An Economic Fallacy: Long-Distance Trains Are Less Subsidized Than The NEC

On February 4, 2014, the United Rail Passenger Alliance (URPA) – a North American intercity rail advocacy group – released a report assessing Amtrak's FY 2013 metrics and concluding that unlike common perceptions, long-distance trains are more effective and less subsidized than Amtrak's Northeast Corridor (NEC) operations. (Take a look at Amtrak's numbers here, and our in-depth backgrounder on the NEC here).

First, we should be clear that RAIL Magazine is a strong proponent of all Amtrak services: NEC, corridor and long-distance. Your blogger has ridden several long-distance trains (Crescent, Lake Shore Limited, Vermonter, Capitol Limited, California Zephyr) and appreciates their value that's misunderstood by many: collections of smaller corridors that do very well despite limited resources.

Unfortunately, the central premise URPA's assessment is statistically misleading: the report argues that the distance one passenger travels is more important than the price one passenger pays. Essentially, it claims that if one passenger travels 1,000 miles and another travels 50, the 1,000 mile traveler means more. The reason why Amtrak doesn't base their operating budget on this is because the person who travels 50 on the NEC pays far more than the the person traveling 1,000 on a long-distance train.

Here's URPA's claim verbatim from the report: "the critical factor is that any passenger carrier, including Amtrak, exists to move people over distance. The best single measure of performance in this activity is "revenue passenger miles" (RPMs), not the simple number of sales transactions (ridership)."  

They base everything - everything! - on passenger miles traveled, not ridership. Yes, long-distance trains are less subsidized per passenger mile traveled. Quite the opposite is true per passenger carried.

A good analogy would be a passenger on an airline flight who claims that since a first class seat is empty after takeoff, they should just get to sit in it at coach fare. They don't understand the inherent economics of value pricing.

Just because there's empty seats on an NEC train doesn't mean that the train is losing money. Capacity does not automatically mean efficiency. URPA basically argues that since Amtrak's long-distance trains operate at or near capacity – which no one argues – that it inherently means that if there were more capacity, it would be met at a similar level. The report doesn't ask the question whether long-distance trains are meeting demand with the ideal amount of capacity. 

On page 6 of the report, URPA presents a apples-to-nothing comparison in regards to Amtrak's travel share on the NEC. While it claims that Amtrak only serves 2 percent of travel in the NEC (which they choose to define as all vehicle trips, including private automobiles), they never provide a similar percentage of traffic for intercity trains versus nationwide travel data. I haven't looked at the data, but I'd guess Amtrak's long-distance share of nationwide travel is infinitesimal. This is not even an apples-to-oranges comparison, but an apples-to-nothing measure. 

If Amtrak ran its books the way URPA thinks they should, there would be no more Amtrak, no more long-distance trains. The economic goal of transportation isn't to move one person the greatest distance. The economic goal is, in fact, to move one person the shortest distance for the greatest revenue.

The bulk of the report is a hack job on Amtrak and the NEC, hoping to raise suspicions by claiming Amtrak's data is unaudited. They scold Amtrak for making capital upgrades to the NEC while also not recognizing those capacity upgrades not only support the railroad's own NEC operations, but the vitality of the numerous commuter rail systems that utilize segments of the route. 

It's a real shame a group that claims itself to be advocates for intercity passenger rail spends the majority of its time attacking the nation's only intercity passenger rail provider. URPA seems to operate in a fantasy world where Amtrak has unlimited fiat over the freight railroads. We all know they don't. So, they're very limited in what they can do to make improvement to long-distance trains. The current struggles with both the Empire Builder (freight delays) and Southwest Chief (BNSF's planned decommissioning of the Raton Pass line) illustrate Amtrak's limited ability to make improvements on infrastructure it does not own.

UPRA often chooses to direct its fire at Amtrak rather than the real culprits: governments at all levels who refuse to make legislative and regulatory changes in favor of long-distance trains.   

In the meantime, how about celebrating that Amtrak - unlike VIA Rail and the Canadian federal government, which have been slashing intercity passenger rail across Canada - is not only maintaining and expanding its network, but also carrying more riders on all phases (NEC, corridor and long-distance) while reducing operating subsidies? To find that kind of productive advocacy, you may want to direct your attention to the National Association of Railroad Passengers.