COMMENTARY
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BY DON PHILLII
Acela, apples, watermelons - and profit? The Acela does not make money. It hemorrhages money while the blame for losses is shifted whereby Acela makes money and long-distance trains lose money Seldom in my life have I seen such a mass of misinformation The problem is that members of Congress and most reporters spread about any one subject as is being spread now about the (and the general public) have no idea what'he has said. I guess it'; American passenger train. The misinformation is spread by connot his fault if those misinformed people don't know that he is fused and shallow politicians, young reporters who have no idea counting a small number of cost items in Acela "profits" and has what they're talking about, and by Amtrak officials who have thrown every conceivable cost into long-distance "losses:' No coi learned that they can count on the first two groups to not underparison is even possible on that basis, but those misleading "facts stand their technical jargon. have become holy writ. Acela "makes" money and long-distance Before we go an inch farther, let me say something. This month's trains "lose" enough money to drag column is intended to hammer home this down Amtrak's financial results. Just re fact: The Acela does not make money. It WHEN SOME LONG-DISTANCE TRAINS any newspaper story or listen to any T 1 loses money, big-time. What's more, longstory about Amtrak and that's what yot ENTER NORTHEAST CORRIDOR TERRITORY, distance trains are money-losers but not see. It's wrong, wrong, wrong. big ones. If Amtrak calculated longTHEIR 'COSTS' TRIPLE. THAT HELPS MAKE What are the exact accurate number distance train financials the same way it It is impossible to tell because of Amcounts Acela financials, most long-distance CORRIDOR TRAINS LOOK BETTER. trak's odd methods of accounting, usin trains would be profitable. Now, please practices that could get officials of real read this paragraph again. Let it soak in. for-profit companies in big trouble. Knowledgeable staff member When I first heard Amtrak President Joe Boardman call Acela of congressional committees have torn their hair out trying to ge profitable at a Senate committee hearing, I had to bite my tongue fully accurate numbers. However, the numbers are close enough, not to protest openly. In later testimony and in meetings with reporters, Boardman has added moderating language, and now sever- after some careful investigation, to support the statement in my second paragraph above. Please go back and read it again. al months later, his descriptions are totally accurate, technically. He Andrew Selden, an attorney with Briggs and Morgan in Minn( is also technically accurate about long-distance train losses. But his apolis (and a Tans author) who keeps a close eye on Amtrak, so descriptions have set up an apples-and-watermelons comparison,
its accounting practices are truly strange. A number of costs that are ascribed to long-distance trains are out of line, he says. For instance, when some long-distance trains enter Northeast Corridor territory, their "costs" triple. That helps make Corridor trains look better. Another issue is the commingling of capital and operating funds on the Northeast Corridor, Selden says. Some money that is actually for operations is instead called capital. This makes the cost of Corridor operations seem somewhat smaller, and enables Amtrak to say operating expenses are falling. (Of all the knowledgeable people I talked to about this, Selden is the only one who would go on the record.) Suppose long-distance trains went away overnight and Amtrak had to pay no labor protection. This is admittedly theoretical, but it is clear that Amtrak would save little money. Some costs would go away (crew, fuel, and some equipment maintenance), but other big costs would not, such as the cost of Chicago Union Station operations and the costs of passenger-train shops, since Amtrak would still have to maintain Corridor and short-distance equipment. Selden also has another way to determine that the Acela is actually a financial drain on Amtrak When Acela first went into service, the aggregate costs of the Northeast Corridor spiked up. Nothing else happened in those years to explain the spike. Using U.S. Generally Accepted Accounting Principles, Acela has not earned a positive return on the $3 billion in sunk capital costs used to create the service. One last point to emphasize, and this, too, bears rereading multiple times: No form of ground passenger transportation anywhere on earth earns a profit using the normal accounting standards of private business. The possible exception might be the Paris-Lyon TGV line in France. Two Japanese high-speed lines might make a profit, but too much non-rail income (from department stores) is commingled to say for sure. All other passenger rail systems lose money big-time if all expenses are induded. Some people say bus lines make money.
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No profits here: A southbound high-speed Acela train rolls nonstop through Trenton, N.J., on June 8, 2011. TRAINS: Matt Van Hattem
Oh really? Who pays for highways and city streets? Not the bus companies. Do highways make money? Gas taxes and other user fees don't even come close. Commuter trains lose lots of money (but propel the economy and alleviate congestion). Tourist trains often make money, but they can charge huge prices for one fun ride. So why in the world do conservatives and libertarians keep harping on whether Amtrak makes a profit, as opposed to whether America is being well-served by all its forms of transportation? It's laughable. .1 Don Phillips, a reporter for more than four decades, writes this exclusive column for TRAINS. Email him at: d.phillips@trainsmag.com