Amtrak and the $16 Hamburger

Amtrak logo
Amtrak changed its logo in 2000 from the “pointless arrow” to the “fancifal splotch.”

What are we going to do with Amtrak? Over the past three decades since the rail line was formed as the “for-profit,” government-owned National Railroad Passennger Corporation, it has lost money year after year – all the while taking in more than $25 billion in government subsidies.

I’d be the first to admit that along Amtrak’s passenger routes are some of the most beautiful scenery one could ever hope to see. I’ll never forget a train trip my wife and I once took from Minneapolis-St. Paul to Seattle and back. The Empire Builder route travels across the plains of North Dakota where the cloud-to-ground lightning at night was a sight to see. And the trek through Glacier National Park and the Cascade Mountains of Washington State was equally memorable.

Of course, the price of our train tickets didn’t begin to cover what it actually cost to have us travel on the Amtrak train.

At the other end of the country, I enjoy taking jaunts to New York City from Wilmington, DE. It’s reasonably quick, it means I don’t have to face traffic jams on the New Jersey Turnpike, and it gets me into the middle of Manhattan without having to worry about parking (or the Holland Tunnel for that matter).

[I will say that seeing the “wonders” of post-industrial North Philadelphia and Chester along the train route to NYC is distinctly different than taking in the vistas of the Rocky Mountains!]

But the same question arises here as well: How much is the government kicking in for each ticket that I buy? We may not know that answer, but we do know how much Amtrak is losing on every hamburger they serve on the train.

It costs AMTRAK ~$16 to make a hamburger which is sold on the train for $9.50 … and the taxpayers cover the difference.

It’s one thing to lose money on the transportation service. But to lose money on the foodservice as well is … hard to swallow. Hungry customers trapped on a train with nowhere else to purchase food – how difficult can this be?

In the tortured reasoning of Amtrak, if the train doesn’t serve food, fewer people will ride, thus causing a further reduction in operating revenue.

But here’s the rub: Amtrak ridership in 2011 increased ~5% over the previous year. But operating losses went up four times as fast (~20% over the same period) to more than $900 million.

So isn’t this rich: Amtrak has a business plan that doesn’t work whether ridership goes up or down. 

And another thing:  I wonder if contracting out foodservice to a private entity has even been considered?

In the great tradition of the government jumping into commercial ventures — and then messing it up big-time when it comes to efficiency, the intent was to structure Amtrak so it would deliver a service that would be profitable while also serving the public interest.

And the U.S. Congress has gone back to the well numerous times to “tweak” and “adjust” the program so that it does just that.  For example, the Amtrak Improvement Act of 1981 prohibits the government-owned company from selling food products at a loss.  (Not that this has had any noticeable impact.)

Additional legislation passed in 1997 “mandated” a path to profitability for Amtrak – but with no specific changes to train routes, ticket pricing, employee head-count or wages outlined.

The way I see it, the abysmal performance of government-owned Amtrak is a direct consequence of several factors:

  • High overhead costs
  • Federal bureaucracy
  • Lack of agility and nimbleness
  • Lack of market incentives

It becomes all too tempting to overlay the Amtrak experience onto what will likely happen in other areas where the government has stepped in to regulate activities – like in health insurance exchanges, health care costs and quality of care.

But, you know, if there are problems that arise with healthcare, we can always pass supplemental legislation to “fix it” – just like we did with Amtrak in 1980 and 1997.

And that will solve everything.

3 thoughts on “Amtrak and the $16 Hamburger

  1. Everything you say makes sense, but it could be far worse …

    Consider SRT (State Railway of Thailand). It loses US$ 245 million a year with just 2,550 miles of (narrow gauge) track. Amtrak’s network is over 8 times longer at 21,000 miles, so SRT’s losses are ~35% higher than Amtrak’s per mile of track.

    Passenger trains are ancient, lack air conditioning (a must in this part of the world), and have a habit of derailing at alarming frequency, with attendant loss of life. Railroad crossing barriers are hand-operated.

    Food service? Forget it.

    There’s really only one factor explaining SRT’s dismal “track” record: corruption. It is said that for every 10 tanker cars of fuel supplied to SRT, vendors have to deliver an extra one (for free) to SRT’s directors. The union will not consider any attempts at restructuring or privatizing operations.

    I’m not trying to take the heat off Amtrak, just trying to put things into perspective …

  2. Not only are there no market incentives, there is no competition. Ergo, there is no need for efficiency.

    So it is with government.

  3. Are we on a role or what?

    I was going to suggest that the DoD is a money-losing operation as well when Nelson uttered the “C” word. Ask the GSA what happens with any government contract. How many people will sit out their time to retirement while one lifts a shovel?

    But the cry to get government out of business may miss the point because the corporatization of government may be a more heavily contributing factor than the Libertarians’ pet peeve. And then, who is who? Isn’t it a merry money polyamory where everyone is on the take.

    Finally, do I need to buy a cling-wrapped whitebread sandwich in Roseburg, OR that was shipped in a ‘refer’ from Cincinnati, OH? And perhaps there is a question to investigate about the relationship between the high price of transportation logistics, the $16 hamburger, and Amtrak’s bottomless deficit pit.

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