle and dimed it's entire existence, this time things are pretty seriously bad in the economy. At the same time I try to remain optimistic for my co-workers, passengers and family.

I do work what has been traditionally one of the better routes financially, however, if other routes are cut I am very much subject to getting bumped out of my job by another displaced employee.

I agree that if any long distance trains are to be cut that the Sunset Limited is the likely first candidate. I do believe though, that the overall belief internally is that Amtrak will survive this recession and that once the economy picks up again the anxiety will lessen. When that will be who knows. I've seen dire predictions that it'll be 2017 before the housing market recovers and 2015 before unemployment improves. Hopefully those are the worst-case scenarios. I don't know. I'm no expert.

 

[Anderson]

EB_OBS,

While I'm sorry to hear about your benefit situation, the fact is that things are bad in the private sector as well. Amtrak has not had job cuts to date (that I know of), there haven't been pay cuts (again, that I know of), and the railroad retirement pension you mention is (as I understand it) in the unique position of being solvent.

I own a machine shop. In the last five years or so, we've switched insurers either two or three times to try and control cost increases. We've had to discontinue our defined benefit (i.e. traditional pension) plan in favor of a defined contribution (i.e. 401k) plan because the cost started getting out of hand. I'll have to double-check our COLA situation, but as I understand it we've had to be stingier there than we wish...and we're doing well by comparison to a lot of companies.

My point is that the situation is bad all over. It sucks, yes, but it's a basket case across the board, and Amtrak isn't the only company facing troubles on this front. Also, the issue is more continued runaway escalation here.

Speaking realistically, I don't think there's any chance of the NEC, or even the "extended NEC", getting killed...so Amtrak will survive in some form. The question, then, becomes what form...does it become an incoherent jumble of regional corridors...basically, handling interstate commuter networks? Do a couple of odd-and-end LD services stick around while the "system" as such gets shut down? The form matters a lot, and that's what we're worried about.

 

[Steve4031]

Health care in this country is bad for everyone. The way it's set up is not the best way IMHO. I don't know what the solution is. But making people pay more out of pocket is not the answer. This prevents many from even getting health care.

 

[jis]

I don't believe there will be a 2012 budget passed before the end of the fiscal year, in effect it will just be a bunch of continuing resolutions and the last one will be called the budget to save everyone's face, like was effectively done for FY11. So a more productive discussion will be about what kind of minor hits can be absorbed through several continuing resolutions rather than any budget. There most likely won't be one. Of course I could be wrong. But unless Obama completely folds his tent, which would make his case for re-election pretty hopeless, I see very low likelihood that the Republican numbers from the House will survive in a budget that Obama signs.

 

[Trogdor]

I've been riding/following Amtrak for just over 10 years, and I've been reading Amtrak's obituary (and, particularly, that of the LD system) for 10 years.

It gets a little old after a while.

We were "dead" in 2002 when the Republicans increased their control of the House and took the Senate.

We were "dead" in 2004 when they retained control of the White House and the legislative houses.

We were "dead" when George Warrington threatened to discontinue all LD service.

We were "dead" when the Amtrak Reform Council said the glidepath was hopeless.

We were "dead" when the board fired David Gunn.

Don't know what else to say.

 

[Ryan]

You've been at this for twice as long as I have, but I couldn't agree more. We're going to keep coasting on this path until the 113th Congress, and we'll see what happens there. Amtrak is a speck of dust on the back of a fly sitting on an elephant in the grand scheme of things. You could cut it entirely, and it wouldn't make a single bit of difference in the larger budgetary picture.

 

[transit54]

While I understand the sentiment of the last two posts, a few things stick out in my mind:

1) I think that while financially Amtrak is insignificant, it is a major target of many on the right. To the misinformed, it's a symbol of waste. And while that's not new, an unwillingness to compromise is more prevalent now than at any point I can remember in the last decade and a half. That being said, the current administration, and 'Amtrak Joe' in particular, is one of the most significant supporters of Amtrak since it's creation. So I don't think we'll see draconian cuts that will wipe out all LD trains, for instance, but I wouldn't say cuts are out of the question.

2) If the balance of power in the executive branch or in the Senate shifts significantly rightward in the next election, I can foresee major cuts that would affect much of the long distance service.

 

[Anderson]

I think a key difference between 2002/2004 and now is that:

1) Some of our biggest supporters in the GOP (i.e. Kay Bailey Hutchison) are either retiring or have retired.

2) The GOP, in 2000-2006, was hardly on the warpath for budget cuts, at least compared to the GOP now.

3) Another point to be had is that the GOP majority in 2000-2006, such as it existed, still had a larger share of reps from the NEC and other areas where Amtrak provides a lot of service than it does now.

I think those three bits make an unpleasant amount of difference.

I'll say that it may prove to be unfortunate that Joe Biden became VP instead of sticking it out another few terms in the Senate.

Another point to be had: At least some of the cuts can be made up for with fare hikes. It's pretty clear that there's room to raise fares in some places without losing too many riders...I know we want to avoid "doing a Warrington" here, but if there's some room to "tap" fares (and especially if we get another "bump" in gas prices), Amtrak should have some room to close holes.

 

[EB_OBS]

EB_OBS,

While I'm sorry to hear about your benefit situation, the fact is that things are bad in the private sector as well.

I made no complaints as to my benefit situation. I'm ok with my benefits. I simply attempted to point out that Amtrak employee benefits aren't so ridiculously good to be a target for reductions. I constantly hear the rhetoric about public sector employees and Boeing and/or UAW workers paying nothing or next to nothing into their pensions and/or their insurance premiums. I'm just saying that if that's the kind of benefit package people think Amtrak employees have, they are wrong.

 

[EB_OBS]

I think with hitting 30 million riders last fiscal year, there is room on some routes to talk about some increase in ticket prices. It's probably inevitable. The Empire Builder seems to be sold-out at least seven to eight months of the year.

I also don't think, IMO, that sleeping car passengers need to have every single meal included into the ticket price. Currently it includes breakfast, lunch and dinner, beverages, extra beverages, and dessert, and bottled water, juice and coffee in the sleeper car. You would not believe how much food, half eaten meals, are thrown into the trash by the fourth, fifth and sixth meal. Every one comes to eat that meal whether they are hungry or not, because it's included.

 

[EB_OBS]

I don't want to completely derail the thread but I just want to add that in most cases, it isn't the employee benefits that are the real problem. Not for the private or public sector and not for large or small businesses. It's a symptom of the root cause which is out of control insurance rates, exorbitant healthcare costs, insanely high education costs for doctors and nurses and out of control malpractice insurance and lawsuits. The system is still rampant with fraud and excessive waste and the for-profit healthcare industry is no more looking out for Joe citizen than big oil & gas is.

 

[Anderson]

I don't want to completely derail the thread but I just want to add that in most cases, it isn't the employee benefits that are the real problem. Not for the private or public sector and not for large or small businesses. It's a symptom of the root cause which is out of control insurance rates, exorbitant healthcare costs, insanely high education costs for doctors and nurses and out of control malpractice insurance and lawsuits. The system is still rampant with fraud and excessive waste and the for-profit healthcare industry is no more looking out for Joe citizen than big oil & gas is.

I'm not going to disagree with you in general, but there's also clearly something off on the back end of the insurance industry's costs.

I think with hitting 30 million riders last fiscal year, there is room on some routes to talk about some increase in ticket prices. It's probably inevitable. The Empire Builder seems to be sold-out at least seven to eight months of the year.

I also don't think, IMO, that sleeping car passengers need to have every single meal included into the ticket price. Currently it includes breakfast, lunch and dinner, beverages, extra beverages, and dessert, and bottled water, juice and coffee in the sleeper car. You would not believe how much food, half eaten meals, are thrown into the trash by the fourth, fifth and sixth meal. Every one comes to eat that meal whether they are hungry or not, because it's included.

I'm going to agree on ticket prices. If you look at the PPR on the Builder for FY11, average ticket revenue per passenger went from $109.65 to $114.62. This isn't terribly impressive on its own, but when you consider how many full trip tickets got axed by the incessant service disruptions (not Amtrak's fault, mind you, but the disruptions were rather repetitive and extended) and the share of remaining business that would be restricted to what is effectively very long corridor service (i.e. CHI-MSP), it's an impressive bump. So Amtrak is trying...here, I think the worst you can say is that they're trying to avoid overcompensating and triggering a ridership blowback like Warrington did.

I suspect there is also some political pressure on the coach fares...there are enough people who use even long distance trains for "utility" travel who a major fare hike would slap that you'll run into political pushback if you raise the lowest coach bucket too much or effectively eradicate it on a route. Soaking the sleeper passengers is more viable (it's a kriffing sleeper, of course it's "soakable"), but I don't see the room for filing deficits on the sleepers alone.

Let me take this moment to note a study I did a few months back comparing the ACL's fare table and the current Amtrak fare table for the Northeast-to-Florida services. For all intents and purposes, sleeping car charges on that route are in line with the Pullman charges plus the base fare from the 1960s in real terms. However, coach fares are about half of what they were in the late 1960s. I'd be curious to run a check on the Builder, both at the present and perhaps two to four years ago.

===========================

As to the meal situation, I would put an argument forward for not including dessert at lunch. As nice as that is, it really is an extra. The questions after something minor like that, though, become:

1) What do you exclude (i.e. do you not offer lunch? Offer breakfast or lunch?)

2) What do you include in the event of a delay? i.e. If you exclude lunch on the Builder, do you also exclude lunch if the Builder is 3-4 hours late into Seattle/Portland? This comes up in particular because the old practice on Amtrak before they went to including all meals was, from what I can tell, to include lunch on at least the Broadway Limited if the train was that late into Chicago (I once saw a menu for sale from the Broadway that was a "complementary lunch menu", citing the delay as the reason for offering free food, so it seems to have been something of a practice).

3) Do you vary practices by route? Part of the hangup with the Builder in particular on this count is the promotion of "enhanced [service area] service"...it's going to be a messy sell to folks that the services is enhanced but less is actually included.

One thing I like about this is that you'd get more coach passengers into the diner for a meal here and there...note the seeming confusion in the PIP for this year, where management seemed utterly confused that coach passengers were eating in the diner on the Lake Shore Limited (even if they were clearly migrating towards breakfast/lunch rather than dinner from the average spending numbers). Even if it's only for one meal per day, I think there are a lot of coach passengers who would choose to eat in the diner given the choice...and sometimes, that proposition gets dicey when the train is packed (I've made early breakfasts a regular practice when traveling because the waiting lists can get long).

For what it's worth, I can vouch for the excess food situation...I've been offered unwanted food by tablemates on more than one occasion (resulting in an impressive ersatz surf-and-turf dinner on the SWC on one occasion when I accepted a family's unwanted shrimp alongside my steak). Mind you, I can't think of too many cases where I'd have outright skipped a meal even if it wasn't included, but I can think of a few situations where I could have done with less than a "full meal" at lunch.

 

[cirdan]

What are the odds that individual states might chip in some cash to support individual LD services that beneft them?

 

[Anderson]

What are the odds that individual states might chip in some cash to support individual LD services that beneft them?

Variable, but likely on the lower side at the moment. Texas is unlikely to do anything because of the cultural bent of the state towards the automobile. Arizona is unlikely because the state is in financial trouble; ditto Nevada. With California, the picture is a bit more complex...the state is in financial trouble, but the state has also been committed to rail travel for decades (the San Joaquins were started in March, 1974). New York would present an interesting picture (again, the state's money situation isn't great, but they're supporting a lot of corridor service), and Illinois would be in a similar situation (you've got a lot of intrastate service provided by the western LD trains).

Florida would be...interesting. Let's just say that I think negotiations on that front would be the equivalent of throwing a Molotov cocktail into the state GOP, since there are more than a few GOPers still smarting over that state's governor's canning of the Orlampa project, and there's clearly a good deal of support for some sort of corridor service within the state.

 

[jis]

New York will have to pick up most of Empire Service by 2013 as required by PRIIA Section 209.

New Jersey already picked up all of what was primarily an NJ commuter service, the Clockers several years back.

 

[Bob Dylan]

Interesting comments re Meals on the LD Trains! While most of us agree that Overall the food in the Diners has improved over what was offered a few years ago, the prices have increased more than the improvement IMO! As is known by most of us older than Amtrak, (you know who you are! :lol: )meals used to be a la carte in the Diners, so the idea of returning to that policy, while logical to Bean Counters, is NOT the answer to increasing Revenue on the LD Trains! IMO if this idea was to be implemented revenue would acxtually GO DOWN!, not up!

As much as most of us enjoy eating our meals in the Diner (or at our Seats in FC Acela! :wub: ), I for one, after paying several hundreds of dollars for a Sleeper and rail Fare (or using X Amount of AGR Points!), would not eat three meals a day in the Diner, probably Breakfast for sure (Best deal going on LD Trains IMO), most Lunches but the Prices at Dinner would cause me to probably skip eating regularly in the Diner! (Generally I think that Amtrak could do much better with the Quality of the Food for what they charge, I dont care if I have to eat off Plastic Plates on Paper Tablecloths if the Prices dont contin ue to go up!) We see again and again that the Food on the VIA Trains (along with the service) is Superior to Amtraks, and it has nothing to do with Unions or the fact that Canada is a socialist Country as our T-Party members like to think!)

My idea is that there should be fewer and cheaper (and Healthier) choices at Dinner in the Diners, when the Contracts come up for renewel 60 Mass needs to have some Culinary experts (MBAs know nothing about Food!)come up with New Menus that would better serve everyone that wants to eat in the Diner! Another thought would be to take a look @ the Cafe cars which also serve high priced unhealthy fast food,this could really be an area of improvement also, again take a look @ the VIA Model! Any ideas on this, Im sure that Ive overlooked factors that influence the current system but just because this is the way it is Now doesnt mean it has to continue as is! :help:

 

[AlanB]

My idea is that there should be fewer and cheaper (and Healthier) choices at Dinner in the Diners, when the Contracts come up for renewel 60 Mass needs to have some Culinary experts (MBAs know nothing about Food!)come up with New Menus that would better serve everyone that wants to eat in the Diner!

Amtrak does have Culinary experts planning the menus; you can meet the team here.

They've been around for at least 2 years now, which is one of the reasons that things are improving.

 

[Anderson]

Jim,

I think the number of choices is about right in the diners. As I understand it, they've already got people working on menu improvement (and it's been showing). That said, their "healthy" dinner item has been badly panned, and the staff generally tries to gently guide folks away from it (since it is more or less a tasteless chunk of fish).

The "club diner" approach should help that bottom line, though...there's a clear mid-market on food between a micro-nuked burger in the cafe and a steak in the diner that Amtrak is looking into, and I think this should help things. One thought comes to mind: The diner prices may be going up as part of an accounting trick (i.e. to move some paper revenue into the diners from the sleepers and improve the dining cars' financial performance through entirely legitimate accounting trickery), screwing coach passengers as collateral damage.

Edit: Ok, I think I need to explain the trick, just to be on the safe side. If we assume that, of the 671,000 sleeper passengers in FY2010, every one had an average of 2.5 meals in the diner (ranging from 6 for full-trip passengers on the California Zephyr and Empire Builder to 1 for late boardings/early disembarkations on the Silver Meteor), raising average meal prices by $1 moves about $1.7 million into the food service bottom line. Raise it $1.50 (through hikes on drink and dessert prices), and you get to $2.5 million. That is a lot of money.

Edit 2: Just a thought, but my gut tells me that they're using these upcharges to milk the food and beverage line on the Auto Train. Think about it: That's 150,000 coach pax that they can slide money around on, improving the food service bottom line to deflect criticism while not having to bring in an extra cent off of the passengers themselves.

 

[George B]

I also don't think, IMO, that sleeping car passengers need to have every single meal included into the ticket price. Currently it includes breakfast, lunch and dinner, beverages, extra beverages, and dessert, and bottled water, juice and coffee in the sleeper car. You would not believe how much food, half eaten meals, are thrown into the trash by the fourth, fifth and sixth meal. Every one comes to eat that meal whether they are hungry or not, because it's included.

All meals are included in the cost of a Sleeper ticket because it provides immediate cost coverage for the Diner. Without having Sleeper passengers pay for meals up front, and have all passengers “pay as you go”, then the Diner would be able to cover even less of the cost of operation. Very few, if any, on-board dining facilities have been able to completely cover costs in the history of US railroad passenger service. Eliminating the up-front payment of meals by Sleeper passengers would seriously threaten the continuance of the Diner. And, simply-put, you have to have a Diner on a LD train if you want people to ride it. This is the issue every railroad has struggled with for the past 100+ years.

 

[jis]

All meals are included in the cost of a Sleeper ticket because it provides immediate cost coverage for the Diner. Without having Sleeper passengers pay for meals up front, and have all passengers “pay as you go”, then the Diner would be able to cover even less of the cost of operation. Very few, if any, on-board dining facilities have been able to completely cover costs in the history of US railroad passenger service. Eliminating the up-front payment of meals by Sleeper passengers would seriously threaten the continuance of the Diner. And, simply-put, you have to have a Diner on a LD train if you want people to ride it. This is the issue every railroad has struggled with for the past 100+ years.

Exactly. That is why Amtrak changed from not including meals to including meals in the Sleeper fare. Indeed when it was first put in place the inclusion applied to only full Sleeper accommodation and not to Slumbercoach. And very few traveling by Slumbercoach actually used the Diner. It was just so much easier and less expensive to make ones own arrangement for food whether it be using a cooler or the Cafe/Lounge. That change took place when for a bit serious consideration was given to simply discontinuing Dining Car service and make packaged meals available through the Cafe instead. Good thing that that did not come to pass IMHO.