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Joseph Vranich served on the Amtrak Reform Council from February 1998 to July 2000. He hasalso served aspres- ident and CEO of the High Speed Rail Association and executive director of the National Association of Railroad Passengers. Edward L. Hudginsisdirector of regulatory studiesat the Cato Institute.
The airport shutdowns and fear of flying thatfollowed the September 11 terrorist attacks gaveAmtrak a boost in ridership. But the government-owned and government-operated passenger rail-road, established by Congress three decades ago,will not likely be able to take advantage of a pub-lic demand for alternatives to air travel. Since itscreation Amtrak has received nearly $25 billion intaxpayer funding, and there is no prospect that itwill ever break even. Unfortunately, Congress isnow proposing to throw billions of dollars in newsubsidies at Amtrak.In the Amtrak Reform and Accountability Actof 1997 Congress mandated that if Amtrak is notfinancially self-sufficient by December 2002 itmust be restructured and liquidated. Secretary ofTransportation Norman Mineta recently saidthat Amtrak would not meet that deadline.Amtrak has failed to secure an increasing por-tion of America’s growing transportation market.It carries only about three-tenths of 1 percent ofall intercity passengers. Its on-time performanceon most routes is terrible, and it covers up thisfact by measuring punctuality at a limited num-ber of stops and building in lots of extra timebefore those stops.Many of Amtrak’s trains run much moreslowly today than did trains on the same routesearlier this century. Moreover, Amtrak uses cre-ative accounting to disguise its financial prob-lems. For example, Amtrak receives many subsi-dies from government agencies and has recentlyabandoned standard accounting practices tohide operating expenses as capital costs.Congress established an Amtrak ReformCouncil to monitor Amtrak’s financial perfor-mance and decide whether the railroad can meetits deadline for becoming operationally self-suf-ficient. Amtrak clearly will not meet that goal. Itis time for the council to make this finding offi-cial and begin the mandated process of restruc-turing and liquidation.
Help Passenger Rail by Privatizing Amtrak 
by Joseph Vranich and Edward L. Hudgins
Executive Summary
No. 419November 1, 2001
 
Amtrak and the Aftermathof the September 11Terrorist Attacks
In the immediate aftermath of the terror-ist attacks of September 11, 2001, and thesubsequent shutdown of commercial airtravel, Amtrak reported that it carried twicethe usual number of passengers on its trainsbetween Washington and New York and sawincreased ridership throughout the country.
1
The temporary closure of Reagan NationalAirport also put Amtrak in the unique posi-tion of being the fastest means of transporta-tion from downtown Washington to NewYork.
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Amtrak also boosted revenues fromincreased shipments by the U.S. PostalService and United Parcel Service.Amtrak crowed about “coming to the res-cue of 100,000 passengers nationwide” andbeing “a viable form of transportation.”
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Yet,despite those public pronouncements, it waslater learned that Amtrak’s Beech Grove,Indiana, maintenance facility asked employ-ees to “double their production” and said“the biggest push” was on repairing mail carsand baggage cars, not passenger cars.
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The proper objective for Amtrak duringsuch a time of need would have been to repairas many sidetracked passenger cars as possi-ble. So much for Amtrak going the extra mileto move people in a pinch and taking advan-tage of an opportunity to attract passengerspermanently to rail travel.As more aircraft returned to the skies,reports indicated an easing in the number ofsold-out trains. Inquiries to Amtrak about itstraffic failed to clarify if the passenger surgewas lasting. By September 20, Amtrak’s WestPalm Beach traffic was “thinning out andreturning to normal.”
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One week later the
Los AngelesTimes 
reported:The surge of passengers who flockedto Amtrak trains in the days after theterrorist attacks has begun to sub-side, dimming hopes that the interci-ty rail service could attract lots ofnew passengers amid the airline cri-sis. . . . Amtrak officials provided fewspecifics concerning ridership totalsfollowing the terrorist attacks. Theysaid, however, that ridership nation-wide was up an estimated 17%in thefirst week . . . . On Wednesday [Sept.26], Amtrak said the increase sincethe attacks had fallen to somewherebetween 10%and 13%. They declinedto provide week-by-week or dailybreakdowns of ridership. An infor-mal survey conducted Wednesday byCarlson Wagonlit Travel, one of thenation’s biggest travel agency chains,also suggested only a slight switch toriding the rails.
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Amtrak Trips Now More Competitive?
The market for passenger train servicemay have expanded because the added timerequired for airport security checks—someairports recommend arriving four hoursbefore a flight—makes trains more competi-tive. That certainly is true on the Boston-NewYork-Washington route, and may be true fora few more niche markets.Consider the Chicago-St. Louis rail line.Amtrak allots 3 hours and 17 minutes totravel the Chicago-Springfield segment, aschedule that is not normally competitivewith air travel. But when allowing for anextra hour or two at the airport, the scheduleon this segment becomes competitive withaviation. The key is to keep expectations real-istic—the 5 hours and 40 minute schedule forthe entire Chicago-St. Louis route means thetrain still cannot compete with air traveltimes. In light of increased airport delays, it isreasonable to assume that trains would becompetitive with air travel on routes that are25 to 60 miles (depending on the speed of thetrain) longer than routes that were previous-ly considered competitive, provided the terri-tory involved aligns with an air market. Andthe longer the air delays, the longer the addi-tional distance over which rail would be com-petitive.This small Amtrak competitive advantage
2
The nationshould not staywedded to theAmtrak para-digm, which hasbeen a colossalfailure for 30years.
 
ignores the possibility of extra time that may beneeded for security checks in train stations.Amtrak now requires passengers to show validphoto identification when buying tickets andchecking baggage. Amtrak is working with theFBI to determine if it should institute measuressuch as screening baggage and checking pas-sengers through metal detectors.
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Meanwhile,U.S. Department of Transportation secretaryNorman Y. Mineta has questioned the need torequire rail customers to pass through metaldetectors before boarding Amtrak trains.
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Additional experience is needed to deter-mine the degree to which these changing fac-tors will help or hinder Amtrak.
Overreaching in Washington
In a display of political opportunism,Amtrak is requesting $3.2 billion in “disasteraid” even though no disaster exists atAmtrak.
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In fact, Amtrak has profited fromtravelers’ reluctance to fly. Amtrak’s request-ed bailout is more excessive than the one theairlines received. Consider that airlines aver-aged 1.8 million passengers a day andreceived $5 billion in grants and $10 billionin loan guarantees. Amtrak carries fewer pas-sengers—typically 60,000 a day, and up to80,000 at the peak of the airline diversion—but wants a whopping $3.2 billion in grants.The disparity should surprise no one becauseAmtrak has no upper limit to the amount ofsubsidies it seeks. Amtrak’s current politicalposture is a low point in Amtrak’s history. Asone congressional aide told Reuters,“Amtrak’s agenda, as usual, is capitalizing on[the attacks] in a bogus way.”
10
It must be acknowledged that Amtrakwould use a portion of the funds to correctfire and safety problems in the tunnels lead-ing to New York’s Penn Station. But that verylack of repairs is an indictment of Amtrakpolicies. Amtrak has long known about theneeded work; as the first report pointing tothe problem was issued in 1978,
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and otherreports have been issued since.
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But Amtrakfailed to launch a tunnel improvement proj-ect for 23 years while it squandered billionsof dollars on lightly used trains elsewhereand on glamorous projects that yielded apoor rate of return. If given the funding,Amtrak will undertake needed tunnel work.But Amtrak also will waste a good portion ofthe $3.2 billion on pork-barrel trains thatserve few travelers.Amtrak also is poised to benefit fromthree other pieces of legislation.Under consideration is the $12 billion HighSpeed Rail Investment Act of 2001, whichwould not really bring about high-speed trains(more will be said about this later).Also being discussed is an ill-advised stimu-lus package that includes $37 billion, a goodportion of which would expand Amtrak.
13
Commented one editorial, “A vastly expandedpassenger rail system would do little for thenation’s security and, if the system is a white ele-phant, the short-term economic stimuluswould become a long-term economic burden.”
14
One measure, named the RailInfrastructure Development and ExpansionAct for the 21st Century, or RIDE-21, pro-poses to spend $71 billion on a broad rangeof railroad-related projects.
15
Although thebill appears to minimize Amtrak’s participa-tion, the fact remains that Amtrak’s de factomonopoly in intercity passenger service posi-tions the railroad to feed at this additionalgovernment trough.The rush to throw money at Amtrak rep-resents government at its worst. The nationshould not stay wedded to the Amtrak para-digm, which has been a colossal failure for 30years, because terrorists’ acts have boostedtrain travel. Amtrak is the same mismanagedorganization after September 11 that it wasbefore that date. Additional subsidies will donothing to reverse Amtrak’s high costs andabysmal productivity and are likely to furtherinstitutionalize poor Amtrak practices.Choosing to expand rail service throughAmtrak instead of induce the creation ofnew, more efficient entities reflects morethan the usual lack of governmental imagi-nation; it reflects congressional panic and adedication to a dysfunctional system, both ofwhich are counterproductive to meetingfuture transport needs.
3
The giveawayfares appear to bea move to buildridership at anycost. Unfortu-nately, that costcould be billionsof dollars in newtaxpayersubsidies.
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