This is Brightline, the
first new privately-funded passenger rail line built
in the U.S. in over 100 years. It was completed in 2018
and when the entire line is open later this
summer, it'll stretch 230 miles from Orlando to
Miami. And it was almost entirely done the good
old-fashioned American way, with private equity. The most successful train
system in the U.S. is basically a government
run enterprise. So the Amtrak system from
Washington to New York, the Acela network is a
terrific product. It's one that I've used
many, many times. But frequently used train
lines in the U.S. like Acela, are few and
far between, with just 23 million trips in 2022
compared to France with 879 million. Moreover, the U.S. has
zero miles of dedicated high-speed passenger
rail, which is far behind most developed nations,
and they're getting more expensive to build every
year. If you look at France, you
know, who is the European country that has been
doing this the longest, the first lines were
fairly easy, quick and not that expensive to build. But nowadays you see the
same pattern that they are. They are becoming
more expensive and more difficult, take longer to
build. The lack of rail
infrastructure is in large part due to the
prioritization of highways to support cars and
trucks in the 1950s. By 1960, over 70 million
vehicles had been registered with motor
vehicle bureaus all over the country. But now that those roads
and bridges are crumbling, trains are finally
getting more attention. And while the United
States is roughly 18 times bigger than France, the
countries have about 21,000 miles and 18,500
miles of passenger rail lines, respectively. As part of Biden's
trillion dollar infrastructure plan, $66
billion was allocated to rail maintenance and
expansion, some of which will be granted to
private companies. We used to be number one
in the world in infrastructure. We've
sunk to 13th in the world, but now we're coming back
because we came together and passed the Bipartisan
Infrastructure Law, the largest investment in
infrastructure since President Eisenhower's
interstate highway system. Congress put in about
$65, $66 billion over the next several years to
support the deployment of regional higher speed
rail. This is the largest
investment in passenger rail since Amtrak was
founded, but it still won't be enough to bring
true high-speed rail to the U.S. So can a
privately owned passenger train company like
Brightline make it happen? The company is planning
to build a true high-speed rail project connecting
Los Angeles to Las Vegas called Brightline West,
which it aims to open in 2028. But in the
meantime, it is expanding in Florida. CNBC visited
its newest train station in Orlando, where it's
opening a new line connecting Central and
South Florida in August to explore whether private
rail can work in the U.S. In 2006, Fortress
Investment Group made an investment in the Florida
East Coast Railway, which was built by Henry
Flagler in the late 1800s. This train was originally
conceived as a train for both freight and for
passenger. It was a passenger rail
all the way through the 1960s, and I spent quite
a bit of time traveling around the world, and
particularly in Europe, where the trains are a
very, very typical form of transit. And so I
thought, you know, why not a train here? A team at Brightline
looked around the world to see what works best for
profitable passenger trains in countries where
it's a popular way to travel. And after
returning to the U.S., they considered which
cities would benefit the most from being connected
by rail. And what we discovered was
when you have two big markets that have an
existing demand base of travel between those two
cities, that those cities are separated between 200
and 300 miles, plus or minus. There is an
opportunity for high-speed passenger rail to become
the preferred method of travel. When you look at all the
city pairs that exist, the places around the country
that would be attractive to you, Miami to Orlando
jumps off the top of the page. It's kind of a
lousy drive between them. It's this 230-mile trip
between the two places with lots and lots of
trouble in between. And when he says trouble,
he means it. 80 some miles of that
drive are on I-95, one of the deadliest highways in
America, with one stretch in south Florida causing
108 fatal crashes and 123 deaths over the past 20
years. But with a reliable
train, some of these fatal crashes could be avoided
as more and more cars will be off the road. I think Brightline is
already having a significant impact on
traffic in South Florida. It's going to have a more
broad based impact across the state as we start the
service into Orlando and we run the full 235
miles. However, because most of
Brightline Florida is currently operating on
existing tracks with train crossings instead of
being elevated above the road, there have already
been around 90 fatal run-ins with cars since
service began. We looked at the corridor
we built between here and cocoa and we thought this
is actually the proper way to do it because you end
up with your own corridor. You don't have to share
with anybody. You don't have any rail
crossings, which is great from a safety and a speed
perspective. And so there was, again,
a lot of lessons learned. And partly why it was able
to get the line up and running on time was
because it shares the line with Florida East Coast
Railway freight. This model came from
Amtrak, which borrows 96% of its lines from
freight. But this has proven to come with
additional difficulties for Amtrak, like long
delays and increasing ticket pricing. We started because we
owned the freight train at the time. So the original
concept was to take the existing rail corridor
and basically build on that, enhance that, which
we did. So from Miami to Cocoa
Beach, it basically goes along the same corridor
as the Florida East Coast Railway. And we share
that that line with the freight train. And the rest of the way
from Cocoa Beach to Orlando is fresh track,
boosting the total cost of the Florida line to about
$6 billion. The vast majority of
successful train systems around the world are
nationalized lines, meaning the government
assumes full responsibility for the
rails. But even Amtrak, the
largest operator of passenger rail in the
U.S., is structured as a private corporation and
receives both private and public funding. While having privately
owned passenger rail is not the typical method
seen in train-dependent countries around the
world, there are some examples of it working
well. There are a number of
private trains that have been very, very
successful, both public-private
partnerships, government-sponsored
trains, the SNCF network in France or Trenitalia
in Italy. Italo has been a big
success. The Eurostar has been a rip-roaring
success. There's plenty of examples of both public
and private ownership and sponsorship working well. However, these companies
usually have had to use either government grants
to begin their ambitious infrastructure projects
or a bail out somewhere along the way. These systems are not
risky in terms of operations, but they're
risky in terms of getting built because you don't
know how many years you're going to be delayed. You
could be delayed by changing politics. You'd be delayed by
something in the economy. And so it takes a really
gutsy private company to put in billions of
dollars and then take ten years before they get any
revenue. Even the Eurostar, which
connects Great Britain to mainland Europe via the
Channel Tunnel, had to receive a couple of
shareholder and French state bailouts to stay
afloat during the pandemic. Fortress does
have a very diverse portfolio, ranging from
ski resorts to clean energy, which help it pay
for expensive projects like this. It is possible for private
companies to deliver high-speed rail and also
to do it well. It seems less possible on
the basis of the evidence we have, which generally
show that private companies also are not
able to make high-speed rail financially viable. So there needs to be a
subsidy somewhere. And that's exactly what
Brightline hopes to do for its upcoming project. Brightline West, a $12
billion 218-mile line of high-speed rail
connecting Las Vegas to Los Angeles. In the case of high-speed
rail, not in all projects, but in case of very
risky, big, very expensive infrastructure projects
like high-speed rail, very often the public sector
government ends up stepping in and saving
the project, no matter how it was delivered, whether
it was delivered by a private company or a
public company. And Brightline West still
expects this to be the first completed true
high-speed rail project in the U.S., with trains
running over 186 mph. But it might not be able
to get by without a little help from Uncle Sam. In order to be a part of
Biden's infrastructure initiative, Brightline
West has to be built with unionized labor, American
resources and use 100% renewable energy, which
is why it's pursuing a $3.75 billion federal
grant in partnership with the Nevada Department of
Transportation to get the project rolling, so to
speak. No highway exists based on
fully private funding. No airport exists based
on private funding. And moreover, those roads
need to be maintained every single year by
additional investments made by the public
sector. It also plans to build the
line in the median of I-15 with land leased from the
California Department of Transportation. Brightline West choosing
to use existing transportation corridors
is what we've found to be the secret sauce. It's
what we've found to be helpful and we've been
working with states, cities and counties. They like it too. And so if you can create
this private-public partnership, it really
aligns us and creates win-win results. This differs from the
other major high-speed rail project in the U.S.,
the California High-Speed Rail, which is building
from the ground up and not along a major interstate. Acquiring land has
historically been one of the biggest hurdles for
passenger train development in the U.S. Because Brightline is
using pre-approved land, it's been able to move
quickly and cheaply. The whole approval stage
is often really stretched out in time and hard to
go through, and there are many hoops that you have
to jump through. And it can be frustrating
for the people who are planning the project and
who want to deliver the project, but it gets even
harder once you get to delivery because that's
when you really face people in the real world,
like the people who own the land that you're
going through and the neighbors and so on. But Brightline thinks that
makes being a private company a logistical
perk. One of the advantages of
us being a private sector entity is we are able to
both make decisions quickly and then act on
those decisions quickly. And when you do that,
you're able to move the ball forward in a very
direct way. That's one of the virtues
of sort of the entrepreneurial spirit of
a private company. And this is a company
built on an optimistic viewpoint of the future. At this point, it's
practically derivative to say that car culture is
synonymous with the United States. It's literally
built into the fabric of the country, with 92% of
households having access to at least one car. But if private companies
like Brightline continue to expand, would
Americans actually use it? This idea that Americans
love their cars and are never getting out of
their cars is a little bit of a nostalgic idea. Number one, the
statistics will bear that out. The age at which
people get their driver's licenses has materially
been getting older and older. The number of
people that get a driver's license that feel the car
is that important in their life is diminishing over
time. So this is not the 1950s. Gas is not 25 cents a
gallon. And the interstate
highway system isn't brand new. This is a different
world. They're different
sensibilities about all kinds of things, personal
priorities, their view against the ecological
impacts of the decisions that they make. All of
these things favor the future of traveling by
train as a smarter way to get around. Brightline is optimistic
about its abilities to get people off the roads and
into its trains. Reininger said they
expect to transport up to 8 million people a year
with the Florida line. Ticket prices from Miami
to Orlando are expected to cost $39 for kids and up
to $149 for premium seats. And it's something that
doesn't just impact our city, our state and our
country. It actually impacts the
world because many of the people that come here to
the state of Florida are coming either to Miami,
Orlando or both. Brightline estimates 35
million people travel between Orlando and Miami
every year, with most currently driving on I-95
and the Florida Turnpike. The U.S. is blessed with
the best interstate highway system in the
world. That's probably one of the things that has
retarded our growth in the passenger side. But
there's real limitations in these big cities as to
how many more lanes of traffic you can support. And so with that, I think
you need a different solution. I think train
travel is a big part of it. And Brightline West will
eventually be serving a pair of cities that has
50 million visitors making the trip every year. 85% of those people are
driving. Those people that are
driving are limited to qone road. And that
results in, not surprisingly, extreme
congestion on that roadway. And it makes for
a very challenged transit. Driving along that one
roadway. That screams for another
alternative. Because Brightline West is
also being built in the median of where people
are traveling and we're taking them out of our
cars, we are the best billboard for our future
success. People have to pass us
for the four years that we're being constructed
and every time they're sitting in traffic one
way or the other, or every time there's a backup,
they're going to say, I want to take that train
as soon as it's open. And leadership in the
company thinks both projects can garner
enough riders to be profitable. Brightline West has the
opportunity to run 10 or 11 million people a year
based on the size of the market and the propensity
of those people to move back and forth between
those marketplaces. That will make it a very
profitable entity. It will be profitable at
significantly less ridership than that. The
threshold is much lower than what our aspirations
are. They have already shown
that if you provide a super high-quality
service and experience, that the people will show
up by the millions and they have. Brightline doesn't yet
have any other private companies directly
competing with its plans to create rail lines
across the U.S. Texas Central is another
hopeful project seeking to connect Dallas and
Houston via rail, but plans have seemingly
stalled after it ran into land acquisition
challenges. Certainly we're the
clubhouse leader having built the first train in
this country in the last 125 years and hopefully
the second one here shortly, but I expect
there will be lots of competition over time
because this is a compelling business
opportunity. As Brightline West could
be the first high-speed rail line in the U.S.,
it's essentially viewing the project as a proof of
concept, both for it and future competitors. I'd call it the blueprint
for America's high-speed rail industry. And so
what that means is we are building in America, we
are utilizing American Union labor, and we'll
create about 35,000 construction-related jobs
and a thousand permanent jobs after all that are
localized within the region that we're
building in. We believe this is a
great demonstration project and a proof of
concept so that we can build and work with
others to build other systems in the future. It's been able to achieve
its deadline so far with Brightline Florida and
aims to break ground by the end of the year for
Brightline West and complete the project
before the LA 2028 Olympics. There's nothing that says
private is necessarily better or worse. They can be very
complimentary to each other. I do think that in
terms of developing and building things, private
enterprise is probably a little more nimble than a
government agency would be. But it does hope to work
in conjunction with and connect its lines to
government-subsidized trains like Amtrak or the
California High-Speed Rail Project in the future. Thinking of all this as a
network, as opposed to the Amtrak system versus a
public-private partnership system, but making sure
it's all connected. If we're going to have a
national system in the future, that's the only
way we're going to be able to think about this. Brightline West and the
California High-Speed Rail, we're complements
of one another. We actually have the same
goal and the same mission. We want to see a unified
high-speed rail network in America. And so we're
starting on the West Coast to do that. But we're
rooting for them and they've been rooting for
us. And together, I believe we're going to do
that.
