Even during the golden years when the railroads carried 25% of all intercity trips the profits were never really in hauling passengers as freight was the big money maker. Most railroads turned their passenger trains over to Amtrak in 1971 for a reason – the trains were losing lots of money. The railroads were paying high taxes on their private infrastructure (stations and terminals), along with the high cost of maintaining tracks for high-speed passenger operation. In addition, the railroads faced taxpayer-subsidized competition from highways and airlines that drove many of the private passenger routes out of existence.
Many of the factors that drove private industry out in the late 1960s and early 70s still exist to this day. The business of operating passenger trains in the U.S. was and continues to be a difficult business proposition as Amtrak continues to face stiff competition from taxpayer-subsidized highways and airlines (airports). Gasoline for automobiles is still relatively inexpensive and highways continue to receive hundreds of billion of dollars in yearly taxpayer subsidies, along with airlines and their taxpayer-funded airports and air traffic control.
Currently Amtrak’s Northeast Corridor makes money above the rails (positive contribution) and most all other services operate at a loss. The Northeast Corridor is not profitable in a business sense as it is generally undercapitalized by at least $2 billion per year (Amtrak’s own figure), but the revenue received exceeds the direct cost of operating the trains by about $500 million per year. The state-supported trains come close to breaking even with about a $50 million year loss. However, the biggest money losers are the long-distance trains with an aggregate yearly loss of about $500 million per year. Basically the NEC’s contribution is erased by the long distance losses. The long-distance trains are certainly well patronized and they are operated in a relatively more efficient manner than what the railroads ran, but in general the cash cost of operating a cross-country train is double what is received in ticket revenue. You can kind of get a sense of why Amtrak (and Congress that funds them) have been so hesitant about expanding the national system.
I’ll talk about some ideas to increase revenues/lower costs in a future blog post.