I'm not doing your homework for you. They've been posted here in years past, but digging up documents which were posted years ago is a lot of work. Try searching the forum for Boardman's presentation on the avoidable-costs numbers.Can you provide an actual link to a document that provides actual numbers?
That's a laugh. I'm a professional investor and I've made a lot of money because I understand how money and profit works. Don't ever try to invest until you get some humility and learn to listen to people who know what they're talking about.I don't think you understand how money or profit works.
Amtrak has deleted most of its documents and reports from previous years, or I'd link you to them. You might find them by searching this forum.Please cite anything that says this. And by cite I mean provide a link to a document, page, testimony, financials, anything.
Amtrak has also obstreporously refused to publish the FRA-required marginal cost data, but it has been back-estimated by a number of people over the years. The results are pretty consistent. You can find most of it at this forum if you search.
That's my entire point!And even then, do you know what every "marginal-cost profitable" business that can't pay its overhead costs is? Unprofitable, if not broke.
You don't seem to understand what you're saying.
False.Actually, the AT is a great example of a train that has been profitable running completely independently.
False.It has its own resources for everything.
False. It went bankrupt, anyway. Look it up.It was a perfectly designed business.
It's subtly different -- it depends on bulk ***far more*** than Walmart does -- but in terms of economies of scale, it is actually about the same. It's a capital-intensive infrastructure business and they're *all* like this. (Standing room on a train is perhaps the ultimate in discounted widgets, having no immediate marginal cost at all and being entirely a matter of volume sales. Seats on a train come close.)Amtrak is not Walmart. It's not a business selling discounted widgets with low margins that makes up for it in bulk.
Not really, but I see that you don't understand why they're similar.Freight rail and passenger rail are also two completely different businesses.
....you're starting to get it, maybe? First, do you realize that Amtrak actually is charged for the maintenance of the rails used by the trains on the LD network? That's a side note, anyway.The economies of scale in freight railroads have to do with physics. You can ship bulk products and containers for pennies on the dollar across the continent compared with other methods of transport. It just takes a lot longer.
The monopoly pressure on freight railroads has more to do with competition and access to networks. The economies of scale come into play with maintaining the rails themselves--something Amtrak doesn't do across it's LD network.
Second, more important, it's not just the rails which have economies of scale. It's also the freightyards -- the freight stations. There's a reason the railroads have consolidated them and run a smaller number of massive yards rather than lots and lots of little sidings like they used to.
And Amtrak, in a manner parallel to the upkeep of freight yards, pays for maintenance and upkeep and operations of passenger stations. About the same cost for a station if they're stopping one train a day at the station as if they're stopping 15 trains a day. (And yet these are still included as variable costs in most of the estimates of marginal profit for the trains.)
And the biggest economy of scale is the length of the trains. In both freight and passenger service. Running a train which is twice as long does NOT use twice as much fuel (it uses less), and does not use twice as many employees (it uses less) and does not double the maintenance costs (it's less locomotive maintenance). This is actually the core economy of scale in railroading.
You seem to be a confused person who doesn't understand how to use accounting for business and investing decisions, but my *entire point* is that gross profit is different from net profit. And it has *massively* different business decision results.I know this is confusing to people who don't understand accounting, but gross profit (before fixed expenses) is not the same as net profit (after fixed expenses) and it really doesn't matter if you can't cover your fixed expenses.
If you have a product which doesn't make a gross profit, your business decision should be either to raise the price, cut the costs, or shut it down, stop making it.
If you have a product which makes a gross profit but your overall business doesn't make a net profit, you would be an IDIOT if you stopped making the product. You should instead sell more product.
Do you see why the difference is critical for business decisions? That's my *entire point*. The Lake Shore Limited is a gross-profit train. That means that the *correct action* if you want to make more money is to *make more of it*. Add cars to it, make it longer, run more trains per day on the same route.
You are still missing the point. Suppose a single Starbucks doesn't cover its expenses because it doesn't MANUFACTURE enough coffee. They only get enough coffee beans to make 15 cups of coffee a day. Let's say they make $5 profit on every cup of coffee, the customers are banging on the door, but nope, they can't pay the rent because *they aren't making enough coffee*.If a single Starbucks doesn't cover it's expenses because it doesn't sell enough product, they close it.
Do you declare that the "cup of coffee is unprofitable"? Or do you realize that ***the cup of coffee is profitable and you need to order more beans***?
Because THAT is the situation Amtrak is in.
The Lake Shore Limited is one cup of coffee. It's a profitable cup of coffee. Amtrak is a Starbucks which isn't allowed to buy enough beans to sell more than 15 cups of coffee a day.
Now do you get it?
People are saying "Oh, the cup of coffee is unprofitable, let's close the Starbucks". That is a lie and that is nonsense. The Starbucks is only getting enough coffee beans to make 15 cups of coffee a day, and that's not enough to cover the rent, and *that* is the truth. They need to be making more coffee.
(Literally, the way Amtrak claims the LSL is unprofitable is the equivalent of taking the rent for the Starbucks location and dividing it amongst the 15 cups of coffee sold per day to claim that each cup of coffee is unprofitable. It is *nonsense*. And Amtrak is emphatically supply-limited, with trains selling out repeatedly at high prices -- so it is a matter of not having enough beans. It would be different if Amtrak were demand-limited and there just weren't enough people who wanted coffee, but *that is not the case*.)
Actually, thanks for the Starbucks analogy? This may help explain it to other people who are being really thick about this and don't understand why it's vital to look at the *marginal* profit of each product.