NARP Emphasizes Efficiencies That Maintain Good Service

Release #05-25

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Washington—The National Association of Railroad Passengers today strongly criticized the concept of eliminating sleeper, diner, lounge and checked baggage services from Amtrak trains. DOT Inspector General Kenneth M. Mead, in a report released this morning, recommended that Amtrak “implement multiple pilot projects” doing just that on “its worst-performing long-distance routes as well as on others that offer the best potential for savings.”

Because roughly half of long-distance passengers change trains en route, elimination of crucial amenities on “multiple” routes would take revenue away from most others.

It is disheartening that the IG looks at cutting costs only by cutting service, ignoring extensive Capitol Hill testimony this year on ways to cut costs without devastating service and revenues. At a June 9 House Railroads Subcommittee hearing, witnesses agreed that Amtrak could net substantial savings by replacing or renegotiating the contract with GateGourmet, which has supplied on-board food since 1998. At a May 12 hearing of a Senate appropriations subcommittee, Amtrak President & CEO David L. Gunn was asked, “Are labor costs out of line?” He responded that Amtrak had made great progress, and that the “basic problem is work rules; rates of pay are not the problem. I have 700 to 1,000 people on payroll that would not be there if we had control over crew size and crafts.” [At the hearing, Mead added, “I agree wages are not out of line.”] It is also unfortunate that the IG’s report does not try to ascertain the needs of Amtrak’s customers.

NARP President George L. Chilson said, “Rather than inform the debate over the future of intercity rail passenger service in this country, its negative tone is more likely to inflame it, increasing the chance of yet more policy errors. We are glad that Congress appears to be taking a broader and more comprehensive view as it contemplates the enormous potential that intercity passenger rail has for addressing some of America’s mobility and transportation problems.”

NARP is also encouraged about Amtrak’s planned August 2005 relaunch of the Chicago-Seattle/Portland Empire Builder, which will allow Amtrak to raise fares by offering enhanced passenger amenities.

The IG’s calculations make the unreasonable assumption that “no coach passengers would abandon Amtrak if they no longer had access to amenities [besides a basic coach seat].” This ignores the fact, noted in our July 14 release, that many coach passengers take very long trips. We said, “For trips 800 miles or longer, FY 2004 ridership was 819,870 in coach and 318,378 in sleeper. Also, in ignoring connecting passengers using coach and sleeper on different segments of the same trip, the IG ignores coach revenue that would be at risk with loss of sleepers even if other services remained.”

Further in this regard, the IG admits, “Our analysis to date has not examined the elasticity of demand for coach service should diner-based food service and other amenities currently offered be eliminated.”

The IG’s analysis does show that eliminating sleeper service would not produce cost savings for the Auto Train, where sleeper passengers account for 44% of ridership. The report also admits that “most of the costs associated with the number of passengers, such as station operations, would be relatively fixed and would not actually decline with a fall in passenger numbers.”

The report acknowledges that Amtrak would have to continue to make payments on its leased equipment if these cars are placed into storage, and that there is “lack of a real secondary market for much of this equipment.” (15) NARP strongly believes that Amtrak should fully utilize available equipment to maximize revenue in the face of fixed costs. If anything, Amtrak’s national network needs a larger equipment pool to meet the traveling public’s demand, given the large number of trains where all sleeping-car rooms are sold out.

The report ignores a fundamental reality, to which Amtrak testified at the June 9 hearing: the primary purpose of food and beverage service “is to enhance ticket sales and ridership, not serve as a profit center.”

In exploring Amtrak food service, the report suggests impractical alternatives like passengers getting meals during station stops.

As Sen. Conrad Burns (R-MT) said last Tuesday, “Food and beverages, as well as sleeper cars, are essential components of long-distance train travel. I agree that Amtrak needs to be more aggressive in contracting for food and beverage service, but I also believe we need to keep those amenities available.”