Does Amtrak’s Northeast Corridor Really Lose Money?

Depends who you ask.

Chatterbox has always accepted as an article of faith that if Amtrak were to shut down, the private sector would step in to provide passenger rail service along the Northeast Corridor from Boston to Washington—where demand is extremely high—and maybe in two or three other places, too. Lately, though, he’s learned that even the Northeast Corridor loses money. Pointing this out is a brilliant tactic on Amtrak’s part because it suggests that without a public subsidy—i.e., without Amtrak—city-to-city passenger rail service in the United States will disappear not only in the vast majority of places where it isn’t needed but also in the very few places where it is. This may not clinch the argument for maintaining service along the worst money-losing routes (nothing can), but it does establish that passenger train travel is like the opera—a social good that just can’t make it in the marketplace without the benefit of government or private charity. (To see Chris Suellentrop’s Amtrak “Assessment,” click here.)

But is it really true that the Northeast Corridor loses money? Having just dropped a cool $500 to take his two children from D.C. to New York for the weekend on the Acela Express, where he was barely able to find seats, Chatterbox has a hard time accepting this. In his 1997 anti-Amtrak book Derailed: What Went Wrong and What To Do About America’s Passenger Trains, Joseph Vranich, a former Amtrak public affairs spokesman, writes:

In 1993 Railway Age editor William C. Vantuono reported that Amtrak trains operating in the corridor are profitable on what is called an “above the rail” basis, even including a portion of maintenance. That was followed some time later by an Amtrak announcement that the Metroliner earned a profit. Progressive Railroading summarized it best: “It has taken many years and billions of dollars in new equipment and infrastructure, but at least one Amtrak passenger service is finally making money. Amtrak says its Northeast Corridor Metroliners in fiscal 1996 became the first service in the company’s 26-year history to post revenues that covered fully allocated costs of operation. Metroliners took in $1 for every 93 cents in costs, Amtrak says, to earn a record $155.7 million, 10 percent more than in fiscal year 1995.” The Metroliner profit was $14 million on a fully allocated cost basis. Amtrak projections show the Metroliner will probably operate at a profit in future years as well, and Amtrak is convinced that the American Flyer trains will, too.

Vranich’s claim of financial robustness for the Metroliner, which provides express service between major cities along the East Coast, is borne out in a chart delineating the profits or (mostly) losses of individual Amtrak routes in the final report put out by the Amtrak Reform Council, a panel created by Congress that favors Amtrak’s abolition. According to the chart, the Metroliner and Acela Express (which is gradually replacing the Metroliner) saw a profit of $51.3 million, or $19.33 per customer, in 2001. Non-express trains along the Northeast Corridor remain unprofitable; they lost $71.5 million last year, or $11.42 per customer, even though they pulled in $328.6 million in revenues. But presumably the problem here is the enormous onetime cost of purchasing the new Acela trains, of which (if Chatterbox is interpreting this chart correctly) there are roughly twice as many providing non-express service as providing express service. Assuming the Acela trains don’t conk out in two or three years, even the non-express trains should be on a path to profitability.

So how can Amtrak say that the Northeast Corridor is bound by fate to lose money? Because the tracks and tunnels and bridges along the route, which Amtrak also owns, are extremely old and cost a fortune to maintain. Chatterbox will examine the “profit-eating infrastructure” argument tomorrow.