ON JULY 27 America’s National Railroad Passenger Corp announced that it will implement a corporate restructuring programme with effect from October 1, in a bid to improve its bottom line by up to US$85m a year. Amtrak plans to offer early retirement and other incentives to reduce its management staff of 2900, but President George Warrington would not say how many posts would go.
The four existing business units - Intercity, Amtrak West, Northeast Corridor and Mail & Express - will be merged under the control of E S Bagley Jr, currently President of the Northeast Corridor unit. A ’top-to-bottom assessment’ will seek to eliminate overlapping operations, tighten cost controls and improve revenue opportunities.
Warrington blamed the slowdown in the US economy for Amtrak’s failure to meet its traffic forecasts, even though ticket revenues are running approximately 10% above the same period last year. Load factors on Acela Express services, which Amtrak was counting on to boost its profitability, are apparently falling below expectations. Amtrak has few options other than cuts in staff and services to achieve short-term cost savings. But so far the company has not suggested any changes to its network growth strategy.
On July 25 the Transportation Department’s Inspector General Kenneth Mead told the Railroad Sub-Committee of the House Transportation & Infrastructure Committee that Amtrak had posted its largest ever loss in fiscal 2000 - US$944m. He warned that the first eight months of the current year showed the deficit increasing by US$21m.
Mead believed that Amtrak would not meet the December 2 2002 deadline set by Congress in 1997 for eliminating operational subsidies. ’Revenues are ahead of expectations, but expenses outpaced gains’, he testified. Instead of being on a glide slope to operational self-sufficiency, he fears the railway is actually on a slippery slope to financial ruin.
Members of the committee had divergent views on what should be done. ’We can’t afford not to have a national passenger rail service’, said Democrat James Oberstar. But Republican John Mica insisted that ’Congress cannot continue to put good money after bad.’ Mica explained that he was only talking about liquidating Amtrak as it is now constituted, suggesting that if it takes US$100bn to build a true high speed rail network, ’Congress should stand behind it.’
Warrington said it was ’wacky, irrational and frustrating’ that Amtrak was not able to meet its mandate to run a national network and turn a profit in the classic commercial sense. ’If you’re a public service provider, you go where the community need is. If you’re a business, you go where the money is. But if you’re Amtrak, which way do you go?’ he asked. He warned that Congress would have to provide more funding for capital improvements, if Amtrak is to be converted into a public-private joint venture as some suggest. ’Until this basic infrastructure is built as a public responsibility, it’s going to be difficult to attract private investment.’
A report released on July 16 by the General Accounting Office forecast that the US$12bn upgrading programme now being proposed by Amtrak would actually cost up to US$19bn over 30 years. So far, 56 of the 100 Senators, plus 136 members of the House, have co-sponsored a bill which would authorise Amtrak to sell bonds during the next decade to finance an initial tranche of works in 11 corridors, lifting the top speed to 145 km/h. The federal government would provide bond-holders with tax credits over 30 years in lieu of Amtrak paying interest.
- Work began in early August on a US$530000 project to restore passenger services to Louisville, Kentucky later this year. Amtrak’s Kentucky Cardinal currently terminates at Jeffersonville, Indiana, just across the Ohio River. New track is being laid into Louisville Union Station, where Amtrak will restore one platform and establish a ticket office and waiting room. The railway expects to decide later this year whether to extend the train to Nashville, Tennessee.
