Editor’s Note: This article originally appeared on this platform on February 4, 2021. It has been updated for content and photographic illustrations added. – Corridorrail.com Editor
By J. Bruce Richardson, Corridor Rail Development Corporation; June 9, 2022
In 1970, in the middle of Richard Nixon’s first presidential term, American railroads made a deal with the Devil to rid themselves of the current and potential ongoing losses attributed to passenger trains. Amtrak was possible because of the deal with the Devil. Today’s Amtrak under President and CEO Stephen Gardner has managed to demonstrate many worse possible scenarios mimicking what the railroads were doing in the 1960s to convince the Interstate Commerce Commission that passenger trains were bad and freight trains were good leading to the creation of the National Railroad Passenger Corporation. Now, over half a century later, the nation’s first private passenger train operators are building new track, new stations, and planning multiple-frequency daily departures. The passenger train industry is coming full circle.
Look at the 1960s scenario: While many mainline passenger trains were breaking even or making a modest profit, the secondary trains were bleeding money. The heavy hand of government through the Interstate Commerce Commission was demanding many trains had to continue to operate “in the public interest.”
For every two streaks of rust and adjacent infrastructure the railroads continued to own – even if they did not operate over the tracks – taxes had to be paid on that infrastructure. Cities, towns, incorporated wide spots in the road, and states had become accustomed to tax revenue from railroads at high levels.
Passenger cars and locomotives bought post-World War II were reaching the end of useful service life. For much of the equipment, tax advantages gained through depreciation had already gone away. Some railroads sold their rolling stock to equipment trusts and leased it back, seeking tax and other advantages. It was time to consider a new generation of passenger trains. Some, such as the Pennsylvania Railroad had begun the process, with the development of the original Metroliner equipment. Somewhere around 1964/65 saw the last new equipment ordered for long distance trains, including the end of the Santa Fe Hi-Level fleet order.
Stations facilities, many built in the early 20th Century (or before) were often in need of upgrading and renovation.
And, there were many more reasons, beyond the fact the previous Johnson Administration had yanked the mail and express contracts in 1967, the first crippling blow to passenger trains.
Even though the beginning of the Railroad Era saw the transportation of passengers by rail as important as the transportation of freight, as the years went by passengers played less and less of a role in the minds of many railroad executives. In the 19th Century the popular passenger complaint was (paraphrasing) “cattle can be transported from one end of the country to the other, but people have to change trains in Chicago.”
Railroad executives often complained hauling cattle was easy, but passengers more difficult. Cattle did not complain, passengers did. Cattle cars just had to be hosed out after use, passenger cars required much more complex cleaning, maintenance and stocking for sheets, blankets, and hot water.
Freight-friendly railroad executives were promoted to the top jobs, not executives from the passenger departments. To them, freight trains were good, passenger trains were an expensive annoyance.
One side note is for many railroad executives – freight guys, too – there was a certain pride taken in their passenger trains and their corporate reputation that came as a side benefit. But, that pride was not overwhelming enough to want to continue to run passenger trains. This was also a time when fleets of railroad business cars executives used were being vastly reduced and corporate jets were being acquired by the railroads. If you were a railroad president and you did not have your own corporate jet, you were doing something wrong.
This is also the time when two other major factors were coming into vogue: Many railroads re-incorporated themselves as “Industries” holding companies instead of just as railroads. The current (now, discredited) thinking was railroads as holding companies would be financially stronger if they bought other companies, often completely divorced from any expertise a railroad may have, and enjoy the benefits of newly acquired dividends. That pretty much ended up as a myriad of business cases for college classrooms in “How to kill a business quickly, in the most painful way possible.”
The other factor was “merger fever.” If a 1,000-mile railroad was good, a 2,000-mile railroad was three times better. Just think of the savings! One personnel department. One accounting department. One sales department. And, on and on. So, it began. All of the small railroads rushed to combine to fight the big guys. The big guys rushed to combine to fight against the former little guys who were now larger and more aggressive. Others just merged because it was the fashionable thing to do.
Some mergers made common sense. Systems operating in the same geography, often with trackage of one railroad in sight of a rival railroad, could combine for better efficiency and stronger financial clout. In some cases, bigger was better, even if it was painful to achieve. Redundant, highly-taxed track and station and support buildings could go away, saving big bucks just in tax bills. Some lines as originally built were dependent on miles of bridges along the right of way while nearby track of a former rival/now merger partner was straight and on solid land. Expensive to maintain track could be abandoned without loss of providing a service on the surviving nearby track. Merged car and locomotive fleets could be more efficient. There were a number of solid, legitimate reasons to merge in many cases.
Executives sat in their executive chairs behind their executive desks in railroad executive suites and stared at walls and maps and dreamed of what mergers may be possible, while making sure, of course, their railroad was the surviving entity and they were the surviving executives in charge of the merged company.
There were some, notably the Penn Central Transportation Company, made up of the two completely different railroads and operating philosophies and most critically, non-compatible early computer systems, that would prove to be disastrous. There was a reason the Pennsylvania Railroad and the New York Central System were rivals, never meant to be partners. Their disastrous corporate marriage would be a major factor leading to the creation of Amtrak.
Another factor the railroads were suffering from was their – as an industry – overall lack of marketing savvy. Traditionally, railroads ran trains, and customers came with reverence to the railroads asking them to haul their tonnage. While all railroads had industrial development departments which were dedicated to selling land adjacent to railroads for factories and warehouses, thus capturing new business, and most railroads had some sort of sales department, there was never a tradition of aggressive sales as found in other industries.
For many railroads, life was good either hauling the endless supply of coal or making big bucks hauling agricultural products. Coal roads and Granger railroads were common descriptions.
Then, these annoying scrappy entrepreneurs, known as long-haul truckers, came along and started eating the railroads’ lunches. The railroads – after a long while – tried to fight back with piggyback service, now known as intermodal service. While intermodal is good, it was too little, too late. Former railroad customers became accustomed to having a truck and trailer back up to their local loading platform and the trailer being hauled directly to their receiving customer on a schedule that was convenient for the customer, not the railroad.
All of that brings us back to 1970, and the creation of Amtrak.
The federal government would create and fund the National Railroad Passenger Corporation and contract the operation of passenger trains back to the railroads. The railroads had to make an initial financial contribution to Amtrak, kick in all of their passenger equipment and send over whatever passenger department personnel they wanted to get off their payrolls. The payoff for the railroads was they would now be paid to operate their former passenger trains and be relieved of the ICC oversight of the passenger trains.
There were two major conditions: The railroads had to agree by contract passenger trains would have priority dispatching by the railroads, and – the real deal with the Devil – had to dispatch the trains at a train mile rate far below the market rate. The initial contracts would last 25 years. As has been constantly demonstrated, the priority dispatching part of the contract – baked into law by Congress – has often been ignored by the freight railroads. A hotshot intermodal train or even a merchandise boxcar train often takes priority over an Amtrak passenger train.
For those who don’t know about train miles and car miles, those are what the railroads charge to either move an entire train one mile over their tracks, or move one car – freight or passenger – over their tracks. There are extra charges for switching and other items.
The Devil’s train mile rate was just pennies compared to the market rate their freight customers paid. For those in the East, when you see the Tropicana Juice Train today moving quickly up the railroad, know that train is generating a train mile rate that may be much as 10 times or more the train mile rate the Silver Meteor is generating running right behind the Tropicana train. That is how much of a deal with the Devil the railroads were willing to make to be through with passenger trains. That has not changed much in the half decade since Amtrak began operations. Train mile contractual rates Amtrak pays its host railroads have not kept up with inflation of the past 50+ years, much less reflected actual costs of dispatching and the maintenance of track to passenger train speed levels.
Why would they make sure a deal? For many, they believed passenger trains would be even further out of style than they were already in 1970. They believed the capital costs of buying new passenger equipment, updating stations, and carrying all of the other costs associated with passenger trains would add up to more than the loss of revenue for dispatching Amtrak trains over their trackage.
Oops! Wrong bet. The railroad execs looked into the wrong crystal ball. They had no glimmer of how difficult it would be for passengers to board a jet airliner later in the 20th Century. They had no glimmer of how difficult it would be to build enough roads and highways to meet demand. They only looked at what turned out to be a short-term solution to an unsolved long-term problem.
Travel travails in the 21st Century have been a gift to Stephen Gardner’s Amtrak. While other modes of travel, even with the problems the airlines face and the near-wholesale retrenchment of intercity bus transportation, not to mention to soaring costs of gasoline for private vehicles, Amtrak today seems intent on sabotaging its own future with small-potatoes business plans that mostly rely on finding government funding to maintain basic services instead of using any type of entrepreneurship to advance the company and better serve passengers while maintaining its original Congressional charter to operate a national passenger train system, not a system of disconnected short corridors..
Here in the 21st Century, what’s old has become new, again. Private entrepreneurs are looking at operating passenger trains. Amtrak’s statutory authority as the only provider of passenger service is long gone. Competition is coming. Will the freight railroads be ready?
The answer is yes, they will be ready. With the many changes in the economy and national traffic world over the past half century, the railroads have come to realize their need to “sweat their assets” more for better financial returns. Modern railroad executives know passenger trains paying a market rate train mile cost benefits the railroad.
While the annoying old saw of “railroads are too busy to even consider new passenger trains” is still floated around by those who have yet to embrace the future, things like precision scheduled railroading have opened up many slots on freight tracks which could be used by passenger trains – if the passenger trains paid a fair train mile price.
The other traditional argument against more passenger trains is every single passenger train requires slots of four freight trains to be able to operate at track speed and consistently meet a printed schedule.
Look at the Florida East Coast Railway. They have made a deal with Brightline which would horrify many traditional freight railroaders. Brightline is adding necessary infrastructure such as second tracks and crossovers to the FEC right-of-way (and, building new bridges) to easily handle the FEC’s full traffic load plus 16 roundtrip frequencies a day (the equivalent of one roundtrip per hour from six a.m. to nine p.m.) for Brightline on the same trackage. To ensure no favoritism problems by dispatchers, the FEC and Brightline jointly created a new, stand-alone dispatching company to eliminate favoring a freight train over a passenger trains, or vice-versa.
Brightline is also paying appropriate train mile rates for use of the tracks.
When Brightline opens its fully scheduled service in late 2022 with 16 roundtrips a day between MiamiCentral Station and Orlando International Airport with appropriate intermediate station stops, there is no doubt many skeptics will suddenly see what the visionary founders of Brightline knew all along: In the right markets/city pairs with the right product, Americans are not afraid to ride trains; they embrace train travel. But, they expect value for the price of their tickets and they expect to be treated well, not as an intrusive annoyance as has happened far too frequently on Stephen Gardner’s Amtrak. Most onboard services and station services employees for Amtrak are good at their jobs, but far too many consider their job as an entitlement and are not interested in providing critically important good passenger service.
Those who argue everything in the future has to be the same way it has been for the past half century are simply not comprehending the real world. As employees are entitled to a fair day’s pay for a fair day’s work, so, too, are railroads – private enterprises, not public utilities – entitled to be fairly compensated for use of their tracks and infrastructure. When the current host railroad/Amtrak contracts are due for renewal, it will be essential for Amtrak to pay a fair train mile cost.
The most tedious and tiresome argument presented by Amtrak True Believers and Near Believers is the host railroads will not allow any other entity than Amtrak to operate over their properties. This ignores basic realities such as the huge New Jersey Transit commuter services operating over the Northeast Corridor – owned by Amtrak itself. New Jersey Transit has its own train and engine crews and operates its trains as a tenant on the NEC, paying a usage fee, not an operating fee to Amtrak. SEPTA has a similar deal.
In California, Herzog Transit Services operates the Altamont Corridor Express (ACE) over Union Pacific trackage and in Florida Herzog is also the operator for South Florida’s Tri-Rail. In New England, Keolis operates the MBTA service as well as the Virginia Railway Express over CSX (former RF&P) and Norfolk Southern trackage. Many will wave a decades-old letter posturing letter written by BNSF regarding the railroad’s position of not allowing any passenger operator but Amtrak on their property. What may have been true for a short time for public consumption decades ago is not necessarily true today.
If Amtrak wants to be treated fairly by its host railroads, and, therefore be able to offer reliable, on-time service to its passengers, then the next generation of host railroad contracts will have to look much different than they do today. As long as there is an adversarial relationship between Amtrak and host railroads, there will be little harmony or progress towards expansion.
The railroads’ current method of throwing huge infrastructure expansion costs – well beyond what Brightline is paying for upgrades – for adding a single train or adding an additional frequency of a passenger train is not realistic nor sustainable. A better way – a more fairer way – of compensation must be found.
The twenty original participating railroads forming Amtrak were:
• Atchison, Topeka and Santa Fe Railway
• Baltimore and Ohio Railroad
• Burlington Northern Railroad
• Central of Georgia Railway
• Chesapeake and Ohio Railway
• Chicago, Milwaukee, St. Paul and Pacific Railroad
• Chicago and North Western Railway
• Delaware and Hudson Railway
• Grand Trunk Western Railroad
• Gulf, Mobile and Ohio Railroad
• Illinois Central Railroad
• Louisville and Nashville Railroad
• Missouri Pacific Railroad
• Norfolk and Western Railway
• Northwestern Pacific Railroad
• Penn Central Transportation
• Richmond, Fredericksburg and Potomac Railroad
• Seaboard Coast Line Railroad
• Southern Pacific Railroad
• Union Pacific Railroad
• Chicago, Rock Island and Pacific Railroad
• Chicago South Shore and South Bend Railroad
• Denver and Rio Grande Western Railroad
• Georgia Railroad
• Reading Company
• Southern Railway
• Alaska Railroad
• Erie Lackawanna’s Hoboken-Port Jervis service
• Florida East Coast Railway
• Kansas City Southern
• Soo Line Railroad
• Western Pacific Railroad