When Amtrak said last month that it may be forced to “suspend all of its money losing routes in October,” it released a list of 18 unprofitable long-distance trains that it threatens to drop.

The list was way too short.

That’s because every regular Amtrak route lost money last year, according to an internal Amtrak document obtained by TRAINS.

While that’s not surprising – rail advocates have said for years that passenger trains don’t make money – it contradicts Amtrak’s repeated claims that some routes are profitable, and that the railroad uses those profits to cross-subsidize its unprofitable long-distance trains.

The figures obtained by TRAINS, which show all above-the-rail costs, also call into question Amtrak’s rationale for service cutbacks. As a whole, the long-distance network was the railroad’s biggest money-loser in the year ending September 30, 2001, the figures show. (Click here to see the financial performance of Amtrak routes in 2001.)

But several long-distance trains on the chopping block posted operating ratios that were lower than some regional routes that have not been publicly targeted for cutbacks.

The best-performing long-distance train last year was the Empire Builder, which had a 2.03 operating ratio (expenses divided by revenues). The Silver Meteor and Southwest Chief weren’t far behind, posting operating ratios of 2.15 and 2.16, respectively.

The trio is among those on the Amtrak hit list. Yet regional services with higher operating ratios – Hiawathas (2.24), Chicago-St. Louis (2.66), and Chicago-Detroit (3.54) among them – are not.

Certainly the Builder, Meteor, and Chief had far more red ink last year. They lost a combined $164.2 million, vs. the combined $59.3 million lost by the Hiawathas, Chicago-St. Louis, and Chicago-Detroit corridors, the Amtrak figures show.

But that’s not the point, Amtrak critics say, because of the railroad’s cross-subsidy claims and the notion that Amtrak is supposed to operate a national system.

"These numbers show that Amtrak has been caught with its hand in the Enron cookie jar," says Frank Wilner, author of The Amtrak Story.

Profitability hinges on which costs are measured

Amtrak says it uses a different definition of profitability and maintains that it has been up front about the costs and needs of the system.

"We have profitable services in the Northeast Corridor," Amtrak spokesman Bill Schulz says.

The way Amtrak calculates profitability – it doesn’t factor in costs such as depreciation and interest expense – Metroliner/Acela Express and the Heartland Flyer turned profits in 2001. Metroliner/Acela Express earned $64.1 million profit, Amtrak claims, while the Heartland Flyer’s profit was $600,000.

Curiously, an Amtrak Reform Council report that relied on Amtrak data reached the same conclusion, but produced a lower profit figure for Metroliner/Acela Express: $51.3 million.

In fact, the internal Amtrak document, the ARC report and Amtrak’s Route Profitability System figures all differ. Amtrak Intercity, for example, lost $788 million last year based on the full cost figures obtained by TRAINS. ARC’s analysis pegged the loss at $581 million. And the figures Amtrak releases to Congress and the public show a $410 million loss for Intercity.

Confusing? You bet.

"That’s what the Amtrak Reform Council was so frustrated about," says its chairman, Gil Carmichael. "We couldn’t really determine what the operating company’s cost is. The sad thing is, Amtrak doesn’t have to operate that way."

After three years of seeking answers about Amtrak’s cost structure, the reform council came up empty. "We still don’t know how many people it takes to run the operating company and how much money they need for that," Carmichael says. "And we don’t know how many people it takes to run the Northeast Corridor infrastructure, or how much money it takes."

So Carmichael threw in the towel.

"I gave up two years ago trying to analyze Amtrak’s finances," he says. "I realized they just do not keep books like a corporation. They’re neither fish nor fowl – they’re not a federal agency and they’re not a corporation. The data that we’ve got right now is just not reliable in any way."

Cross-subsidization may pit east vs. west

Ross Capon, executive director of the National Association of Railroad Passengers, notes that Amtrak does plow profits from other lines of business, such as commuter contracts and Mail and Express, into its money-losing train operations.

"One part of the answer, I think, is they cross-subsidize from profitable enterprises, which is not always train operations," Capon says. "Another point that was explained to me is that … if you exclude depreciation, progressive overhaul funding and excess Railroad Retirement funding, the Northeast Corridor is profitable."

But when Congress is embarking on a debate over passenger rail and its costs, shouldn’t the entire price tag be included? Carmichael thinks so, although he doubts Amtrak can ever produce actual cost figures.

Wilner says Amtrak frequently uses different accounting definitions. "When they report to Congress on their expenses, they ignore depreciation to try to look more profitable," he says. "When they send bills to states for Amtrak service, they include depreciation."

Even if Metroliner/Acela Express and the Heartland Flyer are deemed profitable using Amtrak’s definition, that doesn’t appear to fit with the railroad’s February 1 assertion that it would be forced to drop all of its money-losing routes if its annual appropriation wasn’t doubled to $1.2 billion from $521 million.

Amtrak has been "straight and transparent about the cost of the system" under outgoing President and CEO George D. Warrington, Schulz said. "We’ve tried at all times to be very honest and clear about the popularity of and need for service, as well as the economics of passenger rail," he said.

The economics of long-distance trains, Schulz said, mean that a $200 million cross-subsidy will be required to keep them running beyond September.

Amtrak Reform Council member James Coston says cross-subsidy is a "dangerous" and misleading term. "There’s no such thing," he said. "All trains lose money, just like all airports and highways."

And by claiming it cross-subsidizes long-distance trains, Amtrak pits the Northeast Corridor against every other region in the country.

"The geographic disparity is something that Amtrak tries to hide, but it’s right out there," Coston says.

Indeed, two weeks ago Sen. Patty Murray, D-Wash., questioned why the West Coast’s blossoming passenger network is heavily state-subsidized, when Northeastern states contribute nothing to the Northeast Corridor.

"The states that currently enjoy the best rail service and put up none of their own money will continue to enjoy that service while the rest of the country will have to do without," Murray said of Amtrak’s cutback strategy. "I intend to have some say in how Amtrak gets funded next year, and I don't intend to play by those rules."

Cutting trains won’t offset all losses

Considering its worsening budget situation and inadequate federal operating and capital support, few would argue that Amtrak can get by without cutbacks or new federal spending.

After all, the railroad lost a record $1.1 billion last year despite earning record revenues, and there is concern that Amtrak may run out of money before the end of the fiscal year in September.

But there is disagreement over how Amtrak is making cuts.

Coston says Amtrak’s decisions are based more on politics than transportation or financial needs. "It’s a strictly political mindset, and they’re trying to get as much political juice as they can," he says.

The long-distance cutbacks would affect every state on Amtrak’s route map – and therefore as many congressional districts as possible – while also appearing to make a substantial dent in Amtrak’s losses.

"They identified what looks to be a major source of potential savings…but it just doesn’t buy you very much in terms of cost savings," Coston says of Amtrak’s plans to drop the 18 long-distance trains. "The numbers are so much higher than the biggest sinkhole, which is the Northeast Corridor. The math as Amtrak presents it just doesn’t add up."

Coston, an attorney from Chicago who is considered a potential candidate to replace Warrington, says he supports the Northeast Corridor because it’s a vital piece of the transportation picture.

"But ownership of the Northeast Corridor is what’s been dragging Amtrak down for all these years," he says, citing its massive capital improvement needs and years of deferred maintenance.

The Northeast Corridor product lines lost more than $368 million last year, according to the Amtrak figures obtained by TRAINS.

The Amtrak Intercity losses – whether $788 million, $410 million, or somewhere in between – can’t be completely offset by cutting the 18 long-distance trains.

Amtrak won’t save that much because the railroad would still have system-related costs to bear, says Anthony Haswell, who founded the National Association of Railroad Passengers and helped frame the 1970 legislation that created Amtrak.

Since Amtrak says it needs a $200 million subsidy to continue long-distance trains beyond October 1, Haswell figures that’s about how much Amtrak estimates the route cutbacks would save.

But Haswell says "a lot more investigation is necessary." Last year, Haswell filed suit in federal court to force Amtrak to release detailed route-by-route financial information that breaks down the train-, route- and system-related costs of each train. After arguments are heard, the suit likely will head to a judge in May or June, he says.

Why the numbers matter

Such detailed information is necessary, Haswell contends, if Congress and the public are to make an informed decision about how to reshape the national passenger rail system.

The data would help Congress determine how much corporate overhead is shifted to long-distance trains. Some sources claim, for example, that the cost of Amtrak’s 500-person professional engineering department – which is responsible mainly for the Northeast Corridor – is allocated to long-distance trains that never turn a wheel on the corridor.

Haswell is not alone in his belief Amtrak needs to open its books further.

DOT Inspector General Kenneth Mead this month said Congress should ask Amtrak to develop fully allocated cost estimates for its routes. He also urged Congress to ask Amtrak to explain how it arrived at the $200 million figure it claims it needs for continued long-distance service, plus show how it derived the cross-subsidy claims. Schulz said Amtrak officials met with the inspector general’s staff last week to go over those financial details.

Mead says that even if Amtrak’s appropriation is doubled next year it still may not be enough to keep the railroad moving. And many rail advocates echo Mead’s assertion that a focus on Amtrak’s financial plight diverts attention from the real issue: What type of rail system does the public want, and how should it be funded?

Coston says the public clearly wants a modern, well-funded passenger system. Amtrak’s increasing ridership proves that.

"The debate shouldn’t be about whether the operating ratio is 2.3 or 2.1," Wilner says. "We know that intercity rail transportation cannot earn a profit. Past and current Amtrak management wrongly led this country down that path."

And misleading Congress – such as contending it was on a "glidepath to operational self-sufficiency" last year, then crying poverty this year – has eroded Amtrak’s credibility, Coston says.

"I think it has a real credibility problem," he says. "Congress is skeptical of what Amtrak says."

Rep. Don Young, R-Alaska, made that clear at a hearing this month, when he wondered aloud how Amtrak could say it was nearing operational self-sufficiency when watchdogs said its financial position was worsening.

"At a minimum, this raises serious questions about Amtrak’s candor and credibility," said Young, chairman of the House Transportation and Infrastructure Committee. "While suddenly discovering that it cannot meet the self-sufficiency deadline, Amtrak has begun to point fingers at virtually everyone but its own company."

Meanwhile, Amtrak says too much is being made over the proposed loss of 18 long-distance trains.

"It is possible to get too wrapped around the axle of the long-distance service being on the chopping block as an action independent of other actions," Schulz said.

The mandatory 180-day notification process for route eliminations required that Amtrak announce the potential long-distance cutbacks. But that doesn’t mean that other service won’t be dropped, as well, if Amtrak’s appropriation is insufficient, Schulz said.

Service cutbacks, as opposed to route elimination, can be made on much shorter notice within 30 days of Amtrak receiving its appropriation, he explained. So if those cuts become necessary, they will happen after the appropriations process is complete.

"Amtrak remains very much committed to serving a national network," Schulz said. The proposed long-distance cutbacks are "not what the company wants to do. It’s exactly opposite of what the company wants to do. We very much want to continue to operate today’s network in 2003."

Whether that comes to pass will be up to Congress and the Bush administration, which has yet to formulate a plan for passenger rail.