Amtrak has lost money every year since 1971 - here's why train tickets are so expensive
- Amtrak has been operating since 1971, but it has yet to become profitable.
- With high ticket costs, Amtrak has become a less viable mode of transportation in the United States - it's often more expensive to take a train than it is to fly.
- The US government attempted to make Amtrak financially self-sufficient with the Acela Express, but Amtrak still has a large sum of debt from years of underfunding.
Following is a transcript of the video.
Narrator: Amtrak is the only passenger railroad service that operates throughout the continental US. With about 500 destinations, the service has been operating since 1971. But with high ticket costs, Amtrak is becoming a less viable mode of transportation.
In fact, it's often more expensive to take an Amtrak train from New York City to Boston than to fly. Why does the US, a country that created billionaire railroad tycoons, have such an expensive and inefficient train system?
Amtrak has had a long history of financial instability since its formation. Passenger trains used to be owned by private companies that operated freight trains. At the start of the 20th century, nearly 42 million passengers traveled by rail as their primary mode of transportation. However, by the 1940s, railroads began to become less popular as buses, planes, and cars grew in popularity. And by the 1960s, many railways, such as Penn Central and Atchison, Topeka & Santa Fe Railway, all discontinued most of their trains. Passenger trains were no longer profitable, especially when the US Post Office began shipping mail by truck and air.
In an attempt to rescue the service, then-president Nixon signed a law in 1970 that ensured government funding. This act created the National Railroad Passenger Corporation, which eventually became Amtrak. Of the 26 railroads offering passenger service, six declined to join Amtrak. Although the railroad service continued, its problems with ridership and financial instability remained. Amtrak competed with other railway companies for train stations and tracks. On its first day of service, passenger trains had to be rerouted from seven train terminals in Chicago into just one. Amtrak also had to pay and maintain multiple train stations in one city due to the lack of track connections.
Throughout the early 2000s, the US government attempted to make Amtrak financially self-sufficient by trying to increase ridership and implement the Acela Express, which runs at a maximum speed of 150 mph. But their plans failed, as Amtrak still had a large sum of debt from years of underfunding.
To this day, trains still have a low profit margin and rely heavily on subsidies to operate. According to the company's 2017 fiscal year report, Amtrak had a total revenue of $3.3 billion. Unfortunately, this wasn't enough to make Amtrak profitable. It still had a total operating loss of $194 million. Many of the lines don't make any money or are operated at a loss. To accommodate the money-losing routes, Amtrak uses profits from its popular lines, such as the Northeast Corridor. Since this is one of the most popular routes, Amtrak can charge higher prices and send those profits to other, less profitable lines.
Additionally, the USA is a very big country. It's the fourth-largest country, with about 3.8 million square miles of land. In comparison to Japan, which is smaller than the state of California, the US requires a lot more rail to cover its land. Amtrak trains run on 21,400 miles of track, and only owns about 630 miles of it. For example, between New Rochelle and New Haven on the Boston-New York route, the tracks are owned and operated by Metro-North Railroad. This means Amtrak needs to pay Metro-North Railroad to run their trains over these tracks, which adds extra costs to passengers' tickets.
According to Amtrak's company profile, it operated approximately 300 trains a day in 2017. In comparison, SNCF, the French National Railway Company, operated 14,000 trains daily. That's 47 times more trains, serving a nation that has one-quarter of the population of the United States. France is also even smaller than the size of Texas.
While Amtrak has lost money every year since 1970, it does intend to return a profit some day. Despite losing $194 million in 2017, that was still 15% less than 2016, and the company has been reducing its losses every year since 2012. Hopefully, consumers won't have to bear the brunt of reducing those losses even more.