- The Washington Times - Monday, June 11, 2001

Amtrak has staged a marketing blitz in the past year to win the hearts and patronage of customers. But it may not be enough to save the nation's passenger railroad.
Among its efforts, Amtrak started a frequent rider program to attract regular customers, announced plans to expand rail service to 21 more cities and capped off the year with the debut of Acela Express, the nation's fastest and sleekest high-speed passenger train.
To supplement income from passengers, Amtrak recently started carrying express freight, such as U.S. mail and perishable food products.
Revenue, says Amtrak spokesman Bill Schulz, "continues to be up over last year for us. It was up 7 or 8 percent on ridership and 12 percent on revenue. We continue to make strides on monitoring and cutting expenses within the company."
Ticket sales and revenue were near all-time highs for Amtrak when it celebrated its 30th birthday May 1.
But behind the optimism stands a grim reality. If Amtrak does not meet a fiscal 2003 deadline for becoming self-supporting on operational expenses, Congress is threatening to liquidate it. In other words, Amtrak is fighting for its life.
"We expect to make operational self-sufficiency by 2003," Mr. Schulz says. "We are strategically expanding routes where it makes financial sense."
But at a news conference last week, Transportation Secretary Norman Y. Mineta said what Amtrak does not like to admit.
"It's obvious that by 2003 they are not going to be self-sufficient," Mr. Mineta said. Despite repeated promises that profits are only a little further down the road, "they haven't been," Mr. Mineta said. "They come back to Congress every year with their tin cup."
He said he expects to be appointed soon to head the Amtrak Board of Directors. Using that key position, he said he expects to "look at selective routes and promote them instead of trying to blanket the country with routes that are not financially viable."
If Mr. Mineta's vision comes true, it will represent an entirely new direction for Amtrak. The only remaining routes will run along the East and West coasts and between a few major Midwestern cities, such as Chicago, Detroit, St. Louis and New Orleans. All the other routes — some of which are staples of transportation for mid-sized cities — could simply disappear.
Half-billion dollar annual subsidies have continued each year for more than a decade. Along with them have come promises each year by Amtrak officials that just a little more spending will finally make the railroad self-supporting on its operational expenses.
Operational expenses are the day-to-day costs of running a railroad, such as payroll, office supplies, fuel and insurance. They are different from capital expenses, which are primarily equipment, track and similar infrastructure. Oct. 1, 2002 — the deadline for self-sufficiency — is the beginning of fiscal year 2003 for the federal government.

Tired of promises

Some congressmen, such as ranking Senate Commerce, Science and Transportation Committee member John McCain, say they are tired of listening to promises. "Senator McCain fully doesn't expect Amtrak to meet the deadline and he is reserving and examining all options," says Pia Pialorsi, spokeswoman for the Arizona Republican.
The numbers from March 21 General Accounting Office testimony to Congress could spell the end for Amtrak as we know it.
"Amtrak made minimal progress in 2000 toward achieving operational self-sufficiency," the GAO reports. "Although Amtrak is required by law to achieve operational self-sufficiency by the end of 2002, the outlook for it doing so is not bright.
"In 2000, it reduced its budget gap — the gap that Amtrak says it has to close to become operationally self-sufficient — by only $5 million. It must achieve an additional $281 million in savings by the end of next year. If it does not, Amtrak must submit a plan to the Congress for its liquidation."
Congress might want to reconsider whether America even wants a national passenger railroad, the GAO says, along with the tens of billions of dollars in subsidies it would need in the next 20 years.
Although Mr. Mineta said at a rail conference in Washington last month that Amtrak's finances "do not look good at all," the alternative of no passenger rail service is worse. "On the other hand, we can't afford to have Amtrak go down," he said.
Mr. Mineta's dilemma could be an example of what most government leaders say about Amtrak. Nobody wants to keep pumping billion-dollar subsidies into it. At the same time, nobody wants to get rid of it.
Even feuding presidential candidates Al Gore and George W. Bush, only weeks before last year's election, agreed Amtrak should survive.
A policy statement from Mr. Gore spoke of the way Amtrak can reduce traffic congestion and pollution. He proposed "a major commitment to build high-speed rail systems in major transportation corridors across the nation."
George W. Bush's policy statement was only slightly different.
"Our national railroad network, which helped build our country and is an important economic lifeline, is a crucial component of our public transportation system," Mr. Bush said.

High hopes

Congress organized Amtrak in 1971 from a conglomeration of bankrupt regional passenger rail systems. Despite high hopes and an initial $24 million federal subsidy, Amtrak never made money.
The struggle continues today. Only one of Amtrak's 40 routes is making more money on operational expenses than it expends. That one runs along the Northeast Corridor between Washington and Boston.
Since the initial subsidy, Amtrak has consumed more than $23 billion in federal money. Last year, it lost $944 million, the most in its history, according to the Transportation Department's inspector general.
When the 20th century started, passenger rail was the dominant form of long-distance travel. Air service and automobiles chipped away steadily at rail's attractiveness to customers.
By the 1960s, most railroads wanted to drop their passenger service completely to concentrate on the more lucrative freight rail service. Congress responded by forming the public-private joint venture called the National Rail Passenger Corp., which soon became known as Amtrak.
At an inaugural celebration in New York on May 1, 1971, then-Transportation Secretary John Volpe announced "a new era" in passenger rail and predicted Amtrak would begin to break even financially in three years.
From the first, pressure mounted on Amtrak. State and federal politicians told voters they planned to bring Amtrak to their hometowns and asked the railroad to help them make good on their promises. Amtrak's management told Congress that it would need bigger subsidies than originally anticipated.
Only the north-south routes along the coasts were profitable, or at least came close. Yet the same politicians who decry the subsidies want the rail service to criss-cross the country, particularly their home states.
In 1995, in an attempt to cut its losses, Amtrak cut train service by about 12 percent and laid off about 2,000 employees. Rather than reducing costs, the move cut more deeply into revenue.
The Sunset Limited between Los Angeles and Orlando, for example, was losing $8 million per year. The railroad terminated the service in 1996 hoping to save money. Instead, it lost more money. Net revenue dropped another $1.5 million from lost passengers, mail and express package deliveries.
Continuing complaints from Congress laid the groundwork for a new chairman to take over. George Warrington, 48, a career railroad man and marketing specialist, took over as Amtrak's chairman in 1997 with a completely different philosophy.
Making the rail system bigger will make revenue bigger, Mr. Warrington believes. Eventually, it could lead to profitability and an end to federal subsidies.
"In the final analysis, you don't gain market share by eliminating routes," Mr. Warrington said last month during a speech at the National Press Club. "For 30 years Amtrak has been expected to perform like a business and at the same time serve community needs like a nonprofit organization. We cannot do this."
Mr. Warrington defends Amtrak's subsidies as a long-term investment. New routes to mid-sized cities in Iowa, Louisiana, Texas and Florida, for example, are expected to add $65 million in new revenue for Amtrak after new construction is completed in 2003. The new track would increase Amtrak's miles of rail from 34 million to 38 million, and increase ridership 26 percent, Mr. Warrington predicted when he announced the plan last year.
Mr. Warrington took the reins of Amtrak after three years as president of the railroad's Northeast Corridor operations. Under his leadership, Amtrak has asked Congress for $30 billion over 20 years to close what he calls a "rail investment gap." It also wants to issue $12 billion in bonds over 10 years to raise money for high-speed rail lines around the country.

Acela to the rescue?

If there is only one venture that will make or break Mr. Warrington's career, it would be Acela Express, the 150-mile-per-hour train that started service along the Northeast Corridor Nov. 17.
When all 20 trainsets scheduled for delivery this year begin operating, they are expected to cut half an hour off the train trip between Washington and New York and 45 minutes off the trip between New York and Boston. Eight have been delivered so far. The Washington-to-New York tickets cost $143 and the New York-to-Boston tickets cost $120, both of which compare favorably to airlines. When the time to and from airports is figured into travel time, Acela Express is only a little slower than flying.
However, the teal-and-silver, sleek-looking trainsets come with a price tag of more than $800 million.
Mr. Warrington says they are expected to generate $180 million per year in new revenue. If it is successful, Amtrak plans to use Acela as the starting point for intercity travel for other railroad routes, such as between Chicago and St. Louis; Los Angeles and San Francisco; Miami and Orlando.
However, major obstacles remain, not least of which is the Amtrak Reform Council.
Congress created the Reform Council in 1997 to rein in a railroad whose greatest consistency seemed to be its escalating financial losses. At the same time, Congress set the five-year limit for Amtrak to operate without operating subsidies. The 11-member council is made up of representatives from Congress, the Bush administration, industry and labor unions.
Reform Council members recommend that Amtrak be divided into three separate entities. One would be a company focusing on profiting from train operations, a second would be a government-owned corporation to maintain tracks and stations, and a third would be a government committee to oversee operations.
The Reform Council's prodding led to the recent General Accounting Office report that gave the gloomy outlook for Amtrak's prospects of meeting Congress' deadline.
In testimony to Congress March 21, the GAO reported, "We believe that it is unlikely that Amtrak will be able to operate a national system without federal operating support after 2002."
On nearly every point Amtrak uses to justify its subsidies, the GAO undercut it.
Amtrak, for example, argues it improves air quality and reduces congestion by switching many travelers to rail transportation.
The GAO, however, said, "Even if rail travel quadrupled, it would account for only about 1 percent of the nation's travelers." Amtrak's contribution to cleaner air and less congestion was insignificant, the GAO said.
Amtrak also says it offers an additional travel choice that relieves the burden on other transportation modes, such as highways and airlines.
However, the GAO said that in many cases Amtrak is not convenient enough for travelers to be a realistic travel choice.
"Yet travel choice entails more than physical access," the GAO said. "To offer travel choice, rail must be competitive with other travel modes."
The GAO even cut into Amtrak's plans to expand revenue by expanding its capacity, saying the costs might never be recovered. Examples included $25 billion for a 703-mile high-speed rail system linking California's major cities, $4 billion for a Midwest Regional Rail Initiative between nine states and $7 billion of capital expenses through 2015 for the Northeast Corridor.
"In part because Amtrak's future is uncertain and because Amtrak and other rail systems are counting on large increases in federal assistance for intercity passenger rail, the Congress needs to decide whether the magnitude of the benefits to the public and the nation's transportation system from intercity passenger rail justify such investments when compared to alternative modes of transportation," the GAO said.

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