NASA vs Amtrak?

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D.P. Roberts

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I readily admit I don't know much of anything about Amtrak's financing. But recent news from NASA about the Boeing & SpaceX contracts got me thinking.

(Here's a link to NASA's new contracts, if anyone hasn't heard about this: http://www.cbc.ca/news/technology/nasa-s-spacex-boeing-deal-a-giant-leap-for-space-flight-1.2771526 )

Basically, NASA is still being funded by the government, but it's subcontracting its spaceship construction & operation to two private companies, Boeing and SpaceX. NASA still gets its funding from the government, but now private companies can try to operate spaceflights more efficiently, pushed on by competition between the two companies.

What if Amtrak used NASA as a model, and contracted out its railroad operations the same way?

On the surface, it looks like it might work. If the US has a vested interest in maintaining passenger rail across the US, it could keep its funding as it does now, but contract out the operation of passenger rail to the major Class I railroads (or other companies that might want to try it).

Basically, Amtrak would say something like "The Empire Builder costs Amtrak $X per year to run. We think private companies could run a train across the northern US more efficiently, so we'll bid the service out at 80% of X." Then, let BNSF, competing railroads, new startups, or even airlines compete for that bid.

If it works, then Amtrak saves money, service would probably improve, and the congresscritters who only like private enterprise would be pleased (as the winning bidders line their pockets with campaign contributions).

If it doesn't work, Amtrak proves that private enterprise could not, in fact, do the job better than they can, and perhaps those angry voices for privatization would quiet down.

Either way, it seems like a win-win for Amtrak.
 
Experience with privatization of Train Operating Companies (TOC) in the UK suggest that initially there will be need to increase subsidies beyond where it is now, but a plan can be put in place with incentives to reduce the subsidies to much lower over time. Contrary to popular belief private companies really do not have some pixy dust that would immediately cut operating costs. This has been shown over and over again.

Whatever makes people keep thinking that BNSF really wants to get back into the LD passenger business completely beats me. Where is the ROI?
 
They're not comparable situations.

It's not like there's more than one destination or any passengers that wouldn't be government employees. Its got more in common with contracting with an airline to fly troops back from overseas. Government Entity A needs to transport staff to Government Facility C from Government Facility B. It contracts with Private Company D to develop, construct, and operate Vehicle E between B and C.

That's wildly different than what you're suggesting. Something more comparable would the large scale contracting of a city's mass transit system. I'm pretty sure that's not happened anywhere in the US and history actually went the other way with cities bringing transit in-house.

Also, it's not about efficient. It's about not having to buy a vehicle optimized for low Earth orbit operations and a separate deep space vehicle. NASA only has the funding to buy one of the two and it chose Orion and it's deep space mission.
 
They're not comparable situations.

It's not like there's more than one destination or any passengers that wouldn't be government employees. Its got more in common with contracting with an airline to fly troops back from overseas. Government Entity A needs to transport staff to Government Facility C from Government Facility B. It contracts with Private Company D to develop, construct, and operate Vehicle E between B and C.
Having experience that on two roud trips to that Souteast Asian vacation land some 40 years ago, I would not use that as a comparison. These were flights on planes I would regard as rejected from freight service. It helped me understand my Grandmother's statement that at the end of WW2 they did not count the boys home safe until they walked in the door.
 
What if Amtrak used NASA as a model, and contracted out its railroad operations the same way?
You mean the way a dozen commuter rail operators do, including Metrolink, the MBTA, RailRunner, etc.?
Basically, it only works if you control your own tracks. Otherwise there are "too many cooks" and it becomes impossible to get agreements made.

(NASA comes close enough to "owning" outer space -- at least there isn't any contention for ROW -- and NASA certainly owns the launch pads.)

In practice, several of those commuter rail operators have hired Amtrak as the contract operator, so I don't see much benefit in Amtrak hiring someone else.

Keeps coming back to the same thing doesn't it? Owning the tracks.
 
Whatever makes people keep thinking that BNSF really wants to get back into the LD passenger business completely beats me.
BNSF not only operates under contract to Metra (and proudly stamps its name on the trains, too, which UP does *not* do), it has also taken multiple new contracts to run passenger trains (Cascades, Northstar).

This is, at any rate, much more open to operating passenger trains than any other class I freight railroad; CSX, by contrast, was eager to get out of its contract to operate MARC for some reason, and CN has been ditching its operations as fast as possible in both the US and Canada.

I don't expect that BNSF would want to take on revenue risk, but it seems pretty interested in doing contract operations.
 
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(NASA comes close enough to "owning" outer space -- at least there isn't any contention for ROW -- and NASA certainly owns the launch pads.)
There's not any ROW contention yet! Soon. But not yet.

Also, Air Force more than NASA. SpaceX has been flying from USAF sites while they're building one at Kennedy, to lease, and Orbital flies out of the Mid-Atlantic Regional Spaceport that, while on the property of Wallops, I'm pretty sure is owned by the Virginia Commercial Space Flight Authority.
 
How can privatization be cheaper? A private company has to generate a profit for the parasites on Wall Street. Where will that money come from?
 
(NASA comes close enough to "owning" outer space -- at least there isn't any contention for ROW -- and NASA certainly owns the launch pads.)
There's not any ROW contention yet! Soon. But not yet.

Also, Air Force more than NASA. SpaceX has been flying from USAF sites while they're building one at Kennedy, to lease, and Orbital flies out of the Mid-Atlantic Regional Spaceport that, while on the property of Wallops, I'm pretty sure is owned by the Virginia Commercial Space Flight Authority.
yeah in the Cape Canaveral area it is easy to get confused since the Cape Canaveral Air Force Station is right next door to the Kennedy Space Center. Indeed the Falcon 9 launch last week was from the Air Force Station and not from KSC.
 
The only reason a private company would want to operate a train is to make a profit. To be able to do that vs Amtrak would be to increase revenue (fare/subsidy) or decrease costs. While there may be some room for better management or reducing labor costs it is likely very marginal.

What privatization proposals tend to ignore is the national ticketing system. To share costs for that would be very complex, to lose the system would be very bad for national long distance rail. Even now most of the western regional commuter rail systems are not very convienent for transfer from LD... Caltrains/Northstar/Metra/Coaster/Sounder etc.
 
And yet the airlines are able to issue tickets spanning multiple airlines using clearing houses which are based on those used by railroads in the past to do the same. The Amtrak system could be adopted as the national ticketing and clearing house system. Indeed it would really be nice if there were such allowing cross ticketing among Amtrak and the commuter agencies already.
 
Experience with privatization of Train Operating Companies (TOC) in the UK suggest that initially there will be need to increase subsidies beyond where it is now, but a plan can be put in place with incentives to reduce the subsidies to much lower over time. Contrary to popular belief private companies really do not have some pixy dust that would immediately cut operating costs. This has been shown over and over again.
One thing that private companies can do better than state-run ones is lobby senators and congressmen (across party lines) to be more pro rail.

I believe this is part of the reason for the various additional services that were added in the UK simce privatisation.
 
That's wildly different than what you're suggesting. Something more comparable would the large scale contracting of a city's mass transit system. I'm pretty sure that's not happened anywhere in the US and history actually went the other way with cities bringing transit in-house.
hasn't New Orleans contracted the operations of its buses and streecars to Transdev?
 
How can privatization be cheaper? A private company has to generate a profit for the parasites on Wall Street. Where will that money come from?
A private company isn't cheaper per se. But I believe having several private companies competing for contracts introduces innovation. If there is one company enjoying a monopoly (be it state run or private), it is easy for that company to say "what you want can't be done", and provide some burocratic explanation that nobody really swallows but that you can't really question either as the person making the statement can hide behind his own expertese. This leads to managment laziness and a tendency to leave things as they are. If there are several companies, on the other hand, you can always point at another one and say "if they can offer to do this, why can't you?"

If you object to Wall Street making money off running trains, do you also object to people like GE or Siemens making money while selling stuff to Amtrak? That money is also somehow going to Wall Street.
 
But I believe having several private companies competing for contracts introduces innovation. If there is one company enjoying a monopoly (be it state run or private), it is easy for that company to say "what you want can't be done", and provide some burocratic explanation that nobody really swallows but that you can't really question either
Problem is, railroads, telephones, telegraphs, roads, canals, air traffic control, etc. are *natural monopolies*. (Look up the term "natural monopoly" if you don't know it.) This is due to network effects. (Look up the term "network effects" if you don't know it.)

So they're gonna be monopolies. (Or at least, if they're efficient and well-run, they're gonna be monopolies.) Competition is great in areas where it works, but these are areas where it does not work. You can get some limited benefit by having renewable / re-biddable contracts with companies bidding for them (like MBTA, who tossed MBCR and hired Keolis), but it's not really the benefits of competition; it's more the ability to change management easily if management goes rotten. (Which is useful, true.)

For further clarification: there are sub-areas where competition does work. Buying rolling stock is one of them. The natural monopoly arises from the network effects, so it's very much linked to the *network structure* -- the tracks, or in Amtrak's case, the routes and schedules and ticketing. There's no natural monopoly in manufacturing rolling stock -- there is some in design (standardized parts, especially couplers), and that has to be centralized and there can't be competition between different coupler types.

You can subcontract and get competition for stuff which doesn't have network effects, but if you try to do it with stuff that has network effects, it doesn't really work; either you don't get competition, or you damage operations and make everything more expensive, and sometimes both.
 
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That's wildly different than what you're suggesting. Something more comparable would the large scale contracting of a city's mass transit system. I'm pretty sure that's not happened anywhere in the US and history actually went the other way with cities bringing transit in-house.
hasn't New Orleans contracted the operations of its buses and streecars to Transdev?
New Orleans RTA contracted with Veolia to operate the system (buses and streetcars). Many transit systems have contracted with Veolia (or Keolis or First Transit or others) to operate part or all of their systems.
 
but it's not really the benefits of competition; it's more the ability to change management easily if management goes rotten. (Which is useful, true.)
In the UK, despite everybody complaining that everything is going downhill and used to be so much better, I think overall passenger miles have something like tripled since privatisation. So I think we should stop listening to the moaners and judge the tree by its fruits. I remember the old BR of the 1980s well and it was not the efficiently run paradise the nostalgics make it out to be. And it was definitely not sustainable. On many routes, the lemon was being squeezed dry as BR wasn't getting the subsidy or investment it needed to keep things running and there was often a make and do mend attitude which was essentially deferring repair and replacement costs to the future. The few major investments there were were often financed by selling assets and sooner or later you run out of assets to sell. When people say, subsidies have gone up since privatisaion, they need to bear in mind that some bouncenack was needed to put the network back into a sustainable condition.

Detractors say, traffic growth is not purely due to trains getting better, but that there have been shifts in external parameters. More people need to commute because houses in the cities have become unafforadble. The government has scaled down on its road building program. Admittedly, all this has had an effect. But this didn't start with privatisation, these were longer-term trends. The rail regulator effectively didn't ask the private companies, "how much will you charge to run this service", but asked "come up with a suggestion on how to improve this service". Maybe a state run BR could have done that too, but the fact that you sign a contract and commit for several years does provide a certain level of stability and predictability which you don't have if government can come back and micro-manage whenever it wants.
 
Here is an interesting graph of what I was explaining above.

The railways were nationalised to form BR in 1948.

They were in poor state at the time, having suffered from lack of maintenance during the war.

The government started on a major modernisation program from the mid 1950s. This was poorly thought out and led to a lot of waste.

Then came the Beeching program in the 1960s which until the early 1970s saw about half the track mileage being eliminated (mostly porly utilized routes)

In the mid 1970s followed a further modernisation wave, with the diesel HSTs being introduced. This led to some growth in traffic, but momentum ran out and it began to fall off again.

In the 1980s, there was sectorisation and reorganisation which again led to some growth but again this ran out of steam and tailed off again.

Privatisation of the 1990s however, led to growth that for the first time didn't tail off after a few years but continued solidly with no sign of abating.

GBR_rail_passenegers_by_year.gif
 
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Yeah, but regarding the UK, you've got a lurking variable. You need to track government spending on the railways. Basically, the rise in ridership correlates with *the government pouring money in*, not so much with privatization per se.
 
Of course, we all know about the efficiently run U.S. railways and the smashingly profitable trains they were running in the pre-Amtrak days. Many different railroads with many different approaches, all of which were highly successful. Union Pacific and Santa Fe, for example, were making money hand over fist on the trains they ran to the west coast from Chicago. Illinois Central was rolling in dough because of their great Panama Limited profits, and B&O's Capitol Limited was the cat's meow! The Silver Meteor was the one thing that kept SCL in the black. They sure didn't want to give up operation of those trains, did they?

NURSE, I THINK MY MEDICINE IS OVERDUE! I'M SEEING VISIONS OF ROBERT R. YOUNG!

(In truth, if even one of the above stories were true, I might be able to take this seriously. Sorry.)
 
Of course, we all know about the efficiently run U.S. railways and the smashingly profitable trains they were running in the pre-Amtrak days. Many different railroads with many different approaches, all of which were highly successful. Union Pacific and Santa Fe, for example, were making money hand over fist on the trains they ran to the west coast from Chicago. Illinois Central was rolling in dough because of their great Panama Limited profits, and B&O's Capitol Limited was the cat's meow! The Silver Meteor was the one thing that kept SCL in the black. They sure didn't want to give up operation of those trains, did they?

NURSE, I THINK MY MEDICINE IS OVERDUE! I'M SEEING VISIONS OF ROBERT R. YOUNG!

(In truth, if even one of the above stories were true, I might be able to take this seriously. Sorry.)
In most of those cases I'll agree, but I have to disagree in the case of Seaboard. Though the trend was going the wrong way, the New York-Florida run was (as far as I can tell) still profitable and Seaboard was building new stations right into the 60s that weren't "downsizes" a la NYP (the recently-replaced Winter Park station was one such station). The fact that the Auto-Train was such a hit (my understanding is that Auto-Train failed because of the Louisville debacle plus a derailment or two, not because of the Lorton-Sanford route) underlines this: There was enough business in the mid-70s to support 4-5 daily trains from the Northeast to Florida, and some of those trains were long.

However, Seaboard had some other trains (joint operations and otherwise) that were going to pieces in terms of ridership. I suspect that Seaboard's situation is like Santa Fe's: They had a few trains they wanted to dump but a good number that they would really rather have kept (IIRC Santa Fe, for example, probably really wanted to ditch the ex-Grand Canyon for a raft of reasons...they tried to get rid of that train back in the 50s and were forced to axe the Chief in its place...but they wanted to keep the Super Chief and were happy to keep the San Diegans).
 
I'm not sure whether you're talking about Seaboard Air Line Railroad or the successor Seaboard Coast Line, which included ex-Atlantic Coast Line operations. I doubt very seriously that SAL, or ACL, or SCL made any money on their passenger service. It generally functioned as a sort of loss leader. Traveling businessmen were supposed to be impressed with the carrier's performance and would then route their freight shipments over that railroad, thus generating profits that would offset passenger train losses. When traveling businessmen abandoned the railroads in favor of airplanes and automobiles, the incentive to impress a businessman (who wasn't on the train) evaporated. Remember the coach full of traveling salesmen in The Music Man? That may be a fictitious light comedy, but it shows what the railroad was to a "commercial traveler" in the past. It's not like that today, and hasn't been for over 60 years.

The Lorton-Sanford Auto Train operated over ex-ACL tracks (still does). It was not a loser for the railroad because the railroad was paid regular rent by the Auto Train Corp., which was a tenant. The Auto Train Corp. made its money by charging to haul automobiles (i.e., freight) which contributed to the bottom line. The freight revenue from the auto haulage, plus the revenue from the passengers' tickets, taken together, were supposedly enough to offset the expenses and provide a profit margin. This worked pretty well until various increasing expenses caught up with them. There was at least one significant (costly) derailment; the Louisville extension absorbed capital and never paid its way; and I understand maintenance was mostly contracted out because the Auto Train Corp. did not have its own facilities for heavy repairs.

I lived in Chicago when the U.S. Postal Service announced that it would end Railway Post Office service. Within a week or two, train-off notices appeared at Santa Fe's North Michigan Avenue ticket office. Santa Fe knew that those postal contracts were not necessarily making their trains profitable; but they were serving to help keep the losses at a manageable level. The railroad immediately dropped all but a handful of trains, and it was understood by all that the Super Chief and the other "saved" trains were running only because Santa Fe liked the idea of having those trains as their public face. There was no illusion that the trains were profitable, nor that anybody expected them to be.

If it had been possible to run those trains at a profit, the very astute people running the Santa Fe would have figured out a way to do it. Same for U.P. and a score of other railroads.

Those who expect Amtrak to run at a profit, or even to break even, without subsidies from freight traffic, or mail, or government largess, are not paying sufficient attention to historical fact. They are also ignoring the fact that competing modes also enjoy various subsidies that amount to as much or more than those received by Amtrak.

Tom
 
There was enough business in the mid-70s to support 4-5 daily trains from the Northeast to Florida, and some of those trains were long.
Literally everything else has changed since then too. How much, in now dollars, did a flight from NYC to Miami cost back in 1970? How many times more flights are there? Big chunks of 95 didn't exist either.
 
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