Amtrak vs. Freight Railroads: Shippers, You Are Impacted!

Written by Jim Blaze, Contributing Editor
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A headline story says that U.S. Sen. Dick Durbin (D-Ill.) has introduced a bill that would allow Amtrak to sue the freight railroads for preventing Amtrak from meeting suitable on-time performance standards. The senator alleges, “By empowering Amtrak to hold the freight railroads accountable ... we can improve Amtrak’s on-time performance and save taxpayer dollars. The people of Illinois—and Amtrak riders nationwide—deserve assurance that they can arrive at their destination in a safe and timely manner.”

Realistically, the risk is that the freight shippers who use railroads will actually pay the price burden. Railroad companies could write penalty checks to Amtrak if this is enacted into law and then enforced. The theory of this column is that priority shipper freight will instead be delayed. That will be the price paid. Shippers, consider this brief as your alert message.

By the numbers, here are approximate ranges of delay costs that various train types face. It’s the theoretical time value, using logistics and time delay analytics. The numbers represent relative values (not absolute; do not take them to the bank):

COST PER HOUR OF TRAIN DELAY

  • Amtrak: $300
  • Amtrak Passenger: $30
  • General Merchandise Freight: $500
  • Customer Freight/General Merchandise Car: $50
  • Intermodal: $800
  • Customer Freight/Intermodal Unit: $150
  • Express Intermodal: $1,000
  • Customer High-Value/Intermodal Unit: $500

When broken into per-hour costs, the implied dollar spread shows that it is freight customers who pay fully allocated costs for all of the rail company track and dispatching capacity. Amtrak pays only a fractional percent of what we call avoidable railroad company costs. The Amtrak-estimated value of its long-distance trains has a relatively low delay time under these logistics assumptions.

What about Amtrak’s asserted profitability? Amtrak’s overall income statements reflect a continuing long-term “going concern” loss. Translation? Amtrak says it loses money on most of its intercity routes—even where its trains use the rail freight tracks at a discount price.

Said differently, as Amtrak approaches its 50th year of subsidized life, it’s still financially dependent upon a low track use discount price—a low price set by Congress for freight railroads as a condition of relief from those passenger train losses occurred a lifetime ago.

A lifetime ago? Yes. In economic terms, many economists consider 50 years to be “forever” from a risk analysis point of view. That part of the grand bargain a half-century ago? The part for Amtrak profitability? Never happened.

Only the discounted somewhat-ransom-like track use fee seems to live on.

What are the consequences if Amtrak wins its case? Freight railroad train dispatchers will have to put freight shipments “into the hold track.” Shippers actually will bear that delay cost. Are shippers paying attention?

The above costs are representative. Shippers, do you know what your delay costs actually are? How much delay might each of you be willing to absorb for Amtrak before you switch mode to truck?

Who is addressing these shipper-risk questions? Not Congress. Not the Surface Transportation Board.

Have the freight railroad companies discussed this potential exposure with their customers?

Agreed, the above represents contrarian thinking about Amtrak passenger train delay. Perhaps that’s exactly what’s needed before a policy or a legal decision gets made. We are talking about comparative logistics here.

Isn’t this shipper impact a bit aggressive? Not if your supply chain exposure is high. As a rail customer, have you assembled your delay cost numbers? Have you calculated your exposure?

Shippers, if you’re a major rail customer, you can’t depend on the above examples. You need real “inside numbers” arrayed against projected Amtrak delay dollars.

Protecting Amtrak as rail freight market share declines is the other side of this public policy issue. Back in 1970s, rail freight market share was arguably about 20% or more of tonnage and shipper freight payments, higher for some commodities like coal. But coal is clearly fading and a footnote to this report. Today, as Amtrak becomes more insistent on its track priority rights, the supporting freight customer share moved by rail is in some cases down to about 10%. For some of the highest-value freight shipments, like parcel express intermodal, it’s calculated by some experts at less than 3%.

Squeezing the freight railroads while they face such market shifts doesn’t seem like prudent public policy. Instead, why not invest government capital for building dedicated Amtrak train schedule recovery tracks (passing sidings and improved signaling).

The outlook for continued passenger train costs shifting to the rail freight carriers and their customers seems short-sighted. Shippers, it’s probably best that you not be just bystanders in this public policy struggle.

Independent railway economist, Railway Age Contributing Editor and FreightWaves author Jim Blaze has been in the railroad industry for more than 40 years. Trained in logistics, he served seven years with the Illinois DOT as a Chicago long-range freight planner and almost two years with the USRA technical staff in Washington, D.C. Jim then spent 21 years with Conrail in cross-functional strategic roles from branch line economics to mergers, IT, logistics, and corporate change. He followed this with 20 years of international consulting at rail engineering firm Zeta-Tech Associated. Jim is a Magna cum Laude Graduate of St Anselm’s College with a master’s degree from the University of Chicago. Married with six children, he lives outside of Philadelphia. “This column reflects my continued passion for the future of railroading as a competitive industry,” says Jim. “Only by occasionally challenging our institutions can we probe for better quality and performance. My opinions are my own, independent of Railway Age and Freightwaves. As always, contrary business opinions are welcome.”

Categories: Class I, Freight, Intercity, Passenger, Regulatory Tags: ,