This video was made possible by Away. Get the perfect suitcase for $20 off by going
to awaytravel.com/wendover20 and using the promo code, “wendover20.” On July 12, 2017, Amtrak got a new CEO. The American government-owned railroad company
would now be helmed by Richard Anderson. Anderson was no stranger to the American transport
industry. He had previously worked for nine years as
the CEO of Delta Airlines—leading it from bankruptcy to prosperity. This job, of turning around a struggling company,
is rarely a popular one. It requires making difficult decisions that
plenty will not agree with, but it’s a job that some leaders have a knack for. Having succeeded with this at Delta, there
was at least some evidence that Richard Anderson could complete the same task elsewhere. That’s why he was brought to Amtrak. Amtrak is certainly a company in need of turnaround. While it is government owned, it is intended
to operate as a for-profit company. Despite that, however, it has never turned
a profit since its inception in 1971. Each year, the difference between what it
makes from running its trains and what it costs to run those trains is made up by government
subsidies, grants, and debt. The company’s primary purpose, beyond making
money, is, of course, to carry passengers, and they don’t even do that all that well. In 2018, only 73% of their trains arrived
on time. In the case of their long-distance trains,
just 43% got to their destination on time. In fairness, the majority of the company’s
delays are the fault of the freight rail companies that own the tracks that carry their trains,
but still, it’s sure that the company could use some work. So, Richard Anderson has been getting to work. To understand how Amtrak works as a company,
you have to understand the types of trains it operates. There are essentially three categories. The first are the Northeast Corridor trains. This route, connecting Boston, New York, DC,
and a number of smaller cities up and down the east coast, is operated by both higher
speed Acela and slower Northeast Regional trains, and overall, the Northeast Corridor
is by far Amtrak’s most profitable route. The slower, regional trains they operate earn
them a profit of almost $25 per passenger. On the higher-speed Acela, they profit more
than $80 per passenger. Without this route, Amtrak would be in a far
poorer financial state. The second type of trains are the state-supported
ones. Essentially, what these are are shorter routes
supported by the subsidies offered by state governments. Every single short-distance train outside
the northeast corridor is state-supported, and this type includes routes like Charlotte
to Raleigh, North Carolina; Chicago to Quincy, Illinois; or Vancouver, Canada to Portland,
Oregon. These routes range in profitability. The DC to Lynchburg train, for example, earns
the company almost $40 in profit per passenger. Meanwhile, the Fort Worth, Texas, to Oklahoma
City, Oklahoma one loses more than $30 per passenger. Overall, though, the state-supported routes
as a grouping are unprofitable, but not by that much. They are somewhat close to break-even. The third type of trains is the long-distance
ones. Ranging from 13 hours to 65, these routes
connect big cities to small towns all across the US. Many of these routes have storied histories
and strong fanbases of those who prefer the more relaxed method of travel, however, these
routes certainly do not help Amtrak’s financial performance. Every single one of Amtrak’s long-distance
routes lose money. How much money they lose ranges anywhere from
$12 per passenger in the case of the Palmetto between New York City and Savannah, Georgia
all the way to $456 per passenger in the case of the Sunset Limited from New Orleans, Louisiana
to Los Angeles. Overall, Amtrak loses more than a half billion
dollars a year operating these long-distance routes. Part of what makes Richard Anderson the perfect
figure to turn around Amtrak is that he does not care about trains. That’s to say, he has no sense of sentimentality
about the history or the grandeur or the allure of particular storied routes. His passion is for profitability and that’s
his goal, seemingly no matter the cost. Therefore, three core parts to Anderson’s
Amtrak plan have emerged—expanding the Northeast Corridor services, optimizing the state-supported
services, and cutting back the long-distance services. Starting with the Northeast Corridor, this
is clearly Amtrak’s greatest asset. The company owns most of the tracks between
DC and Boston meaning that they don’t run into the same problems of using freight railroad’s
tracks like with almost all their other services. This means they can run these services relatively
reliably, and therefore have a clear advantage over planes or buses when traveling between
New York and DC or Boston. Consequently, they have cornered the market
between Boston, New York, and DC. The first part of Amtrak’s plan to double-down
on this route was initiated before Anderson even joined the company. Amtrak is receiving new, faster, and larger
train sets for their higher-speed Acela Express service on the route in 2021. With the introduction of these, Amtrak has
teased plans to create four tiers of transport for the corridor. The lowest would be a new, local train operating
all the way from Richmond, Virginia to Portland, Maine making most all stops along the way. This idea for this sort of, “super-local,”
train would be to connect additional smaller communities to the Amtrak Network, as this
service could be used to connect to other higher-speed trains. The next tier up would be the existing Northeast
Regional service, operating between Boston and DC, with some continuing on into Virginia. Above that would be the current Acela Express,
operating limited-stop service between Boston and DC, then above that would be new, nonstop
services from DC and Boston to New York. The company launched the first of these in
September, 2019, with a travel time of 2 hours and 35 minutes—shaving about 15 minutes
off the travel time of the stopping Acelas. In the future, the addition of nonstop services
from Boston and additional frequencies from DC will cement this as the most premium option
in the Northeast Corridor, and the idea is that these four tiered options together will
help capture more of every customer segment—thereby squeezing more revenue out of Amtrak’s most
profitable route. The fact that some of Amtrak’s state-supported
trains break even is a fantastic sign because it means, with optimization, that Amtrak can
turn this grouping profitable. Anderson has made noise about expanding Amtrak’s
short-distance network across the US. The company has not announced any specific
new routes as part of a major short-distance expansion, but it’s clear that there are
opportunities. Trains tend to be competitive in time and
cost to flights under a distance of about 300 miles or 500 kilometers. That means there are plenty of likely profitable
routes that Amtrak could set up, like Dallas to Houston or Los Angeles to Las Vegas. While it’s unlikely that Amtrak would set
up any additional short-distance routes without state funding, the company does have potential
future competition. Two private companies are fairly serious about
starting up high-speed train service on these routes. Between Dallas and Houston, a company called
Texas Central Railway is months away from starting construction on a high-speed line
connecting the cities in just 90 minutes. Elsewhere, Virgin Trains USA—the company
that owns what is currently the only privately-owned inter-city railroad in the US between Miami,
Fort Lauderdale, and West Palm Beach—recently acquired a company that had begun planning
and permitting work for a Los Angeles area to Las Vegas high-speed line, and is looking
to start construction in 2020. If these projects are completed, which seems
quite possible, two of Amtrak’s most potentially profitable routes would be snapped up and,
if successful, it would open the door to future private rail projects in the US. While significant rail investment and development
would no doubt prove quite beneficial for the country and help solve many of its transport
problems, to Amtrak, it would get in the way of their ability to cherry-pick the most profitable
short-haul routes in order to offset the loss of long-distance routes. That brings us to those long-distance routes. This is where things get tricky for Amtrak. As a publicly-owned company enjoying quite
sizable amounts of public funding, Amtrak relies on keeping in the good graces of the
US Congress. Their long-distance routes pass through more
than 40 states and cutting them would be politically unpopular anywhere. Not only do they serve as economic stimulus
by providing jobs to rural areas, but many of the company’s 500 stops represent the
only public transport link to the outside world from the small towns they’re in. Congresspeople are well aware that the loss
of a route that their constituents use would not help with their popularity. At the very same time, Congress has been putting
the pressure on Amtrak to cut its losses, even though the very thing loosing all their
money are these long-distance routes. Therefore, for now, the company has started
making efforts to cut cost on these trains. As one example, they’ve started to move
their long-distance trains away from serving fresh meals from their onboard kitchen towards
stocking pre-packaged, pre-prepared foods. This, undoubtably, did not go down well with
Amtrak loyalists, but the whole long-distance mess gets even messier. The company has been accused of, essentially,
misleading accounting practices. This would presumably be in order to make
the long-distance routes seem like bigger money losers than they truly are in order
to help the case for their discontinuation. The company attributes different costs to
different lines to give a sense of which make money and which don’t, but this isn’t
always done well. For example, it apparently cost $3 million
a year to maintain the company’s electric train equipment outside the northeast corridor
even though, aside from a small branch line to Harrisburg, there are no Amtrak electric
train routes outside the northeast corridor—only diesel. It also attributed all the cost of its baggage
handling services to its long-distance trains, even though these are used on many short-distance
services as well. The biggest highlight of their cost attribution,
though, is what they marked down as the cost they bore for their station in Miami—the
terminus of some of the long-distance routes—to be cleaned of snow. The last time it snowed anywhere close to
Miami was 1977. What’s likely to happen, in the near future,
is that Amtrak will cut the most egregious losers in its long-distance portfolio while
keeping those that are closer to break-even in order to appease Congress. The termination of any route would be a huge
loss to many. They each provide hundreds or thousands of
jobs and connect many of the country’s smallest towns to bigger cities, but its likely a necessity
given the pressure from DC. The new leader of Amtrak, Richard Anderson,
has, though, helped lead the company towards the goal that long seemed impossible. In the company’s last fiscal year, it lost
just $30 million. In Amtrak terms, that is nothing, and it puts
them on track to break-even in 2020—an achievement that the company has never reached since its
inception 50 years ago. This will occur during what is clearly a time
of great change for Amtrak. It is reinventing itself at the beginning
of a period of reinvention for the American rail industry as a whole. What many are worried about, though, is that
it and the Congresspeople behind it will forget the difference between a private company and
a government-owned one. If Amtrak was a true for-profit company, it
would have long ago made the quite easy decision to cut every single long-distance route. Doing so would immediately turn them into
a quite profitable corporation, but the company’s purpose is to connect America, and there’s
a whole lot more to America than a four-hour radius around the largest cities. Anyone who’s travelled a lot, and possibly
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Is there a reason why the Wolverine Line is included in the map of the long-haul routes? That should definitely fall under the state sponsored routes as it goes from Chicago to Detroit to Pontiac. That's one of the Amtrak lines that does well too, and is "high" speed (110 mph) west of Kalamazoo.
Does anybody know where the footage at 8:28 is from??
Philly is the 2nd biggest city in the northeast after New York and is where most of his train station footage is from but doesn't get mentioned once. Weird how much this city gets forgotten considering how big it is
Funny to think that American small towns are so dependent upon government subsidies, given that they tend to vote in favor of less "socialism".
I tried to throw /u/WendoverProductions/ a little bit of support by using the promo code in this episode for AWAY to buy a Christmas present for my wife, but it threw me an error that the code is invalid. :(