Let’s start here: Rail service by Amtrak in the United States has two huge obstacles to overcome on the road to profitability:
- Amtrak serves as the local and regional transportation system in much of the U.S. (areas that do not have an NJ Transit or SEPTA) and that service, with few exceptions, needs subsidies to work.
- Amtrak serves as the transportation of last resort for remote areas — meaning long-distance routes serve a vital social purpose but will never make a profit.
Despite this — and despite an $869 million deficit in 2022 — Amtrak Chairman Tony Coscia is convinced the organization can break even financially. And soon.
The reason: Amtrak nearly reached that financial milestone … right before the pandemic.
Coscia, speaking in late August aboard the inaugural ride of the NextGen Acela — which will play a huge role in this effort — said Amtrak had reached the goal of a plan to remake itself that was hatched a decade ago.
“In 2015 and 2016, we literally ripped Amtrak down to its studs and we rebuilt everything over again,” he said. “By 2020, we had gotten to the financial break-even point. We were at record ridership. When COVID hit, we were humming, and the Acela was a big part of it.”
So much so that Amtrak already had purchased the next-gen trains. That funding did not come from the massive infrastructure bill, Coscia proudly points out.
The pandemic not only resulted in an obvious drop in ridership, the new trains (which were originally scheduled to be launched years ago) were delayed by two years because of a production slowdown.
All of this resulted in a $1 billion shortfall for Amtrak just two years ago, Coscia said. That number shrank to $600 million last year — and Coscia is hopeful it will return to break even in Fiscal Year 2028.
“One of the reasons why we’re excited about (the NextGen Acelas) is that it can produce a lot of revenue,” he said. “We regularly sell out Acela at premium prices. And to be honest, the product is not great anymore.”
The NextGen Acelas are much better. In fact, they are almost too good. They will be able to reach speeds of up to 160 mph, but they won’t get much of a chance to do so. The outdated infrastructure they run on cannot handle it.
“Running a train really fast and running it reliably requires straight lines, which we don’t have here,” he said. “After we destroyed everything in Europe after World War II, they rebuilt their system on straight lines. We have a system that was built at the turn of the last century. It runs on curves, and since nobody was running a train more than 40 or 50 miles an hour anyway, it didn’t really matter.
“This train is designed with a lot of modern technology that permits it both now, and in the future, to accelerate to higher speeds based on the utilization of tilt technology. As we upgrade the infrastructure, we’re going to be able to run this train faster and faster and faster.”
And with more passengers.
The NextGen Acela seats 380 — or more than 100 more than the previous.
“From a revenue and demand standpoint, we think having a better product that we can generate more money from,” he said. “These trains are going to help a lot. Plus, they will be cheaper to maintain this because they are brand new.
“Cutting a half a billion dollars in losses over the next two years certainly is not going to be easy, but this will help us do it.”
Which leads to those challenges.
The deficit Amtrak is running is not caused by Acela. In fact, if Acela were its own company, it would make a nice profit.
Coscia, a partner at Windels Marx in New Brunswick, notes the company has two other business lines — both of which provide a valuable public service but not a profit.
The first is providing supported services in areas that do not have a local transit system — such as NJ Transit. Those regional entities pay Amtrak, but not the full amount.
“Based on the complexity of how they work, it’s almost impossible for us to recover 100 cents on the dollar, although we keep trying,” he said.
Then, there’s the long-distance business. They can be among the most scenic train routes in the world, but they are not money makers.
The Southwest Chief (Los Angeles to Chicago) runs through the Grand Canyon region. The California Zephyr (San Francisco to Chicago) goes through the Great Plains and Rocky Mountains.
When Amtrak suggested a few years back that it may need to eliminate these routes, the pushback from Congress was quick.
The reason was simple: While these trains accommodate plenty of vacationers and groups such as the Boys Scouts, they also provide a vital transportation link for remote areas, Coscia said.
“From a mission standpoint, the long-distance business is extremely important,” he said. “We’re often the only thing serving some of the communities on the long-distance lines. Deregulation got rid of buses; nobody’s flying airplanes there. And many of the people in the area or either elderly or disabled so they don’t drive.
“We talk about hospitals of the last resort; we’re the travel option of the last resort in these communities. Any threat of us leaving is like literally stranding these people.
“You don’t realize it if you live on the East Coast, because you have so many options. But if you live there, we’re it. Twice a day, an Amtrak train comes through your town. That’s it.”
The key to supporting these ventures — in addition to Acela — are better regional runs. Coscia said the Gateway Tunnel project will help in that regard in this area (see story here). As will the new train fleet that will start rolling out soon.
The good news: Ridership, especially among younger generations, is increasing, Coscia said.
It’s a reason he’s confident Amtrak is on its way to breaking even.
“Our biggest problem as a company is that we don’t have enough trains and enough seats to sell people,” Coscia said.
