The most fundamental of Amtrak's problems is its economic performance. Although ridership has grown significantly and revenue has tripled, the corporation's subsidy needs from the federal government have outstripped income growth (Figure 1). In 1981, revenues from ticket sales, express and mail services, and other sources totaled some $496 million, yet an additional $712 million from federal and state sources was necessary to meet total operating expenses of $1.2 billion.
Probing deeper into the revenues and expenses of Amtrak, two major cost categories appear. The first of these can be classified as direct costs and includes the basic expenses associated with moving passenger trains over the railroad: labor, fuel, and other expendables, railroad charges, etc. The second category, indirect costs, includes costs of maintaining Amtrak as a railroad system or network. Stations, servicing facilities, repair shops, reservations systems, car and locomotive maintenance, management, insurance, taxes, etc., make up the indirect costs. In Amtrak's case, because of the overall low frequencies of train service, the revenues generated are inadequate to offset these common expenses, which make up an excessively large and disproportionate share of corporate costs. In FY 1980 Amtrak incurred total expenses of $1.1 billion, yet the actual cost of direct operating expenses (moving the trains over the tracks-labor, fuel, expendables, etc.) was only $272 million, or about 25 percent of the total. Indirect expenses (stations, yards, shops, maintenance of locomotives, cars, and the small amount of track owned by the corporation) totaled $644 million, or 56 percent of expenses. Revenues generated from ticket sales, food and beverage sales, and the movement of mail and express in the year ending September 30, 1980, totaled just over $410 million. On a direct-cost basis Amtrak's trains earned more than the cost to operate them by some $127 million. The high infrastructure costs are clearly a major problem and reflect serious diseconomies of scale.
The
high ratio of indirect costs to total costs is at the heart of Amtrak's
financial problems. The very nature of Amtrak's operation as a passenger
railroad is largely responsible for this imbalance. Some 500 stations scattered
over a 24,000-mile network in 45 states is Amtrak's service area. Yet over some
75 percent of this extensive network only a single train a day (or less)
operates in either direction (Figure 2). Stations,
servicing facilities, and repair shops must be in place to allow passenger
access to trains and to keep the trains running.
These basic infrastructure elements are prerequisites of operation-whether one train or several is operated over a particular part of the network. Servicing a train at an intermediate stop may require upwards of a half dozen people, plus the normal station complement of ticket agent and baggage/express handlers. If only one train in each direction is operated, the full-time servicing crew may be engaged in work for only an hour or two each day. Multiply this scene across the network and the reasons behind high indirect costs become a little more clear. Simply put, the large physical plant costs are not offset by adequate revenue generation. The level of train service is extremely thin, and this of itself is the single most important element in the financial problem.
In comparison, no European railway main line sees less than several trains per day (Figure 3), even on long-distance routes in excess of 400 or 500 miles.