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AMTRAK: the National Railroad Passenger Corporation

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AMTRAK: the National Railroad Passenger Corporation Amtrak Amtrak The National RaUroad Passenger Corporation George ~ HUton American Enterprise Institute for Public Policy Research Washington, D.C. George W. Hilton is professor of economics at the University of California, Los Angeles, and an adjunct scholar of the American Enter­ prise Institute. Library of Congress Cataloging in Publication Data Hilton, George Woodman. AMTRAK: the National Railroad Passenger Corporation. (AEI evaluative studies in economic policy) (AEI studies; 266) 1. Amtrak. 2. Railroads-United States-Passenger traffic. I. Series: American Enterprise Institute for Public Policy Research. AEI evaluative studies in economic policy. II. Series: American Enterprise Institute for Public Policy Research. AEI studies; 266. HE2583.H54 385'.22'0973 79-25118 ISBN 0-8447-3369-5 AEI Studies 266 © 1980 by American Enterprise Institute for Public Policy Research, Washington, D.C. All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from the American Enterprise Institute except in the case of brief quotations embodied in news articles, critical articles, or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. "American Enterprise Institute" and @) are the registered service marks of the American Enterprise Institute for Public Policy Research. Printed in the United States of America CONTENTS 1 THE LIFE CYCLE OF RAIL PASSENGER SERVICE 1 AMTRAK'S STATUTORY AUTHORITY AND 2 PLANNING PROCEDURES 15 The Initial Planning Operation 18 Revisions in the Statutory Authority 21 3 AMTRAK'S OPERATING EXPERIENCE 32 Demand Conditions 36 Fare Policy 42 Cost Conditions 43 Comparisons with Rival Carriers 52 Financial Experience 59 4 EVALUAnON OF THE AMTRAK PROGRAM 62 Impact on Rival Carriers 67 Conclusion 75 1 The Life Cycle of Rail Passenger Service The National Railroad Passenger Corporation, established by Congress in 1970, began operating a federal network of intercity passenger trains the following year. Amtrak, as the corporation came to be called, was Congress's response to forces that threatened the imminent extinction of intercity rail passenger service in America. As such, it was a new departure in public policy: never before had Congress directly intervened in the economy to save a service that was being replaced by alternatives. The life cycle of rail passenger service had approximated the standard pattern of output of industries over their life cycles. l Most early railroads were built with the expectation of moving passengers and agricultural products to and from steamboats on the East Coast, the Great Lakes, or the inland river system. In the first half of the nineteenth century, it had generally been believed that the advantages of steamboats in both cost and quality of service would make them the country's dominant mode of passenger and freight transport indefinitely. However, with the completion of the main lines of the Pennsylvania and New York Central railroad systems between East Coast ports and Chicago in the 1850s, this belief began to be ques­ tioned. The introduction of sleeping cars, dining cars, steel underframe equipment, and train vestibules in the second half of the century gave the passenger train a definite superiority over the steamboat for long­ distance travel. By 1900 the railroad train had attracted the great majority of long-distance passengers, drawing them from inland river packets in particular. 1 On the ubiquity of a pattern of increase in output at an increasing rate, in­ crease at a decreasing rate, decrease at an increasing rate, and decrease at a decreasing rate, see Walther Hoffman, British Industry, 1700-1950 (Oxford: Basil Blackwell,1955). 1 The passenger train probably reached its peak share around the mid-1890s when it is thought to have provided some 95 percent of intercity trips. In 1887-1888 Frank J. Sprague perfected the electric street car, thus providing the first technology that could compete for significant numbers of railroad passengers. In the form of rural trolley lines in New England, electric railways began diverting short-distance passengers from the railroads soon afterward. And, mostly after 1899, the interurbans-more substantial, higher speed electric railways­ began proliferating in the Midwest and elsewhere.2 However, these carriers, which did not prove successful in the long run, merely slowed the rate of increase in railroad passenger volume. Both passengers and passenger-miles on the railroads peaked just after World War 1. In 1920, as table 1 indicates, the railroads carried approximately 1.27 billion passengers for a total of 47.4 billion passenger-miles. That year saw the highest volume in railroad history. The pro­ liferation of automobiles and the development of a federal system of hard-surfaced highways in the 1920s brought the automobile within a single decade to domination of intercity passenger transport, a pattern that has persisted ever since. By 1929 the railroads had lost 38.1 percent of their passengers and 34.3 percent of their passenger­ miles. Short-distance passengers converted to the automobile more rapidly than long-distance. The motor bus, too, which made its first significant inroads into railroad passenger volume in this period, originally carried mostly short-distance passengers. Consequently, the average distance of railroad trips rose continuously as the decline progressed. In 1929 the passenger train still dominated the long­ distance common carrier market so overwhelmingly that it was almost universally expected to survive indefinitely. Most long-distance trains remained profitable-enough so that although many local trains experienced losses, rail passenger operations as a whole were profitable through 1929. The Great Depression introduced a cyclical element that aggra­ vated the secular forces operating against the passenger train. At the beginning of the Depression in 1930, passenger service began to produce a net deficit for the railroads. By 1933 the number of pas­ sengers had fallen to 435 million and passenger-miles to 16.4 billion, only a third of the 1920 levels. An improvement in business conditions in the second half of the 1930s combined with the introduction of lightweight, streamlined, and air-conditioned equipment, improve­ ments in schedule speeds, and the introduction of the diesel locomotive 2 See George W. Hilton and John F. Due, The Electric Interurban Railways in America (Stanford, Calif.: Stanford University Press, 1960). 2 TABLE 1 OUTPUT AND FINANCIAL PERFORMANCE OF AMERICAN RAILROAD PASSENGER SERVICE, 1920-1970 Passenger Deficit as Net Revenuea Percentage Passengers Passenger-Miles (thousands of Freight Year (thousands) (thousands) of dollars) Net Revenue 1920 1,269,913 47,369,906 1921 1,061,131 37,705,737 1922 989,509 35,811,046 1923 1,008,538 38,294,178 1924 950,459 36,368,290 1925 901,963 36,166,973 1926 874,589 35,672,729 1927 840,030 33,797,754 1928 798,476 31,717,566 1929 786,432 31,164,739 1930 707,987 26,875,642 1931 599,227 21,933,345 1932 480,718 16,997,426 1933 434,848 16,368,635 1934 452,176 18,068,635 1935 448,059 18,509,497 1936 492,493 22,459,781 -233,327 26.2 1937 499,688 24,695,214 -241,591 29.2 1938 454,508 21,656,918 -255,263 40.8 1939 454,032 22,712,941 -250,934 29.9 1940 456,088 23,815,598 -262,058 27.8 1941 488,668 29,406,250 -226,029 18.5 1942 672,420 53,747,029 89,329 1943 887,694 87,924,994 279,790 1944 915,817 95,662,501 234,103 1945 897,384 91,826,353 230,060 1946 794,824 64,753,699 -139,736 18.4 1947 706,551 45,972,245 -426,526 35.4 1948 645,535 41,224,319 -559,782 35.9 1949 556,741 35,133,300 -649,627 48.6 1950 488,019 31,790,470 -508,508 32.9 1951 485,468 34,640,031 -680,822 41.9 1952 470,979 34,033,245 -642,390 37.3 1953 458,252 31,678,951 -705,538 38.9 1954 440,770 29,309,861 -669,533 43.4 (Table continues on next page) 3 TABLE 1 (continued) Passenger Deficit as Net Revenuea Percentage Passengers Passenger-Miles (thousands of Freight Year (thousands) (thousands) of dollars) Net Revenue 1955 433,308 28,547,877 -636,693 36.1 1956 429,994 28,215,728 -696,938 39.5 1957 412,625 25,914,446 -723,483 44.0 1958 381,623 23,295,262 -591,543 35.7 1959 353,647 22,074,718 -523,692 32.8 1960 327,172 21,284,084 -466,289 32.9 1961 318,359 20,308,444 -390,495 29.7 1962 313,084 19,926,466 -374,993 25.2 1963 310,999 18,519,049 -378,618 23.7 1964 314,386 18,271,322 -389,008 23.7 1965 305,822 17,161,776 -398,029 21.6 1966 307,530 17,162,776 -379,744 19.5 1967 304,028 15,264,172 -460,414 26.9 1968 301,372 13,163,541 -462,129 25.8 1969 301,673 12,213,983 -437,498 24.4 1970 289,469 10,785,746 -449,579 26.2 a The ICC did not separate passenger and freight net earnings before 1936. SOURCES: Interstate Commerce Commission, Statistics of Railways in the United States; Transport Statistics in the United States; James c. Nelson, Railroad Trans­ portation and Public Policy (Washington, D.C.: Brookings Institution, 1959). to raise passenger volume during that period. Output apparently stabilized at about half the passenger-miles of 1920, but the passenger deficit also stabilized in the vicinity of $250 million per year.3 World War II brought the second major reversal in the secular decline of rail passenger traffic.
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