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This Week at Amtrak; March 11, 2009
A weekly digest of events, opinions, and forecasts from
United Rail Passenger Alliance, Inc.
America’s foremost passenger rail policy institute
1526 University Boulevard, West, PMB 203 • Jacksonville, Florida 32217-2006 USA
Volume 6, Number 8
Founded over three decades ago in 1976, URPA is a nationally known policy institute that focuses on solutions and plans for passenger rail systems in North America. Headquartered in Jacksonville, Florida, URPA has professional associates in Minnesota, California, Arizona, New Mexico, the District of Columbia, Texas, and New York. For more detailed information, along with a variety of position papers and other documents, visit the URPA web site at http://www.unitedrail.org.
URPA is not a membership organization, and does not accept funding from any outside sources.
1) The combined arrogance and hubris of these people is incredible; maybe some enterprising staffer on Capitol Hill will start looking into this and have someone in the House or Senate start demanding some answers. It’s a good thing former Amtrak President and CEO Alex Kummant is gone, but that doesn’t take the Amtrak Board of Directors off the hook for not doing their lawful duty and asking more questions and demanding better of Amtrak.
Brandweek.com has reported Amtrak spent $15.3 million on U.S. media in 2008, not including online expenditures, up from $14.8 million in 2007, according to Nielsen Monitor-Plus.
If you think that’s a lot of money in today’s world of paid media, you’re very wrong. It’s more like a half a drop in the bucket.
Last year, Amtrak spent $98.1 million on what it categorizes as advertising and sales according to its year end figures. That $98.1 million generated ticket revenue of $1,699,300,000. Most successful companies the size of Amtrak spend about 10% of revenues on advertising and marketing costs; Amtrak spent just slightly less than six percent. Even worse, on actual media the public sees, Amtrak spent only .009 – less than a single percent – on advertising.
No wonder Amtrak perpetually remains America’s Best Kept Secret.
To no one’s surprise, the biggest slice of the advertising and sales money was spent on the Northeast Corridor, instead of the long distance national network where the most good for total transportation output could be achieved.
At this point you may be wondering, what’s all the fuss about?
All the fuss is about how Amtrak positions itself with its customers, which, obviously is not its passengers in the minds of Amtrak executives. Amtrak’s true customers, where all of its efforts are spent, are the various public treasuries of the federal and state governments which constantly have to feed the voracious Amtrak bottomless financial pit.
Amtrak’s decision to spend so very little money on national or local media clearly demonstrates how little it cares about being a successful company.
Is Amtrak afraid of success?
Good heavens, what would Amtrak actually do if a lot of people showed up and wanted to ride its trains?
As always, this isn’t an argument about how much free federal monies Amtrak receives as a result of its annual begfest on Capitol Hill, it’s an argument over unsound management decisions and mis-allocation of resources and poor priorities.
During the same year Amtrak spent less than one percent of its ticket revenues on paid advertising, it received about $1.2 billion in free federal monies, of which less than $500 million was for nationwide/systemwide operating assistance.
Let’s be radical and say Amtrak suddenly saw the light and reoriented its priorities and (Gasp!) tripled its annual expenditures on advertising to less than three percent (Still woefully below any national averages for companies in the real world.) What would happen? Amtrak’s load factors would soar, wiping out at least half, if not more, of the annual operating subsidy requirement.
This also directly goes to the debunked lie no passenger railroad system in the world makes money, when we know factually systems in Japan, Germany, The Netherlands and elsewhere do, in fact, make money.
If, like Amtrak, you run a passenger railroad and don’t bother to tell anyone you’re running trains, well, yes, it’s not going to make money, or even come close to breaking even because no one knows there are trains to ride.
2) Let’s revisit some familiar territory, Amtrak’s load factors. We know a load factor of 65% technically makes a long distance train sold out, because allowances have to be made for entraining/detraining passengers at intermediate station stops. When a passenger on the Silver Meteor boards in Miami at the train’s originating terminal, and detrains in Palatka, leaving a vacant seat, that seat may not be filled again until Savannah, 206 route miles to the north. However, that Savannah passenger stays in that seat all the way to Philadelphia, just 101 miles short of the Meteor’s final terminal in New York City. So, that coach seat on the Meteor (which probably needed new upholstery) was occupied for 1,082 miles out of the total route length of 1,389 miles. The magic of trains is when one passenger detrains, most of the time another passenger entrains.
Those with endpoint mentalities or airline mentalities where there are no intermediate stops on a route, often have difficulty grasping this concept. It’s true, once an airplane pushes out from the gate at its originating terminal, any vacant seat on the plane has no other opportunity to be sold/filled. However, once the Silver Meteor departs Miami on its northward journey, that are still 25 more opportunities for passengers to board the train before it reaches the silly "discharge only" territory of the Northeast Corridor, where long distance trains are banned from picking up passengers between Alexandria, Virginia and New York City so Amtrak can falsely prop up NEC numbers without interference from those pesky, money-making long distance trains.
Look at Amtrak’s load factors for last year:
Long Distance Routes
Silver Star – 58.9%
Cardinal – 55.5%
Silver Meteor – 62.5%
Empire Builder – 63.4%
Capitol Limited – 66.9%
California Zephyr – 52.3%
Southwest Chief – 63.8%
City of New Orleans – 63.8%
Texas Eagle – 53.4%
Sunset Limited – 56.7%
Coast Starlight – 62.4%
Lake Shore Limited – 64.1%
Palmetto – 51.3%
Crescent – 51.6%
Auto Train – 63.6%
Average Long Distance Routes Load Factor – 59.7%
State Corridors and Short Distance Routes
Ethan Allen – 40.8%
Vermonter – 45.8%
Maple Leaf – 54.0%
Downeaster – 31.8%
New Haven-Springfield – 47.1%
Keystone – 35.5%
Empire Service – 35.0%
Chicago-St. Louis – 46.6%
Hiawathas – 40.4%
Wolverines – 54.9%
Illini – 50.0%
Illinois Zephyr – 43.1%
Heartland Flyer – 43.0%
Surfliners – 36.5%
Cascades – 56.6%
Capitols – 29.1%
San Joaquins – 39.1%
Adirondack – 69.4%
Blue Water – 78.7%
Washington, D.C.-Newport News – 60.2%
Hoosier State – 35.4%
Kansas City-St. Louis – 37.4%
Pennsylvanian – 74.3%
Pere Marquette – 67.3%
Carolinian – 77.9%
Piedmont – 44.6%
Average State Corridors and Short Distance Routes Load Factor – 43.5%
Northeast Corridor Routes
Acela – 62.6%
Northeast Regional – 48.1%
Average Northeast Corridor Routes Load Factor – 52.9%
These figures show Amtrak has plenty of room for more passengers without adding a single piece of equipment to its far-too-short existing consists.
Look at the numbers above, realizing the sad state of Amtrak’s skeletal national system, lack of operable locomotives and passenger cars, and lack of rational business plan, and think what a combination of advertising, getting bad-ordered and wrecked cars back on trains, and lengthening consists could accomplish. Close your eyes and start thinking about second and third frequencies, and, suddenly you have the beginnings of a robust, healthy system. Go one step further and start implementing Gil Carmichael’s Interstate II vision, and, astonishingly, you have a real railroad, not a shadow of a ghost of railroads past.
2) We’re talking chump change here in the overall Amtrak universe to begin to get Amtrak up to acceptable levels of advertising expenditures. One cannot help but question Emmet Fremaux, Amtrak’s Vice President who handles marketing, as to why he has allowed these advertising numbers to be so low. Has this been intentional, or a result of more senior managers only allocating so little for his total budget?
Where was the board of directors on this? Oh, wait, they were here, but, consider that of the five board members who constituted the Amtrak board last year, not a single one has corporate background experience; each and every one is either a creature of government service, or a Washington lobbyist or Washington attorney. After David Laney, Enrique Sosa, and Floyd Hall all left the board, not a single member replacing them or remaining has any real world, corporate experience, and would automatically know Amtrak’s abysmally low advertising expenditures amount to corporate malfeasance, and, at best, poor stewardship of public funds when the company willingly asks for billions in government subsidies, and then does nothing to promote the company and try and actually attract paying passengers who would replace the need for government subsidies.
3) Well-respected Washington Post Writers Group syndicated columnist Neal Peirce has been writing about Washington for decades, and often strays to the subject of Amtrak. Mr. Peirce again recently wrote about Amtrak and our new President Obama’s spending on passenger rail. One quote from Mr. Peirce’s column bears repeating, for it demonstrates how Amtrak has gotten away for so long with being America’s Best Kept Secret and nobody seems to care.
Asserts James RePass, founder-leader of the 20-year-old National Corridors Initiative; "Suddenly, by the grace of God, we have a president who absolutely, positively gets it." This signifies, he adds, an end of the reign of "the ideological libertarians out to destroy the transportation system by saying ‘the market’ will take care of it, that Amtrak should make a profit – which is nuts!"
It’s this type of clearly wrong thinking that has been pervasive throughout America, bolstered by Amtrak’s bad behavior and not spending near enough on advertising to the public that makes Amtrak such a mess today.
Only when this type of wrong opinion is no longer considered gospel will Amtrak stop being enabled and start working towards being more self-sufficient. There’s nothing in our national government constitution that says every government entity has to lose money. There is nothing unpatriotic about Amtrak being self-sufficient. This is something grossly unpatriotic about Amtrak being such a poor steward of the public’s money and doing such disagreeable and arrogant things like taking public money and then not spending it wisely or in such a way which creates more business, more revenue, and more self-sufficiency.
Joe Boardman, as Amtrak’s Interim President and CEO, what steps are you taking to solve this problem and stop keeping Amtrak as America’s Best Kept Secret?
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J. Bruce Richardson
United Rail Passenger Alliance, Inc.
1526 University Boulevard, West, PMB 203
Jacksonville, Florida 32217-2006 USA