This is Moynihan train
hall at Penn Station in New York City. It's one
of several stations along the Northeast Corridor,
which is the busiest stretch of rail line in
North America. One of the train
companies that operates on this rail line is
Amtrak, which is an inner city rail company that
ferries passengers from one large city to
another. In 2021, when this hall
opened, more than 4 million Amtrak
passengers came through this station. In 2019, before COVID,
more than 10 million people came through Penn
Station. The Northeast Corridor
is also home to the fastest train in the
Western Hemisphere, the Acela. It can hit a top
speed of 150 miles per hour, though it usually
travels at speeds slower than that. The full trip
from Boston to Washington, D.C., takes
about 7 hours. You might notice if you
try to book a ticket on one of these trains,
they are expensive. Even with high ticket
prices in stations like this one, Amtrak has
never made money. Its status as a for
profit company owned and funded by the federal
government has earned it a lot of criticism. But just before COVID,
Amtrak was in its strongest financial
position in history. Ridership has slowly
recovered and it has big plans to expand its
service, including in fast growing regions
that are underserved. There's, I think,
tremendous public sentiment for rail as a
mode and with all of the public attention on
sustainability, really, this is the time for
rail travel. Transportation
researchers think there is a future for rail
like Amtrak. A number of private
investors are starting their own projects. There are two basic
types of passenger train in the U.S.: commuter
trains, which typically travel from the center
of a major city to its suburbs and intercity
trains, which, as the name suggests, offers
service from one large city to another. Commuter trains are
often run by local public transportation agencies,
but almost all intercity trains in the U.S. are run by Amtrak. Amtrak was created in
1970 by the Rail Passenger Service Act. Its formal name is the
National Rail Passenger Corporation. It was
created to buy out the private passenger rail
businesses then struggling to compete. Amtrak operates more
than 30 routes on about 21,000 miles of track. It stops at 526 stations
across 46 U.S. states, Washington, D.C. and three Canadian
provinces. Amtrak can be thought of
as three systems in one. There's the Northeast
Corridor, a 457 mile stretch of track that
runs from Boston to Washington, D.C. That is the only route
that makes Amtrak money. Then there are these
state-supported rail systems, which are
jointly run by Amtrak and 17 states. Over 220 such trains run
each weekday on 28 corridors of less than
750 miles. Those account for about
45% of Amtrak's total ridership. Lastly, there
are 15 long distance routes. All of these are
at least 750 miles in length, and they range
up to 2728 miles. These are the trains
that traverse broad swaths of the country. They have observation
cars, sleeping cabins and dedicated dining cars. The vast majority of
passengers only ride these for a portion of
the total trip. They serve a number of
purposes. They connect small
communities with each other and with large
metropolitan areas. These trains are the
only Amtrak trains in half of the states where
Amtrak operates. They also are the only
form of intercity passenger transportation
in some of these communities. That
includes busses and airplanes. Understanding
these three systems is key to
understanding the cost of a train ticket. The
Northeast Corridor is the most heavily used
portion of the system, in fact, of the about 12.1
million trips taken on an Amtrak train, about 4.4
million of those travel through the northeast
corridor. These heavily used Northeast Corridor
routes are also the most expensive. We do a lot of work to
study what consumer willingness is to pay
and also how much capacity we have for any
given point in time. So our prices
essentially reflect both willingness to pay and
market demand in any market. But service in the lower
priced areas can be a lot spottier. In some
regions of the country, one of Amtrak's long
distance trains might roll into a stop just
once a day, often at odd hours. Delays are
common. Here I'm going to try to
book a ticket from Moynihan Train Hall at
Penn Station in New York to Union Station in
Washington, D.C. And I'm going try to
book the ticket for tomorrow. On this
particular search, it is impossible to find a
train ticket on either an Acela or a slower
Northeast regional train or one of the long
distance trains for less than $100. All of them
cost more than $100. One way that means
you're going to pay about the same amount coming
back. So the round trip ticket
on the Acela is going to cost $674 for a business
class ticket. Bear in mind that first
would be even more. And now on Delta, a
flight leaving at 9:00 in the morning and arriving
at 10:25 a.m.. So just an hour and a
half later starts at $448 round trip and $548 for
first. So a first class ticket
on a Delta flight roundtrip at around the
same time would be more than $100 cheaper than
the Acela ticket. All right. So now what
I'm going to do is book a ticket for a trip that's
going to be further in the future. So let's say
I wanted to book a ticket on an Amtrak train
around the Christmas holiday, let's say on
Friday the 23rd. And I want to come back
on Monday, the 26th. So my total ticket for
that trip on the Acela is going to cost $457. Now we can try the same
thing with the airline tickets. So a round trip
ticket leaving at 9:00 in the morning on December
23rd is $243. For a basic economy main
cabin. A comfort ticket is $273
and a first class ticket is only $343. Tickets on slower
Northeast corridor trains are cheaper than Acela
tickets. If you think about other
modes of transportation like airlines and
highways, there's a lot of federal investment
that goes into infrastructure, such as
airports, air traffic control systems,
highways. And so when people look
at Amtrak, they often think about the
infrastructure that we spend money on that's
required for us to operate, which really
isn't seen in other modes of transportation. So airlines are not
paying for their own airports. They're paying
user fees, which defray costs that the federal
government invested up front. Amtrak's NEC trains are
also a lot more expensive than comparable systems
in other countries. Fares on Amtrak's
Northeast Regional trains average $0.70 per mile. That is about three
times the price of a fare on a train in France or
Germany. Trains in Europe also
tend to be faster or tend to run more frequently
or have other advantages. None of these networks is
perfect. They're just much better
than the American one. Amtrak's system is
demand-based, meaning that prices are
determined in part by the demand for tickets, the
same way airline tickets are priced. Amtrak has a shortage of
trains, a shortage of rolling stock with which
to provide the highest capacity service. And this is something
that especially afflicts the higher end service,
the Acela. This is partly
self-inflicted. Amtrak's Acela trains are
essentially high speed trains that are running
on tracks that are not meant for high speed
trains. The tracks are older and curvy, which
is not ideal. In order to mitigate
this. Amtrak's Acela trains have a tilting
mechanism that allows them to maximize their
speed on curved tracks. That's not unusual. These tilting mechanisms
are seen on some trains around the world. For
example, in Japan, Switzerland, Spain,
Italy, Germany and Sweden. However, there
are different types of tilting mechanisms, and
the one that is seen on Acela trains is the most
aggressive. It has been largely
discontinued elsewhere because of the high
maintenance costs. At the time they were
built, Acela trains were also beefed up to meet
U.S. regulations. They were so
heavy, the French workers who built them called
the Acela locomotive Le Cochon, the pig. That makes them even
more maintenance intensive. There are 20 Acela train
sets, and as of a couple of years ago, 16 out of
the 20 were available at a given time. So it's
80% availability, which is just not good. The
TGVs in France achieve high nineties. Tickets could be a lot
cheaper if the trains allowed for higher
capacity, but the high cost of the trains and
low availability hampers that. That's why the
service appeals to travelers who value time
over money. The convenience of
leaving literally from Capitol Hill in
Washington and showing up in midtown Manhattan two
and a half hours later, as opposed to leaving
from Dulles Airport 30 miles outside of
Washington and landing in LaGuardia, far out on
Long Island. So that convenience
actually, I think, is something that a lot of
travelers may place a premium on. Amtrak has always
struggled financially. For example, it lost
about $1.7 billion in the two years leading up to
the pandemic. In early March 2020,
Amtrak was on its way to making money for the
first time in its 50 year history. But within
weeks, ridership plummeted 97%. Gross ticket revenue in
2019 was just over $2.3 billion. In 2020, it
fell by nearly half, then it fell again by another
30% in 2021. Expenses in 2021 totaled
$4 billion. About half of Amtrak's
expenses are wages, salaries and benefits
for its roughly 17,000 employees. One of the
biggest sources of expenditure is its aging
fleet and infrastructure. Amtrak's diesel
locomotives are about 25 years old on average,
and its railcars average 35 years. The typical useful
lifespan is about 40 years. The trains are
out of date mechanically, hard to find parts for,
unreliable and pretty rundown. In addition,
the Northeast Corridor has a $42 billion repair
backlog. Amtrak would not be able
to make money at the fares that trains in
France and Germany make a decent amount of money
on or fares that the Japanese trains, that the
Shinkansen trains there, about 35 to 40 U.S. cents per mile. So fares
that the Japanese operators are making
windfall profits off of. Amtrak would not be able
to make a profit on these. The biggest financial
challenges we face are to recover the farebox, so
in other words, to get the ticket revenue back
to where it was pre-COVID, and actually
account for the fact that there has been
considerable inflation during the Covid period.
So it's not just good enough to get back to
where we were, but we truly have to compensate
for a lot of what's been going on in terms of
inflation in the last few years. Amtrak expects its
revenue to be relatively low in 2022 again and to
have trouble covering its costs. Part of Amtrak's
financial difficulty results from the need to
operate three systems that perform very
differently. There's the Northeast Corridor,
where demand is high, even with high fares. There are the various
state-supported railways, which vary in their
success. State-supported routes recover about 66%
of their costs through ticket revenue. That's
about twice the average for public transit. Finally, there are the
long distance routes, which are the biggest
money pits. They are expensive
services to run. You run into lots of
different conflicts because you're running
these very, very long routes. They can be
hours delayed plus. We've seen those horror
stories before. One of Amtrak's key
challenges is that outside the Northeast
Corridor, the company rents tracks from
freight companies. Federal law requires
that freight companies give Amtrak trains
priority over freight. However, the Department
of Justice has not enforced this law since
1979. These right of way
issues are the primary reason long distance
trains are delayed and those delays drive up
costs. Despite their financial
troubles, the long distance routes enjoy a
lot of support. In some places, these
trains are the only form of intercity transit. To a certain degree, you
can take the view that they don't always cover
their full operating costs from ticket
revenue, but they provide a lot of services to the
communities they pass through, the value of
which is not really captured in a ticket
price, as it were. There's been lots of
calls for getting rid of them and eliminating
them. And those don't really seem to go
anywhere because it does have the strange
bedfellows that exist around supporting these
these services. Transportation
researchers do think there is a future for
rail in this country, but it may take some
different forms than it has in the past. There's a lot of
experimentation going on in this country, and
that's actually a good thing when it comes to
transportation. The pandemic has disrupted
the way that Americans travel. It's hard to
overstate just how transformative it's
been. But what comes out of it is really what's
going to be interesting. A few private operators
are attempting to build various projects
throughout the country, including in regions
where Amtrak has less of a presence. These
private projects focus on connecting cities that
are what people call too far to drive and too
close to fly. We've seen lots of
examples in in Southeast Asia and in Europe. About 400 miles seems to
be about the right distance. And we've got
lots of corridors in this country that can take
advantage of that. There is the planned 240
mile Texas Central railway meant to connect
North Texas with the greater Houston area. The planned train would
be able to travel in excess of 200 miles per
hour. The whole trip is
projected to take 90 minutes. A company
called Brightline, funded by Fortress Investment
Group, is already operating between three
stations in Florida. Brightline runs on
tracks owned by the Florida East Coast
Railway, a freight railway. A search for tickets on
Brightline for a midday 40 minute trip from Fort
Lauderdale to West Palm Beach revealed fares
starting at $17 each way for one of its basic
tickets and $37 for a premium ticket that
comes with a range of extras, including rides
to and from the station. Driving the same
distance would take about 55 minutes. Prices are higher during
rush hour. The company plans to
expand its service in Florida and is planning
another project called Brightline West, a
service connecting the greater Los Angeles area
with Las Vegas. Amtrak's expansion plan
includes service along the same route. The last
time Amtrak offered service between those
two cities was in 1997. Brightline West plans to
build its rail largely in the center of the
Interstate 15 highway that runs between the
two cities. This will allow it to
avoid having to acquire land to build its own
tracks, a major problem for other projects. It also won't need to
rent track from freight companies. Currently a
major challenge for Amtrak. There is something that
is changing and if we can pull off the private
element to it, I think you'll see a lot more
people trying to invest in those as well because
that's a real indication of the market demand
that's out there right now. Some state level programs
have generated controversy. You have programs like
California High Speed Rail, which famously is
over budget, over time. It's not really
delivering on the promise of taking somebody from
Los Angeles to San Francisco. It's now
running this inland route that's going to stop
short of those major metros. And so at the
same time, you have success stories
elsewhere in the country and some promising
investments, you have this other project,
which a lot of folks are wondering if it's ever
going to be viable. Private sector investors
may continue to have a role to play, but so
will the government. Anything that's at
national scale is going to have to be largely a
public sector undertaking. We believe that open
competition is healthy for everybody. It keeps
us all honest in our business, and it also
shows us innovation that we can share more
broadly across the industry. Our interest
is really in driving the rail mode to be
successful in this country. There could be more
public private arrangements. I'd really like to see
good partnerships between the public and the
private sector when it comes to all modes of
transportation, but particularly when it
comes to passenger rail travel, because
especially if we have private investment,
let's say in Texas, for example, between Dallas
and Houston, people are going to get off the
trains and going to want to connect to other
services. And so you have other kind of train
services in those metropolitan areas. You
have robust bus service in those metropolitan
areas. And so better coordination between the
public and the private side will take advantage
of those different investments and make the
whole system run much more efficiently. Amtrak has its own
expansion plan, which it released in April 2021. Amtrak Connects Us, as
it is called, has the ambitious goal of
bringing intercity rail to 160 communities
across the country, including the 50 most
populous metropolitan areas. Many of the parts
of the country that have grown fastest since
Amtrak was founded have little to no service. The company wants to add
20 million riders to its annual total, more than
doubling its 2019 ridership. That would
add $800 million in revenue. We want to get more
customers onto our existing services
through more frequencies, larger trains, more
popular services. But we also want to
spread passenger rail to new parts of the
country. Amtrak is positioning
itself as a greener alternative to driving. It received $66 billion
in funding from the Bipartisan
Infrastructure bill. $22 billion is dedicated
directly to the agency for fleet upgrades and
other systemwide improvements. $6 billion
goes to the Northeast Corridor and $16 billion
to state-supported railways. Last year, we hired 3700
new employees to help us in our infrastructure
projects. And this is part of the
new spending that we're incurring to make the
investment projects work. The remaining $44 billion
is going to the Federal Railroad Administration,
which will hand out the money in grants to
various state agencies for upgrades to
intercity railway. That's more money than
Amtrak has received in its entire history. The infrastructure bill
has also provided enough funding for Amtrak to
replace its entire fleet, including long distance
trains and Northeast regionals. New Acelas
will also be rolled out in 2023. There are other assets
that will be funded either directly by
Amtrak or through the Federal Railroad
Administration. In terms of tunnels, bridges and
other infrastructure needed to operate the
Northeast Corridor efficiently. The disruptions of the
coronavirus pandemic have created a whole new set
of opportunities for transportation. In certain parts of the
country, particularly in the Northeast and in our
long distance services, we're basically back to
the levels of demand that we saw pre 2019. Not all of our
demographic groups and customer demand groups
are back to the same level, but we're seeing
a lot of new customers and this is what we find
so encouraging. It's hard to say what the
future is going to look like because we've just
come through this tremendous
transformation when it comes to travel. But I
think when we emerge from the pandemic, we're
going to see that that these kinds of services
are critically important for helping the country
move. And I certainly am bullish of the future of
passenger rail service United States.
