Anyone looking at Amtrak’s fares might do a double take, particularly when looking at long distance overnight accommodations. So why is Amtrak so expensive? There are a number of factors to consider starting with the fact that Amtrak needs to cover all of its expenses and receives few subsidies to support itself. This means what it charges for its services need to cover all its expenses including fuel, equipment, facilities and personnel needed to operate all of those including retired personnel.
Amtrak has a number of operating expenses from the fuel that they use to power locomotives, the personnel who operate and maintain them and the facilities in which they operate in. All of these need to be factored in when thinking about the per mile cost to operate.
Mile per mile, Amtrak’s operations in the Northeast pay for themselves and even make a profit for the railroad. However, those aren’t there only operations. They have trains that they operate all across the country.
The fuel that Amtrak uses to power its locomotives is going to be one of their larger expenses. Outside the Northeast Corridor, most of the trains are powered by diesel locomotives. Believe it or not, they are technically electric because giant engines generate electricity and power electric motors that in turn drive the wheels. They also supply power to the entire train or consist.
In the Northeast Corridor the “fuel” that Amtrak consumes is electricity and a lot of it. From Boston to Washington the lines are electric. Instead of generating the electricity to drive the motors, they draw the electricity from the grid. As a commercial user, they draw large amounts of electricity that needs to be paid for.
Once all expenses are accounted for, Amtrak can then look at their income opportunities and forecast how much they expect from each of those along with how much the market will bear.
Amtrak employs a wide variety of staff for their operations:
- Baggage Handlers
- Ticketing staff
- Track Maintainer
- Human Resources
- Office Staff
- Metal Shop
- Signal Operations
Amtrak doesn’t operate in a vacuum. Its trains operate out of stations and staff need to operate out of offices and maintenance facilities. All of these need to paid for, whether they are leased or owned by the railroad.
Both the facilities and the equipment that Amtrak uses need to be maintained. This requires personnel or hiring contractors to come in an performed the required tasks.
There’s a number of income opportunities for Amtrak. These include their Rail Operations and Facility Leasing.
Amtrak’s rail operations are their bread and butter. They own their own lines in the Northeast but elsewhere they need to lease the use of the lines from freight companies. The freight companies take priority and so it can delay Amtrak’s operations in these areas.
Amtrak’s primary service is obviously passenger service.. This includes moving passengers on their own inter-city lines or acting as an operator for some regional rail like Connecticut’s CT Rail line. In addition to passenger fares they can take in income from ancillary services like meals, drinks and overnight accommodations on longer trains.
Amtrak currently offers shipping services for products loaded at one station and having someone else take them off at another station.
Amtrak also allows people to pay to have their privately owned rail cars towed from destination to destination.
Amtrak owns several stations that it operates out of and so can lease space to other other operators such as regional rail and bus lines like Philadelphia’s 30th Street Station. This presents another income opportunity for the railroad.
Once Amtrak know how much their expenses are, they can look their income opportunities and determine what the rates should be. It’s a simple equation at this point – divide the miles that they operate by expenses and determine the cost to operate by mile. From there you can figure out the fare between stations but you have to keep what the market will bear for different segments. For example, if they charged what it really cost for a 1000+ mile journey, few people would take it but if you increase your cost on other more well traveled lines, you can lower your cost on those longer lines and have more passengers.
There’s a lot of different things that get factored in to make Amtrak’s fares what they are but when you think about why is Amtrak so expensive and everything that they do, their fares do make sense.