As America increasingly is sheltering in place, losing unprecedented numbers of jobs and retirement savings, fearful of COVID-19, and facing a stress level unfamiliar except to those who have endured war zones, Amtrak and its workforce face only unpleasant choices if the railroad and their jobs are to survive. Fare-paying passengers have vanished—almost entirely on Northeast Corridor Acela trains; significantly on all others.
“It is unprecedented in the railroad industry.”
Yet rather than follow the business school playbook of lopping jobs as if workers are disposable office supplies, Amtrak President Richard H. Anderson is ministering to his workforce, treating workers as family by making an extraordinary effort to protect their income stream and healthcare benefits. It is unprecedented in the railroad industry.
On a Friday, March 20, when hundreds of thousands of workers nationwide filed that week for unemployment benefits, Anderson held a dial-in town hall meeting to lay out a survival plan whose core is to avoid involuntary furloughs.
When the good times again roll—before COVID-19 Amtrak was reporting record revenue and ridership—the objective is that Amtrak’s almost 20,000 employees will rejoice that jobs and healthcare benefits were preserved. Call it his Sully moment, after US Airways pilot Chesley Sullenberger, whose 2009 “Miracle on the Hudson” saved 155 souls on board his crippled A320 aircraft.
Yes, Amtrak families will feel financial pain, beginning with reductions in non-agreement employee wages by between 7% and 22%; suspension of company matching contributions to 401(k) plans; encouragement that unpaid leave, uncompensated reduced hours and early retirement be taken voluntarily; and an end to all overtime. But there will be no pink slips for now, which elsewhere in America are darkening family futures as did locusts darken skies in the Book of Exodus.
“Much is dependent on enlightened labor leaders facing harsh reality with learned wisdom, rather than union hall polemics.”
Much is dependent on enlightened labor leaders facing harsh reality with learned wisdom, rather than union hall polemics. Anderson says Amtrak will meet the commitment in current labor agreements calling for a 3.5% wage increase July 1, but encourages labor leaders to consider delaying (not canceling) it until Amtrak riders return. A negative response could well upset the no-furlough objective. “General chairmen need to get engaged and figure out how to do this if we are to avoid an involuntary furlough, given that we don’t have any business anymore,” Anderson said.
For sure, Anderson, a lame-duck CEO who officially retires April 15, has won no popularity contests for a variety of managerial decisions during his three-year tenure at Amtrak, such as reducing food service and seeking to curtail long-distance routes.
“The past is best left dormant when a crisis descends.”
The past is best left dormant when a crisis descends, as its solution truly takes a village, meaning all hands wisely focused on the present and future survival of the company. Without Amtrak’s survival, there are no future paychecks, no healthcare benefits and no jobs.
Said Anderson during the town hall call-in, “We have been through a lot of tough times with Amtrak—from host railroads that want to put us out of business, to Presidents who don’t want to fund us, to Congress that doesn’t always want to properly fund us, and to states and private companies that would like to take over our services.” Nothing has challenged Amtrak as has COVID-19.
Anderson, who for three years has voluntarily worked without an Amtrak paycheck, will remain through year-end as an adviser to incoming CEO William J. Flynn, who was hired at $475,000 annually, but told Anderson March 20 he, also, would work without pay so long as other Amtrak employees endure some level of paycheck reduction.
Notably, if the focus is properly narrowed to qualifications to lead an enterprise in severe peril, Anderson’s background is prototypical. Previously, he was CEO of Delta Airlines, which after weathering the horrors of “9/11” and subsequent bankruptcy, emerged even stronger. “On 9/11, we knew specifically what the root cause of the problem was at the time, [and] the transportation system recovered fairly quickly,” Anderson said, in contrast to the current situation. “In this instance, we don’t have clear direction of what the end point of the coronavirus is.”
While Flynn has rail and maritime executive experience—CSX and Sealand Services—his under-fire management DNA is not dissimilar to Anderson’s, having stabilized and strengthened Atlas Air Worldwide Holdings after leading it out of bankruptcy during his 13 years at the helm.
“For Amtrak today, the riders on many trains are fewer, and forget the mail.”
The undeniable and exacting reality facing Amtrak now and into the foreseeable future is the horrendous unsustainable that songwriter Steve Goodman popularized with his 1971 “City of New Orleans” lyrics—“15 cars and 15 restless riders, three conductors and 25 sacks of mail.” For Amtrak today, the riders on many trains are fewer, and forget the mail.
Amtrak now projects losing $1 billion in revenue through Sept. 30, simply because Americans have been told by their federal and state governments, healthcare experts and common sense to stay home. Acela ridership is down 92%, reservations for Acela are down 99%, and long-distance bookings are down 64%. “Those numbers will worsen” as more government restrictions are put in place, Anderson said.
“Projects or ideas for discretionary money end right now.”
Yet Amtrak has been designated by the Department of Homeland Security a “critical infrastructure asset.” Some trains must run now, more in the future, and to assure they do, the day-to-day struggle continues to keep Northeast Corridor bridges, catenary, signals, track and tunnels in a state of good repair. “We will spend capital to keep the existing Baltimore tunnel operating safely and reliably,” Anderson said. “But there will be no more spending on designing a new tunnel a decade away. Projects or ideas for discretionary money end right now.”
Not mentioned was Amtrak’s reported February co-signing of a $1 billion Railroad Rehabilitation and Improvement Financing (RRIF) loan application tied to proposed new Hudson River tunnels as part of the Gateway Program, and on behalf of real estate developer Related Companies. Amtrak also would be on the hook for almost $400 million in construction costs for Related’s Hudson Yard skyscraper project. Related CEO Stephen Ross is a major Trump donor, and along with Trump son-in-law Jared Kushner, according to Vanity Fair magazine, is a significant user of a controversial federal program (EB-5) granting foreign nationals permanent visas in exchange for substantial equity investments at low interest rates. Speculation is that the co-signing with Related is an attempt to reverse Trump Administration opposition to Gateway. The Department of Transportation administers the RRIF program.
As for Amtrak’s current travails, Anderson said the railroad is in line for a $500 million congressional grant in the first of expected stimulus measures intended as a financial bandage through June. Estimates of initial federal stimulus to assist all manner of companies and individuals adversely affected by the COVID-19 crisis are near $2 trillion, say congressional sources—on top of an already $1 trillion federal budget deficit even before the economy tanked. How much more can be afforded—or unafforded, for that matter—before inflicting even more long-term economic harm on the nation is unknown, as so unprecedented and uncharted is this crisis of which Amtrak is but a miniscule part.
“By any measure, the economy is in recession. We can’t just count on Congress to close our gap.”
Although Anderson said Amtrak has more than $3 billion in cash on hand, there remain operating expenses, capital projects that cannot be put on hold owing to their criticality to keeping trains moving, and principal and interest to be paid on existing loans. At least $1 billion in cash will flow out the door in currently anticipated losses through Sept. 30, with no assurances of future federal or state bridge loans or grants, and no timeline on the end of the crisis. “By any measure, the economy is in recession,” Anderson said. “We can’t just count on Congress to close our gap.”
Part of that gap will be closed, Anderson said, by first cutting service. “There is no point in operating empty trains. We have reduced Northeast Corridor service by 40%, and are contemplating stopping Acela service because we don’t have anyone riding those trains. We have 10 routes running on reduced schedules and are working on further cuts.”
DOWNLOAD AN AMTRAK INTERNAL MEMO ON TRAIN CANCELLATIONS
While Anderson said the long-distance network is “intact,” some 40% of the seat capacity will be pulled from consists, he said, which will mirror the 64% reduction in ridership that is expected to decline further. “We need to be aggressive in preserving our cash,” he said.
“I’m certain that the long-distance network will be very different longer term,” Anderson said. “Over the past three or four years, it has taken more than $2.5 billion of federal money to keep the long-distance network operating, and if we don’t have the subsidy from the Northeast Corridor and state [supported corridor] trains bearing their share of the national network, the loss gets that much bigger.”
“Emotions run strong when the long-distance network is discussed, but ridership numbers are telling.”
Emotions run strong when the long-distance network is discussed, but ridership numbers are telling. In reporting record 32.5 million ridership for the fiscal year ending Sept. 30, 2019, the long-distance ridership was but 4.5 million on 15 long-distance trains—less than 15% of total ridership. Of those riders, only 3% actually rode end-to-end.
Calling these actions at preserving cash “demoralizing,” Anderson said, “It would be more demoralizing if we had to tell people they don’t have a job anymore, and that’s what we are working to avoid. If we just stood here and didn’t do anything, and one day in July or August we told everybody that the company was near liquidation and that we were going to lay off 10,000 or 15,000 people, that would be far more demoralizing. That would be irresponsible.”
“We can’t force our customers to get on our trains. That’s reality.”
“We can’t force our customers to get on our trains,” Anderson said. “That’s reality, and we best face reality and make the very best we can, be calm about it, do what we have to do, and position Amtrak to come back strong when we are on the other side of the pandemic.”
Capitol Hill Contributing Editor Frank N. Wilner is author of “Amtrak: Past, Present, Future,” available from Simmons-Boardman Books, 800-228-9670, www.transalert.com. Wilner earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been Assistant Vice President Policy at the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and Director of Public Relations for the United Transportation Union.
Wilner is a past president of the Association of Transportation Law Professionals. He drafted the railroad section of the Heritage Foundation’s Mandate for Leadership (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.