All aboard the mass-transit express? Maybe, but don't expect a smooth ride. An interview with D.J. Stadtler, CFO of Amtrak.
Randy Myers, CFO Magazine
April 1, 2011
The idea that Acela service is "profitable" is absurd, because Amtrak doesn't charge it with the fixed costs associated with its operations or revenue. It's as if a bankrupt airline reported it was "profitable" but only so long as it wasn't counting its landing fees, gate rentals, heavy equipment maintenance, or amortization of initial capital investments. They would, like Amtrak, say, "We're profitable on operations" and sort of slide by the capital costs of their activities. Amtrak incurs losses in the NEC each year amounting to nearly a half billion (or more) dollars, which it doesn't charge against its NEC train operations, and even tries to hide from public disclosure and discussion. If these are taken into account, Acela has accomplished the rare feat of a negative rate of return on incremental invested capital, and that doesn't even account for the cost-free nature of Amtrak's capital, in its annual federal subsidy. Measured by transportation output (passenger miles) and ticket revenue achieved per dollar invested, it is by far the worst investment Amtrak has ever made. Amtrak's market share in the NEC (rather than the air/rail modal split that they like to report) is only about 1-1/2%, so at a cumulative public cost of more than $30 billion, Amtrak is still irrelevant to intercity mobility in the Northeast. The fact that Amtrak is also already heavily over-invested in the NEC is proved by the abysmal load factors it has there. Outside of the New York City commuter markets (Philadelphia-NY-New Haven), Amtrak's NEC and Acela load factors hover around 30%. They can't give away two-thirds of their inventory. And they still think it's a good idea to sink billions of new public dollars into these same over-developed, under-utilized, money-losing markets.
Posted by Andrew Selden | May 24, 2011 01:46 pm© CFO Publishing Corporation 2009. All rights reserved.