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Freakonomics Quorum: Can Amtrak Ever Be Profitable?
1/05/2012
By Stephen Smith
Read More: http://www.forbes.com/sites/stephen...mpaign=Feed:+MarketUrbanism+(Market+Urbanism)
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In many ways, Amtrak’s problems are bigger than itself. They have their roots in one of America’s most enduring trends, which is population dispersal – whether it’s westward state-funded canals and railroads during the early days of the republic, transcontinental railroads towards the end of the nineteenth century, or twentieth century automobile-based suburban and exurban sprawl. For transit of any kind to be truly revived, land use patterns will have to be significantly altered, along with some of the most important tenets of American culture.
- That said, the United States is taking tentative steps towards re-urbanization, and intercity travel is generally the most profitable kind of passenger rail (perhaps because there isn’t as much political pressure to cap fares). The consensus in the European Union and Japan is clearly in the direction of privatization. Even the privatization-averse Swiss Federal Railways aims for profits on its main intercity lines, while achieving remarkable gains in ridership over the past decade. Liberalization seems to be the future of intercity rail (to say nothing of the past), and there’s no good reason that American politicians shouldn’t begin the process towards privatization now.
- The process, however, will be a long one, with privatization being the end goal rather than the starting point. The first thing that must be done is not even management-related, but rather regulatory: the Federal Railroad Administration’s approach to rail safety must be radically restructured. The FRA can no longer be allowed to lag behind European and Asia regulators, foisting unrealistic and outdated safety mandates on all mainline passenger rolling stock in the US, from Amtrak trains to regional/commuter railroads. Our unique standards for bulk and other more technical aspects of rail car design should have been abandoned half a century ago.
- America’s FRA-compliant obese mainline trains are slower, more expensive, and less reliable than modern European and Asian designs. Getting this right is the most important step in the whole process, partly because it will help “commuter” services like the Long Island Railroad and Caltrain. Good intracity mass transit links are a key to good intercity rail, and FRA regulations are more onerous for commuter railroads than they are for Amtrak.
- Next, management must be given much more latitude when it comes to labor issues. They should be able and willing to negotiate (and risks strikes, if need be) over everything except wages and benefits, with the minor proviso that pensions may need to be reigned in. Managers must, however, be given control over work rules. A century ago, when railroading was a grueling and deadly profession, work rules were an essential negotiating point. But now they’re lucrative sources of indirect compensation, and ripe for featherbedding. There may come a point in the future when salaries and benefits should be negotiated down as well, but currently it’s a minor issue compared to work rule reform, and is not worth the political will it will take to tackle.
- Once management is empowered to take control of the organization, we should expect a better financial position, and it will finally be time to begin thinking about privatization. The reason deregulation must come first is that if we were to privatize Amtrak first, as Rep. John Mica‘s plan earlier this year would have had us do, the privatized firm would just face the same difficulties that Amtrak’s predecessors faced before nationalization in 1971.
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Are America's private railroading glory days gone forever?
1/05/2012
By Stephen Smith
Read More: http://www.forbes.com/sites/stephen...mpaign=Feed:+MarketUrbanism+(Market+Urbanism)
.....
In many ways, Amtrak’s problems are bigger than itself. They have their roots in one of America’s most enduring trends, which is population dispersal – whether it’s westward state-funded canals and railroads during the early days of the republic, transcontinental railroads towards the end of the nineteenth century, or twentieth century automobile-based suburban and exurban sprawl. For transit of any kind to be truly revived, land use patterns will have to be significantly altered, along with some of the most important tenets of American culture.
- That said, the United States is taking tentative steps towards re-urbanization, and intercity travel is generally the most profitable kind of passenger rail (perhaps because there isn’t as much political pressure to cap fares). The consensus in the European Union and Japan is clearly in the direction of privatization. Even the privatization-averse Swiss Federal Railways aims for profits on its main intercity lines, while achieving remarkable gains in ridership over the past decade. Liberalization seems to be the future of intercity rail (to say nothing of the past), and there’s no good reason that American politicians shouldn’t begin the process towards privatization now.
- The process, however, will be a long one, with privatization being the end goal rather than the starting point. The first thing that must be done is not even management-related, but rather regulatory: the Federal Railroad Administration’s approach to rail safety must be radically restructured. The FRA can no longer be allowed to lag behind European and Asia regulators, foisting unrealistic and outdated safety mandates on all mainline passenger rolling stock in the US, from Amtrak trains to regional/commuter railroads. Our unique standards for bulk and other more technical aspects of rail car design should have been abandoned half a century ago.
- America’s FRA-compliant obese mainline trains are slower, more expensive, and less reliable than modern European and Asian designs. Getting this right is the most important step in the whole process, partly because it will help “commuter” services like the Long Island Railroad and Caltrain. Good intracity mass transit links are a key to good intercity rail, and FRA regulations are more onerous for commuter railroads than they are for Amtrak.
- Next, management must be given much more latitude when it comes to labor issues. They should be able and willing to negotiate (and risks strikes, if need be) over everything except wages and benefits, with the minor proviso that pensions may need to be reigned in. Managers must, however, be given control over work rules. A century ago, when railroading was a grueling and deadly profession, work rules were an essential negotiating point. But now they’re lucrative sources of indirect compensation, and ripe for featherbedding. There may come a point in the future when salaries and benefits should be negotiated down as well, but currently it’s a minor issue compared to work rule reform, and is not worth the political will it will take to tackle.
- Once management is empowered to take control of the organization, we should expect a better financial position, and it will finally be time to begin thinking about privatization. The reason deregulation must come first is that if we were to privatize Amtrak first, as Rep. John Mica‘s plan earlier this year would have had us do, the privatized firm would just face the same difficulties that Amtrak’s predecessors faced before nationalization in 1971.
.....
Are America's private railroading glory days gone forever?
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