Amtrak: Operating Deficit, Government Operation, etc.

Exactly my thoughts as well. In terms of assets Amtrak is potentially one of the most valuable companies in America.

Ironically enough if their assets are valued around $100B that would make Amtrak more valuable than American Financial Group formerly known as "Penn Central Company".

Apparently AFG has agreed with the notion of Amtrak's potentially high value in the past ...

The case centers on American Financial's long-running efforts to get more value for the Amtrak shares it received way back in 1971. That's when Penn Central Railroad, a former unit of American Financial, agreed to a deal to turn over passenger train service to Amtrak. It paid Amtrak $52 million in exchange for shares of the railroad's stock worth the same amount at the time. Those shares were worth $10 each then. The deal called for Amtrak to buy back the shares at fair market value by October 2002.

In 2000, after Amtrak had lost money every year since the deal took place, Amtrak valued those shares at 3 cents each. American Financial balked, claiming the shares were worth more than that. But after protracted negotiations, it filed a lawsuit in May 2008.

After years of legal wrangling, the court ruled that American Financial waited too long after the dispute to file the lawsuit and dismissed the case.

To give one a sense of what $100B in assets means the two nearest examples (per Fortune 500 2019 Listings) would be Genworth Financial (GE Insurance Spinoff) and Walt Disney Co.

Pretty good company if you ask me.

Valuation of an asset only matters if you actually have the ability to sell or monetize it, and there's very little of Amtrak you could actually sell unless the Class 1's and Class 2's were the ones buying assets and/or operating passenger rail.

Cleanup after decades (or centuries?) of hazmats seeping (or being intentionally dumped) into the soil will far exceed any valuation you might want to place on the coach yards, and likely the terminals as well. I'd imagine there's also a fairly large amount of asbestos in some of those older terminals.

Any sale would basically be a privatization.
Usually goes something like this ,
- Govt pays or writes off all debts and loans.
- Govt assumes or indemnifies hazmat, litigation , and outstanding grievances.
- Govt pays any likely redundancies.
- The sale price is worked out as at market value, based on likely profit, and probably around 10% of the cost of the assets.
- Govt provides a virtual monopoly to the purchaser.
- Govt provides a subsidy for those areas the new private owner can't make a profit , despite the monopoly and "efficiency"
- The privatization is heralded as a success as the new owner makes a fortune.
- The public ownership period is looked back on as the bad old days, when the enterprise was inefficient and cost us billions.

Amtrak actually has their own environmental department and I have noticed over the years that they have been cleaning up their facilities and abating asbestos when they find it in buildings they keep.

The investments being made in Florida right now strongly indicate to me that private capital may be interested in buying something like Amtrak and to operate not only "for" but "at" (a) profit.

Warrington promised a “glide path to self sufficiency” but failed to deliver as did his predecessor Tom “Downtown” Downs. But Anderson is getting it done! The days of true first class airplane travel, with entrees served on china, ended by the 1980s following airline deregulation. It’s time the railroads did the same thing, end dining card and sleepers. Let’s focus on fast, efficient movement of passengers between cities in 500-750 mile corridors. Let’s follow the Amtrak reform law passed by Congress. I will be flamed for these comments but Amtrak’s future cannot be based on providing historical dining and sleeper car services. Forward, Mr. Anderson. I’m glad there is a transportation professional heading Xmtrak and not a politico like Downs.

Wall Street Journal ... Amtrak is now projecting deficit elimination next year ...

Amtrak, Mr. Anderson says, is now on the verge of doing something once thought impossible: breaking even on running its trains.

Its annual adjusted operating loss, which excludes capital expenditures and some other costs, will fall to zero over the next year, which would be a first in its nearly 50-year history. The railroad projects a 900,000-person increase in ridership this year, to more than 32.6 million trips.

Cash on hand is in excess of $1.5B up from about $250M+ in 2013.

Great news! More cash is needed for funding the Hudson River tunnel.

Amtrak will likely continue to help but that project is still beyond their means. The really good news here is that they clearly will be able to order new cars to replace the Amfleets. That is huge news in of itself. Hopefully they order enough to entertain future service expansions and to provide improved flexibility on the Northeast Corridor.

Dcell wrote: ↑Sat Jul 06, 2019 10:58 am Warrington promised a “glide path to self sufficiency” but failed to deliver as did his predecessor Tom “Downtown” Downs. But Anderson is getting it done! The days of true first class airplane travel, with entrees served on china, ended by the 1980s following airline deregulation. It’s time the railroads did the same thing, end dining card and sleepers. Let’s focus on fast, efficient movement of passengers between cities in 500-750 mile corridors. Let’s follow the Amtrak reform law passed by Congress. I will be flamed for these comments but Amtrak’s future cannot be based on providing historical dining and sleeper car services. Forward, Mr. Anderson. I’m glad there is a transportation professional heading Xmtrak and not a politico like Downs.

I'm quick to point out that if you believe the releases, Amtrak has improved their operating cost recovery year after year. Indeed, prior to Anderson, Amtrak was touting 94% of their operating costs were recovered by the fare box.

The best Anderson can do is build on the work of others and accomplish the remaining 6%.

gokeefe wrote: ↑Sat Jul 06, 2019 11:40 am Amtrak will likely continue to help but that project is still beyond their means. The really good news here is that they clearly will be able to order new cars to replace the Amfleets. That is huge news in of itself. Hopefully they order enough to entertain future service expansions and to provide improved flexibility on the Northeast Corridor.

They will need to replaced 400-500 Amfleet Is and IIs. What is the going price for the Siemens coached bought by California and Illinois? Some math follows; 371 million /137 coaches = 2.7 million per coach. Therefore 400 x 2.7 million = $940 million, or 500 x 2.7 million = 1.35 billion.

Perhaps once Amtrak starts breaking even on operating costs, Anderson will stop targeting the LD trains.

electricron wrote: ↑Sat Jul 06, 2019 3:27 pmSome math follows; 371 million /137 coaches = 2.7 million per coach. Therefore 400 x 2.7 million = $940 million, or 500 x 2.7 million = 1.35 billion.

Finance it over 20 years with a low interest RRIF loan from USDOT and you've got a very reasonable proposition. Monthly interest at 1% for 20 years results in a monthly payment of $6,208,573.14 or $74,502,877.68 annually. Considering savings on mechanical from improved equipment performance and warranty it's entirely doable in the future fiscal situation. Amtrak almost certainly has the necessary cash flow right now.

Effectively Amtrak has been eating its own lunch for all these years. Too much money spent on full service diners that could have been spent on equipment expansion instead. Labor would probably see a net gain in crew positions (engineers, conductors and assistant conductors) and mechanical (car cleaners and mechanics) that would offset losses from the diners.

Pretty astonishing revelation in my eyes ...

gokeefe wrote: ↑Sat Jul 06, 2019 11:34 am Wall Street Journal ... Amtrak is now projecting deficit elimination next year ...

Amtrak, Mr. Anderson says, is now on the verge of doing something once thought impossible: breaking even on running its trains.

Its annual adjusted operating loss, which excludes capital expenditures and some other costs, will fall to zero over the next year, which would be a first in its nearly 50-year history. The railroad projects a 900,000-person increase in ridership this year, to more than 32.6 million trips.

Cash on hand is in excess of $1.5B up from about $250M+ in 2013.

Seems a bit strange when it could be spent on some necessary improvements.
Would seem to me a good strategy would be to say , give us the capital and we will improve service and turn a profit on operating expenses.

Are there really 500 Amfleet coaches? Seems like way too many. The new Hudson River tunnel is the top rail infrastructure priority for Amtrak and all other capital purchases such as new rail cars must be deferred. I think Anderson sees this as well.

I’m curious why 500 Amfleets is too many right now? It about equals an airline fleet of 300 A320s in capacity, and has (had) to serve the entire eastern half of the country and parts of the west. Maybe Amtrak could get away with 300-400 now that most states are buying their own fleets though.