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Commentary: Amtrak vs. freight railroads. Shippers, you are impacted!

A BNSF train and Amtrak are next to each other. Image: Flickr/Patrick Dirden

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A headline article says that U.S. Sen. Dick Durbin (D-Illinois) has introduced a bill that would allow Amtrak to sue the freight railroads for preventing Amtrak from meeting suitable on-time performance standards. The senator alleges, “By empowering Amtrak to hold the freight railroads accountable… we can improve Amtrak’s on-time performance and save taxpayer dollars. The people of Illinois – and Amtrak riders nationwide – deserve assurance that they can arrive at their destination in a safe and timely manner.”

Realistically, the risk is that the freight shippers who use railroads will actually pay the price burden. Railroad companies could write penalty checks to Amtrak if this is enacted into law and then enforced. The theory of this column is that priority shipper freight will instead be delayed. That will be the price paid. Shippers, consider this brief as your alert message.

By the numbers, here are approximate ranges of delay costs that various train types face. It’s the theoretical time value, using logistics and time delay analytics. The numbers represent relative values (not absolute; do not take them to the bank):

Cost per hour of train delay

  • Amtrak: $300
  • Amtrak Passenger: $30
  • General Merchandise Freight: $500
  • Customer Freight/General Merchandise Car: $50
  • Intermodal: $800
  • Customer Freight/Intermodal Unit: $150
  • Express Intermodal: $1,000
  • Customer High-Value/Intermodal Unit: $500

When broken into per-hour costs, the implied dollar spread shows that it is freight customers that pay fully allocated costs for all of the rail company track and dispatching capacity. Amtrak pays only a fractional percentage of what we call avoidable railroad company costs. The Amtrak-estimated value of its long-distance trains has a relatively low delay time under these logistics assumptions.

Shippers, think of it as how much your time is worth. What is it worth for a shipper to have on-time deliveries, or for Amtrak to be on schedule? Should it matter that the time of Amtrak’s passengers is worth more than a train carrying fertilizer or auto parts? And how much is the shipper’s time worth if that carload is urgently needed? That worth might change depending on the urgency.

Amtrak asserts it needs to maintain profitability. But Amtrak’s overall income statements reflect a continuing long-term “going concern” loss. Translation? Amtrak says it loses money on most of its intercity routes – even where its trains use the rail freight tracks at a discount price.

Said differently, as Amtrak approaches its 50th year of subsidized life, it’s still financially dependent upon a low track use discount price – a low price set by Congress for freight railroads as a condition of relief from those passenger train losses occurred a lifetime ago.

A lifetime ago? Yes. In economic terms, many economists consider 50 years to be “forever” from a risk analysis point of view. That part of the grand bargain a half-century ago? The part for Amtrak profitability? It never happened.

Only the discounted somewhat-ransom-like track use fee seems to live on.

What are the consequences if Amtrak wins its case? Freight railroad train dispatchers will have to put freight shipments “into the hold track.” Shippers actually will bear that delay cost. Are shippers paying attention?

The above costs are representative. Shippers, do you know what your delay costs actually are? How much delay might each of you be willing to absorb for Amtrak before you switch your transport mode to truck?

Who is addressing these shipper-risk questions? Not Congress. Not the Surface Transportation Board.

Have the freight railroad companies discussed this potential exposure with their customers?

Agreed, the above represents contrarian thinking about Amtrak passenger train delays. Perhaps that’s exactly what’s needed before a policy or a legal decision gets made. We are talking about comparative logistics here.

Isn’t this shipper impact a bit aggressive? Not if your supply chain exposure is high. As a rail customer, have you assembled your delay cost numbers? Have you calculated your exposure?

Shippers, if you’re a major rail customer, you can’t depend on the above examples. You need real “inside numbers” arrayed against projected Amtrak delay dollars.

Protecting Amtrak as rail freight market share declines is the other side of this public policy issue. Back in the 1970s, rail freight market share was arguably about 20% or more of tonnage and shipper freight payments, higher for some commodities like coal. But coal is clearly fading and a footnote to this report. Today, as Amtrak becomes more insistent on its track priority rights, the supporting freight customer share moved by rail is in some cases down to about 10%. For some of the highest-value freight shipments, like parcel express intermodal, it’s calculated by some experts at less than 3%.

Squeezing the freight railroads while they face such market shifts doesn’t seem like prudent public policy. Instead, why not invest government capital for building dedicated Amtrak train schedule recovery tracks (passing sidings and improved signaling).

The outlook for continued passenger train costs shifting to the rail freight carriers and their customers seems short-sighted. Shippers, it’s probably best that you not be just bystanders in this public policy struggle.

One Comment

  1. Mark M.

    I totally agree with your point that better signaling and passing tracks should be installed. But I feel like for the rest of the article you focus on demonizing Amtrak and riling up shippers against Amtrak rather than uniting and demanding better rail infrastructure that would benefit all users (freight and passenger). The bottom line is that we should all be uniting and pushing these Tesla driving bigwigs to give us better rail infrastructure rather than letting us fight over breadcrumbs where there is always a winner and a loser. We have to stand together to stay on track!

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Jim Blaze

Jim Blaze is a railroad career economist with an engineering background and a strategic analysis outlook. Jim’s career spans 21 years with Consolidated Rail Corporation (CONRAIL), 17 years with the rail engineering firm Zeta Tech Associates, 7 years with the State of Illinois Department of Transportation in Chicago urban goods movement research, and two years studying what to do with the seven bankrupt and unrecognizable Northeast railroads at the federal agency USRA. Now primarily a teacher and writer, Jim likes to focus on contrarian aspects of the railroad industry.