Published on Monday, February 28, 2000 in the New York Times
Amtrak To Expand Rail Service,
Copying Strategy Of Airlines
by Matthew Wald
After years of trying to balance its books by cutting service, Amtrak has concluded that to succeed it should instead create routes, offer more frequent service on existing lines and organize itself more like the airlines, so people can change trains and get to places more efficiently.
Railroad officials say the railroad plans to announce on Tuesday that it will run a train from New York to California, which it believes is unprecedented. It also plans to expand service to Monterrey, Mexico, and Toronto, and stretch its Florida-to-New York service to Boston. It will add a third daily train between New York and Chicago, in hopes that if it gives travelers more schedule choices, more people will choose trains over cars or planes. And it hopes to attract business travelers on routes like Washington to Atlanta on overnight trains.
It is a major change of strategy for the company, which has managed to sidestep growth since its creation by Congress in 1971.
"We've been trimming, cutting and shrinking up, to save some out-of-pocket cash," said George Warrington, the Amtrak president. "But we found out that if you reduce the scope of your network, you take out a significant percentage of revenue."
Governor Thommy G. Thompson of Wisconsin, who is chairman of Amtrak's board, said in a telephone interview, "We're going to grow it into profitability."
Mr. Thompson and Mr. Warrington emphasized, in separate interviews, that part of the strategy was to carry more high-value freight. The transcontinental train, for example, will have refrigerated cars for carrying produce, which the railroad says will make it profitable.
Asked how many people would prefer a 58-hour rail trip to a 6-hour flight, Mr. Thompson said, "Some people will, sure, people that love rail passenger service, people who are retired and want to see the country instead of just flying over it."
Cutting trains that did not earn back their direct costs and their share of overhead costs, Mr. Warrington said, reduced the number of passengers fed into the system, some of whom would have continued their trips on more profitable routes.
Now the railroad wants to add trains that can earn back direct costs, and make some contribution, even a small one, to the overhead.
"The airlines figured this out a long time ago," said Mr. Warrington, who plans to imitate the airlines in other ways, including offering discounts for tickets sold to leisure travelers weeks in advance, and raising the price for last-minute travelers.
The new schedules, which will be in place by 2003, include overhauling 50 passenger cars and locomotives, some of them in storage for years, and buying or leasing 2,000 box cars, refrigerator cars and "roadrailers," which have tires and train wheels.
Amtrak is negotiating with the freight railroads over whose tracks it operates, offering them a share of the added profits, and hopes to carry goods on its passenger trains that now move by truck, including meat and poultry and manufactured goods like car parts.
The changes will increase the number of miles Amtrak trains travel every year to 38 million from 4 million and, Amtrak hopes, raise the number of passenger-miles to 6.7 billion from 5.3 billion last year. A passenger mile is one paying passenger traveling one mile.
And the changes will improve the bottom line by $65 million a year, company officials say, which is essential because Congress has said it will end operating subsidies in 2002.
The expansion plans require agreements with the freight railroads but do not need approval by Congress. The changes are big for Amtrak but small in the scope of the overall transportation picture. The railroad is seeking a shift in its share of the intercity passenger market, which is now less than 1 percent. If it gets all the mail and express freight business it wants, the total would amount to 0.13 percent of that market. For the freight railroads and the trucking companies, "that's a rounding error," Mr. Warrington said.
The Amtrak Reform Council, a panel created by Congress in 1997 to report on the railroad's progress, said recently that from 1989 to 1998, while the airlines' passenger miles increased by 35.3 percent and intercity buses' passenger miles increased by 7.8 percent, Amtrak's shrank by 1.4 percent.
Copyright 2000 The New York Times Company