Cheap gas, drop in ridership to force Amtrak budget cuts

An Amtrak train ride from Philadelphia to Boston now costs more than twice as much as the gas it would take to drive there.
An Amtrak train ride from Philadelphia to Boston now costs more than twice as much as the gas it would take to drive there. (Associated Press)
Posted: February 13, 2016

Bad weather and cheap oil are hurting Amtrak's bottom line, and its chief executive wants across-the-board cuts just four months into the fiscal year.

A Feb. 9 letter obtained by The Inquirer from Joseph Boardman, Amtrak's president and CEO, to employees said that in January he requested cuts averaging 3.8 percent from the agency's department heads. It also said more significant cuts are ahead.

"We are going to need to take more aggressive actions to reduce our costs," he wrote, "some of which may be painful to take."

Low gas prices are a big problem for Amtrak. The average cost of gas nationwide is $2 a gallon, the letter states, the lowest it's been since 2009. Low gas prices mean people eschew the train to drive short distances or fly long distances, Boardman wrote.

At the $2-a-gallon rate, a car getting 20 miles to the gallon driving about 300 miles from Philadelphia to Boston would use $30 in gasoline. The same one-way trip in coach on Amtrak's Northeast Regional train, booked two months in advance, is $69.

Boardman's letter described Thanksgiving, typically a busy time for rail, as "disappointing."

The letter also cited bad weather, including last month's massive East Coast snowstorm, as a cause of costly disruptions. But one rail expert said gas prices were a more worrisome concern.

"The gas prices affect [ridership] on a longer-term basis than any weather event, basically," said Bruce Becker, National Association of Railroad Passengers' director of special projects, "and it affects the entire country, not just one section of the country."

Becker said he didn't see anything in the letter that suggested immediate problems for riders.

A decision to make cuts based on gas prices was shortsighted, said Ron Kaminkow, an Amtrak engineer and general secretary for the union Rail Workers United.

"We go into crisis mode and I think, in many cases, that really is harmful in the long term because budget cuts often create even more problems," he said.

Amtrak ended last year with a $305 million operating loss, $70 million worse than was planned, and anticipated an operating loss of $245 million this fiscal year, which began Oct. 1. The agency hopes to increase revenue and keep fixed costs low, but is falling short.

"Our company needs cash to pay our daily expenses, and our cash position is becoming a concern," Boardman wrote.

The letter highlighted personnel costs as a factor in the budget shortfall. An Amtrak spokeswoman said it would be "premature," though, to conclude that layoffs were in the offing.

Amtrak perennially faces budget woes. Saddled since its formation in 1971 with antiquated infrastructure and equipment, the agency has never met its congressional mandate to turn a profit. It generated about $3.2 billion in revenue from 30 million passengers in fiscal year 2015. For the most current fiscal year, it received about $1.39 billion in federal appropriations. It had sought about $2 billion.

Boardman's letter states Amtrak will make "all necessary investments" for employee and customer safety.

The letter says cost-cutting measures will include eliminating nonessential business travel, and asking employees to conduct business by phone or video conference, if possible. Boardman also recommends delaying expensive new projects or making new hires.



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