Amtrak accounting

My contention is that for whatever reason Amtrak continues to reduce equipment operated in day to day service. Most of the route miles are the same but the actual service offered for purchase over those routes is much lower and much less valuable without adequate connections and poor timing from revised schedules. To that extent it is quite difficult to determine through accounting measures what is going on with the trains as you do not have a recorded amount of service being offered during the different years.

If I operated a steel mill I would not just report my revenue and cost without output. Amtrak should do the same. Car miles by type is the only measurement that I can think of the match the nature of passengers trains. We on this board try to figure out if the "Sleeping Car Only" report includes the coach portion of the fare and we cannot as Amtrak does not report the number of cars open for service on each train or portion thereof or single vs double occupancy of rooms.

Mr Payne,

Given the current political leadership at 1600 PA and at DOT, anyone who expects Amtrak to be doing anything at all to add capacity or routings is ... probably very emotionally healthy.

Unfortunately, the political leadership is avowed anti-Amtrak.

We have to deal with this as an objective reality.

Mr Paris06, please explain what you mean by:

5- Funds transferred from NEC to LDs to avoid legislative loss cap.

I have not heard the term used before. Thanks

VPayne wrote:My contention is that for whatever reason Amtrak continues to reduce equipment operated in day to day service. Most of the route miles are the same but the actual service offered for purchase over those routes is much lower and much less valuable without adequate connections and poor timing from revised schedules.

Amtrak does report "passenger-miles", "train-miles" and "seat-miles", see page A-2.1 and A-2.2. Load factor is also calcuated by dividing passenger-miles into seat-miles. Train-miles is really a useless statistic because it doesn't indicate any form of productivity. Car-Miles is also rather useless, because Amtrak operates a wide variety of equipment - of which do not have equal capacities. (Is an Amfleet-I coach equivalent to a Superliner sleeper, or a Talgo business class car?)

There is an industry standard metric that does everything that one could ask for. It's load factor.

In the recent (last two years, I think) Appropriations legislation it was mandated that not more than $495 million (I believe) in Federal funds could be used to cover operating losses. For the first 11 mos. of FY 06 Amtrak Regional and Intercity routes lost $546.2 million - or about $600 million annualized. Info from Aug 06 monthly report.

In the same report Page A 1.7 shows that $177.8 million was deducted from NEC to offset other losses.

By "Car miles" I mean there should be a break out of single level and bi-level car types operated system wide and by train with an appropriate measure of which cars or portion thereof were in service. There should then be a further break out of the cars operated by type.

Amtrak seems to be playing the game were service is reduced to the lowest level possible with no regard to the overall cost recovery of the service mix provided. Yes the total dollar loss figure may improve but as a percentage of cost recovery it is not improved by shortening trains that could reasonable be filled to cover marginal costs.

It seems to me that while the LD trains certainly lose some money in their current structure any efforts to improve certain segments, say the sleeping car line, are hindered by the lack of realisitc inventory figures. Further, the public is left in the dark as to the true direction due to a shortage of information. For example, we on this forum cannot completely state if the coach fare is included in the sleeping car fare tallies because we do not know the total car-miles or room-miles in service.

Look at how an airline would resolve the same question:

A typical airline might have 10 different pieces of equipment, ranging from a EMB-120 or a Bombardier Dash-8 (30-35 seat turboprop) all the way up to a 747/767/777/A330/A340. Load factor is a common statistic that can be applied regardless of the size of the aircraft, because it simply measures what percentage of the available seats are paid for by revenue passengers.

If you fly aircraft that are too big for the route, load factor will take a negative hit, because there's more capacity than demand. So, substitute a smaller aircraft, and use the larger aircraft on another route where there is the demand - or start a new service.

So how can Amtrak increase load factor - thereby improving revenues, lowering costs, and assigning equipment in an efficient manner? Already, Amtrak has the natural ability to add or reduce cars. However Amtrak has determined that it is more cost effective to use a "fixed consist", which might not be a bad idea because it's not a truly fixed consist, but one that is more-or-less optimized for the majority of runs.

Although Amtrak is childed for having dozens of cars languishing in yards, the simple statistic of load factor shows that those cars just aren't needed. Why maintain a car, just to run it empty except for at Thanksgiving and Christmas? We don't build highways to accomodate just two holidays a year, and airlines don't have reserve fleets of old B727s just for those two peak holiday seasons. It doesn't make sense, unless you can use that equipment elsewhere during the other 92% of the year.

I agree - Amtrak needs to clearly define coach and sleeping car revenue. Easiest way is to separate the two out entirely - you're either a coach passenger on a coach ticket, or a sleeping car passenger on a sleeper ticket, which includes the transportation cost embedded within it - no more "fare" and "accomodation charge" for sleeping car passengers. Revenue for each LD train should be divided by four categories: M&E (yes, there is still some Express business), Coach, Sleeper, and F&B (which will include a transfer from the Sleeper cars as long as their meals are included in their fare.) Operational Expenses will then be divided by function as well - M&E, Coach, Sleeper, F&B, then propulsion (locomotives plus Engineer), overhead (Conductor, reservations, station, advertising, and other system allocated costs).

Bob Johnston, in the January 2019 issue of Trains, has an article, Amtrak's Money Mystery, that criticizes Amtrak's accounting, saying, among other things, that their system unduly prioritizes cost cuts over other kinds of changes in rewarding managers at bonus time.

In the sixty-odd years I've been following the railroad passenger business, I've seen many discussions and debates about railroad accounting practices. When I was in high school in the fifties, I wondered how the Union Pacific, which didn't run many passenger trains compared to, say, the Pennsy, could claim eight digit annual losses on passenger trains. (This was inf fifties dollars). Then I discovered that they allocated all or most of their track maintenance to their passenger trains, arguing that they wouldn't have to maintain their track nearly as expensively if there were no passenger trains.

I lack the background and information adequately to respond to Amtrak's accounting practices, although their secretiveness makes me suspicious.

So I ask, my fellow railroad.net members,
Are Amtrak's accounting practices reasonable? If not, how should they change?

Well one example in the trains article says it all. it was discovered that there is a line item in the MIA station charges for snow removal ! !

Sure, that's a ridiculous example. But in any complicated system there are undoubtedly some anomalies. I am trying to get an idea of the overall system's validity. Maybe that's impossible.
For example, there was a scandal some time ago where a military contractor was found to be charging $45 apiece for some regular nuts that would cost a few cents retail. I ran into an old friend who worked for that contractor and, scandalized, asked him about it. "Oh, that's just a minor misallocation of overhead," he answered.
He didn't exactly convince me, but his answer did make me think. Same thing with the snow removal in Miami. It's clearly a mistake, but is it a minor hiccup or a symptom of major flaws in Amtrak's systems?

I’m not an accountant so I can’t weigh in on whether or not Amtrak’s accounting is reasonable.

However:

How do Canadian railroads handle their accounting? How does Brightline? How do UK railroads? How do US airlines? Perhaps we should look at how they do it and adopt their methods.

As an investor, I’d want an accounting system that shows how much each train trip adds in profit to my bank account.

There is more than enough 'wiggle room' within 'Generally Accepted Accounting Principles' that you can operate a railroad through.

Senior Management tells the 'accountants' what the financial narrative they want presented and with the backing of GAAP, Senior Managements financial story will be told. Senior Management, of every corporation that presents financial reports, has some story they want their accounting to present, as well as some things they want hidden - GAAP allows this to happen.

Any 'activist' investor can tear apart any financial statement they set their mind to.

Reality check... this issue is so deep in the weeds no elected official is going to pay any attention to it. It would be better to spend time figuring out how encourage Mr. Anderson into true retirement.

Greg Moore wrote:To give an example from the article (going on memory here, my copy is in the other room): on the NEC, long distance trains are charged a portion of the maintenance budget, the Regional and Acela trains are not. So the Regionals and Acelas basically "make a profit above the rail" but the LD trains operate at a loss because they're paying more for the same tracks.

Aren't the NEC and LD are different "companies within a company" from a financial reporting standpoint? I know they report ridership separately for the NEC vs. corridors vs. LD.

I support accounting for a large airline with multiple internal fiscal entities for the US, Europe, Latin America, Asia, etc... When a flight belonging to one entity is operated into an airport belonging to a different entity, I'd expect to see offsets or transfer pricing to appear in the flight profitability system to account for facilities/labor and other expenses belonging to another entity's ground operation.

If LD revenue is being reported under another entity, the pro-rated track charge offset is needed as a credit to the NEC's balance sheet, and a debit on the LD network's balance sheet. It's cleaner reporting to do so, but you wouldn't necessarily need to have the debit and credit within the same entity.