Amtrak, officially the National Railroad Passenger Corporation, is a passenger railroad provider that runs short-distance (under 750 miles) and long-distance trains among more than 500 destinations in 46 states, the District of Columbia, and three Canadian provinces.

Amtrak operates more than 300 trains daily over 21,400 miles of track as of 2023, although 71% of the miles are on tracks owned by other railroads, known as “host railroads.”

Amtrak's History

Amtrak was founded in 1971 as a state-owned enterprise (SOE) when the federal government stepped in to save an American rail industry that had been pushed to the brink of collapse by a host of 澳洲幸运5官方开奖结果体彩网:macroeconomic forces. The proliferation of air travel and highways increased competition in the civilian transportation industry to unsustainable levels for rail companies by the 1960s.

Combined with rising 澳洲幸运5官方开奖结果体彩网:labor costs and outdated regulations that deterred private expansion, this resulted in the U.S.’s two largest rail companies, Pullman Company and Penn Central, declaring bankruptcy by 1970. The Nixon administration intervened and Amtrak was the result.

Amtrak receives considerable 澳洲幸运5官方开奖结果体彩网:subsidies from both state and federal governments, but it's managed as a for-profit company. This isn't unusual. No country in the world operates a passenger rail system without public support.

But Amtrak’s “for-profit” status is sadly ironic. The train company has never been profitable since its founding nearly 50 years ago. It's only thanks to its subsidies that the company has survived.

The Business Model

Amtrak customers took 28.6 million trips in 2023, which is about 78,356 trips per day, and employed about 21,700 people. Ticket sales make up the bulk of Amtrak’s revenues, according to the company's FY2023 consolidated statements. Amtrak also makes money by leveraging its infrastructural assets.

Ticket Sales

Ticket sales contributed to 81% of Amtrak's operating costs in 2023, along with payments from state partners and agencies. The Northeast Corridor (NEC), which runs 457 miles from Washington, D.C., to Boston, is vitally important to Amtrak’s financial survival. This line accounted for 12.1 million of Amtrak’s passengers in 2023.

All of Amtrak's other lines are small potatoes relative to the NEC. Amtrak’s long-distance lines are its least profitable, making up only 14% of the company’s 2023 ridership.

State and Federal Subsidies

Seventeen states fund Amtrak through 20 state agencies, supporting all of its short-distance lines except the NEC. As of September 2023, the company received nearly $200 million from the Federal Railroad Administration’s Consolidated Rail Infrastructure and Safety Improvements (CRISI) competitive grant program. This funding is planned to be used to support four projects in the Northeast Corridor and the Gulf Coast states.

Leveraging Infrastructural Assets

Amtrak derives the remainder of its revenue from an assortment of business activities related to the infrastructure it owns. Amtrak owns and operates 363 route miles of the 457-route-mile NEC main line, a number of lines outside this line, as well as station structures, platforms, and parking facilities, and a total of 13 maintenance facilities.

Amtrak leverages these assets by charging freight train and commuter train companies to use it♏s track, and by charging access to and/or development of its stations, platforms, and parking lots.

The Forecast for Amtrak

Amtrak is growing despite its heavy reliance on federal and state subsidies and its inability to turn a p🥃rofit, and it has begun implementing big plans for♊ the future.

Americans are increasingly eschewing cars and airplanes for more efficient and environmentally friendly modes of transportation in the face of the changing economy and climate. This trend bodes well for companies like Amtrak. To capitalize on this trend, Amtrak must make quick progress toward its primary goal of replacing its aging fleet.

New Acela Express Trains

Amtrak’s most important assets are its trains, and its most important trains are its Acelas. These high-speed trains travel up to 150 mph, making them the fastest trains in the Western Hemisphere, and generated $496 million in revenue for Amtrak in 2023. But, like most of Amtrak’s fleet, its Acelas are getting old. The company’s fleet of Acelas has been in service since 2000.

However, Amtrak is contracting with Alstom to produce 28 next-generation high-speed trains that will replace the current fleet. The new Acela will operate at a top speed of 160 mph vs. today's fleet, which operates at a top speed of 150 mph. Amtrak's new Acela fleet is scheduled to enter service on the NEC in 2024.

Siemens Contract

In 2021, Amtrak awarded Siemens Mobility, a subsidiary of the German conglomerate that manufactures traffic systems and railway technology, a $3.4 billion contract to build 73 sustainable trains to be delivered starting in 2024. The new trains have expanded capacity and the ability to shorten trip time. Amtrak expects the new trains will add over 1.5 million riders annually. There is also a possibility for up to 140 additional trains and maintenance agreements.

Improving Safety

Aging trains are a huge problem for Amtrak’s public image, which has undergone serious damage due to the company’s poor safety record. The number of fatalities involving Amtrak trains had been rising, from 119 in 2008 to 167 in 2017.

In response to these shortcomings, Amtrak has implemented what it calls Positive Train Control (PTC). PTC is a communications network that combines GPS, radio signals, data centers, and dispatchers to closely monitor the status of every Amtrak train, all the time.

Extending the Network

As of 2023, only 27 out of the top 50 metropolitan areas are directly served by Amtrak.

The company is working to extend its reach through Amtrak Connects US, an expansion plan that proposes service improvements to 25 existing routes and the addition of 39 entirely new routes. This would improve service for 20 million more passengers annually, making it possible to ride to almost every major city in the U.S.

Key Challenges

A 2022 report released by Amtrak’s Office of Inspector General describes safety as the key point of emphasis for Amtrak. Beyond safety, the OIG cites four areas for Amtrak’s focus.

Fiscal Responsibility

Amtrak’s first challenge is demonstrating fiscal responsibility, according to the report. The company is working with the Federal Railroad Administration to develop tools and reports that will enhance transparency. Many of the company’s systems supporting basic business practices are outdated and do not provide timely and accurate information. According to the OIG, Amtrak has begun to upgrade some of these systems. The company will also need solid internal controls to protect its funds from fraud, waste, and abuse.

Building a Solid Workforce

Amtrak’s second challenge is building and deploying a skilled workforce. Beginning in 2022, Amtrak set out to expand its workforce by as much as 21%, including hiring new managers to lead 澳洲幸运5官方开奖结果体彩网:Infrastructure I꧙nvestment and Jobs Act (IIJA)–funded projects and employees to execute them. The timeframe for building this workforce is also a challenge as demands grow.

Coordination With Stakeholders

A third Amtrak challenge is effective coordination with its stakeholders, as the company’s operations, expansion, and finances depend on support from external and internal stakeholders. According to the report, Amtrak has not always coordinated internally across the company as early and comprehensively as needed.

Improving Project Management

The fourth challenge Amtrak faces is improving project management. Amtrak has made progress in this area by creating a new capital delivery department to manage the planning and implementation of major programs and projects.

The Bottom Line

Amtrak makes the bulk of its money from ticket sales, primarily from short-distance trips, and mainly from one line, the Northeast Corridor line. Amtrak also receives significant subsidies from the government to keep it running. The company facꦛes many challenges, some of which should be remedied through the recently passed Infrastructure Investment and Jobs Act.