Some politicians, doctrinaire conservatives in particular, insist that passenger trains should be run with private capital, and government has no business subsidizing them. It's a strange concept since government helped the early railroads develop, providing land and even capital.
Since the days of the ancient Greeks, government has subsidized transportation, building lighthouses and roads, dredging rivers, and so on. Amtrak's critics ignore the hard fact that regularly scheduled passenger trains might have made money 100 years ago but can't today -- not just here, but almost anywhere in the world. The incredible passenger networks of Europe are government-subsidized.
The entire history of Amtrak is replete with examples of CEOs who have tried to get government to commit long-term funding for the company, only to be ignored. Unfortunatel y, all but David Gunn made a fatal mistake: They never told Congress Amtrak couldn't ever make money.
None the wiser, Congress has always expected a profitable company, and over the decades Amtrak's chief executives dutifully have talked of putting Amtrak into the black.
In the mid-1990s Tom Downs went so far as to declare that Amtrak was on "a glide path to profitability." His successor, George Warrington, went along with the dream, pouring so much money into schemes to raise earnings he blew away all the company's capital. In the end, just to meet the payroll, Warrington was forced to mortgage one of its most visible assets, New York's Penn Station.
"I doubt if anywhere it's sustainable," says Anthony B. Hatch, one of Wall Street's leading logistics analysts. "Even if you turn Amtrak to profitability it won't be enough," he adds. Hatch means that Amtrak cannot ever make enough to attract the capital it will need for new equipment. Even if load factors are increased and the trains make a profit, operating and maintenance costs will prohibit Amtrak from earning enough to attract investors and lenders and finance new equipment or expand services.
An airliner can make as many as six or seven trips a day, each flight producing more money for the airline, but, since it's slower, an intercity passenger coach often makes only one or two trips during the same 18 hours. Thus a train's ability to generate more revenue is limited. Higher fares might produce more revenue, but any fare designed to generate an adequate return would drive away customers.
So no matter what, government must belly up to the bar.
When David Gunn succeeded Warrington in 2002, he wasted no time telling Congress it had no clothes. "Amtrak will never be profitable," Gunn told a Senate hearing five weeks after taking office. Congress' mandate that Amtrak be in the black was, he dubbed, "an impossible goal."
Like all other modes of transportation, added Gunn, Amtrak will always need government dollars.
The sooner Washington accepts Gunn's warning, the quicker America will have better transportation.
Rush Loving Jr. is author of "The Men Who Loved Trains." He is a former associate editor of Fortune magazine and was chief spokesman for the Office of Management and Budget in the Carter White House. Business editor at The Times-Dispatch from 1965 to 1969, Loving lives in Baltimore. This column was part of a larger story, "Trains' Formula for Fixing Amtrak" that appears in the March 2009 edition of Trains magazine, online at www.trainsmag.com.
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