National Railroad Passenger Corporation

80 Massachusetts Ave., NE
Washington, D.C. 20002
U.S.A.
(202) 906-3860
Fax: (202) 906-3864
Web site: http://www.amtrak.com

Private Company
Founded : 1971
Employees : 23,000
Sales : $1.6 billion (1996)
SICs : 7999 Railroads, Line-Haul Operating

The National Railroad Passenger Corporation, better known as Amtrak, is the United States’ national rail passenger service, providing train transportation between major cities as well as commuter service and delivery of mail and express freight. A private corporation, Amtrak is almost wholly owned by the U.S. Department of Transportation.

The Creation

On May 1, 1971, the first passenger trains operated by the National Railroad Passenger Corporation (NRPC) pulled out of stations around the country, beginning what was depicted as a two-year federal undertaking to revive (and save) long-distance, intercity rail passenger service in the United States.

Congress had created the NRPC the previous year with the passage of the Railroad Passenger Service Act. The act established a private company, incorporated in the District of Columbia. Most of the new company’s stock was owned by the Department of Transportation, and it was governed by a board of directors made up of the Secretary of Transportation, the head of the NRPC, and 11 other members, the majority appointed by the president. During its first year of existence, the corporation was known as Railpax. After it began operations, the nickname was changed to Amtrak, a contraction of the words America and track.

NPRC was charged with accomplishing three goals, described in the Amtrak Source Book as: “To operate rail passenger service on a for-profit basis; to use innovative operating and marketing concepts to fully develop the potential of modern railway passenger service to meet intercity transportation needs; and to provide a modern, efficient intercity rail passenger service.” Congress authorized grants of $40 million for operations and loan guarantees of $100 million for new equipment. Direct funding was to last only two years, by which time the corporation was to be completely self-supporting.

Background

By the time Congress created NRPC, intercity rail passenger service in the United States had been in a 20-year decline. Until the 1950s, railroads were the only way to travel long distances. But during that decade, the federal government began financing the interstate highway system, a $41 billion, 16-year project, and, as jet airplanes were introduced, significantly increased its support for the construction and improvement of airports.

Airplanes, personal automobiles, and buses began competing with the country’s railroads for long-distance travel. The railroads responded to the competition with new equipment on their prestige long-distance routes, replacing steam locomotives with diesel engines, and introducing lightweight stainless steel passenger cars with air-conditioning and double glazed windows. But as the number of passengers continued to drop, the rail companies had little incentive to make major capital investments to upgrade their tracks, signaling, stations, and maintenance facilities. Why, they thought, should their profitable freight business subsidize a means of intercity transportation that was competing with systems receiving federal and state tax dollars. By 1958, rail service accounted for just four percent of intercity travel.

The decline in rail passenger service and the deterioration of passenger facilities continued during the 1960s. By the end of the decade, the number of passenger trains had dropped to 500, down from more than 20,000 some 40 years earlier, and only 12,000 passenger cars remained in service. Losses from passenger service operations in 1970 came to more than $1.8 billion dollars in 1997 dollars. Most of the loss was on long-distance, intercity travel. Commuter and suburban lines obviously were less affected by airlines and, at least during the 1960s, lost little ridership to buses and private cars. Many of the railroad companies filed applications to get out of the intercity service on most or all of their routes. Among the most critical was the proposal by Penn Central (the merged Pennsylvania Railroad and New York Central Railroad) to eliminate all its passenger service in the Northeast and Midwest.

Federal Action

The Railroad Passenger Service Act allowed the railroad companies to transfer their money-losing passenger operations to NPRC in exchange for either a tax write-off or Amtrak stock. Only three lines, the Denver & Rio Grande Western, the Rock Island, and the Southern, did not join Amtrak, opting to continue their own passenger service.

The basic network of routes for the new corporation was developed by the Transportation Department with assistance from the Interstate Commerce Commission, the railroad unions, 15 railroad companies, 43 states, some 3,000 members of the public, and numerous U.S. Senators and Representatives. Factors considered in selecting the routes included existing routes, cost, ridership potential, size of the terminal cities (had to have a population of at least 1 million), and the condition of the tracks and facilities (no funds were allocated for improving these).

Between January and May 1971, as the new corporation got itself organized, a major argument developed regarding the company’s objective: was it to reintroduce the traditional, and well-known, long-distance routes of the past, such as the “Empire Builder,” “San Francisco Zephyr,” and “Super Chief,” or should it concentrate on introducing high speed (150 mph) rail corridors? Those two visions of passenger service in the United States would haunt the NPRC for decades.

The 1970s—Amtrak’s First Decade

Although it operated in 43 states over 24,000 miles of track, the enterprise Amtrak began managing on May 1, 1971, was hardly a national transportation system. Essentially, Amtrak was a travel broker. It operated 119 passenger trains, a multicolored assortment of some 1,200 cars—coaches, diners, sleepers, and observation cars—with an average age of 20 years. The individual railroads donated some cars to Amtrak but continued to own the stations, terminals, yards, locomotives, and maintenance facilities, and employed all the people who worked on the passenger trains and in the stations and yards. In its first year, Amtrak leased the crews and equipment, along with the seat reservation, booking, communication, and dispatching systems from the various freight lines. In 1972, Amtrak began buying the diesel locomotives from the railroads and initiated a program of rebuilding and refurbishing the engines to improve on-time performance.

The tracks Amtrak’s “rainbow” trains ran on also were owned by the freight companies. For access to the rights of way, which was guaranteed by the legislation, Amtrak paid the freight companies a rental charge. That charge was determined by a formula established in the federal statute. The legislation also gave Amtrak trains priority dispatching over freight trains, but did not address the issue of liability in cases of injuries. Despite the logistical problems and uncomfortable rolling stock, Amtrak was able to keep the passengers it inherited in 1971, and during its first two years even increased ridership.

The creation of Amtrak seemed to generate three conclusions. Some people believed the new entity was really expected to revive intercity rail traffic. The more skeptical seemed to think that this was a last gasp effort and that once the equipment finally gave out, that would be the end of it. Others within the industry and among the passengers saw it as a ruse to eliminate routes in sparsely populated areas while keeping rail service along corridors between major cities in the Northeast and on the West Coast.

None of these occurred after Amtrak’s first two years because OPEC, the cartel of oil-producing countries, cut back the production of oil. The resulting energy crunch in 1973 and 1974 caused the price of gasoline (and airline tickets) to increase and lines at gas stations to grow long. Many Americans (and politicians) increased their support of alternative means of transportation, including rail passenger service. Congress approved funding for fiscal years 1972-73 totaling $179.1 million in grants and $100 million in guaranteed loans. In 1973, Amtrak began ordering new equipment.

The new silver trains with the red and blue Amtrak logo attracted more riders and marketing became easier. A centralized and computerized reservations system also helped improve service. During the decade, the company purchased 600 Am-fleet and Amfleet II cars and 284 Superliners, including locomotives, coaches, lounges, sleepers, and dining facilities.

Amtrak also began to take control of yard and station facilities, reservation offices, and all personnel except for train and engine crews. In 1972, Amtrak employed about 1,500 administrative and clerical workers. Within two years, as the company assumed responsibility for more of the passenger service operations, employment climbed to 8,500.

The Northeast Corridor (NEC)

As Amtrak was placing its equipment orders, the major freight lines in the Northeast were going bankrupt. As creditors, shareholders, railroad unions, and other railroads (who shipped to and from the East) cried for some action, the federal government took a step that would have a huge impact on Amtrak. The Regional Rail Reorganization Act of 1973 created Conrail (Consolidated Rail Corporation), a federally supported freight company made up of seven bankrupt railroads operating in the Northeast. The legislation also supported funding for preliminary engineering work to improve the Northeast Corridor in order to cut passenger travel times between Boston, New York, and Washington, D.C.

Company Perspectives:

We are America’s passenger railroad. Our mission is to consistently deliver a high-quality, safe, on-time rail passenger service that exceeds customer expectations.

Three years later, following the passage of the Railroad Revitalization and Regulatory Reform Act in 1976, Amtrak acquired 621 miles of right-of way from Conrail. Most of the routes, about 450 miles, were in the Northeast Corridor, from Washington, D.C. to Boston. The acquisition also included lines from Philadelphia to Harrisburg, Pennsylvania; from New Haven, Connecticut, to Springfield, Massachusetts; and from Porter, Indiana, to Kalamazoo, Michigan. For a switch, now freight trains would have to pay Amtrak to use these rails. As part of the legislation, Congress authorized $1.9 billion over five years to rebuild and improve the tracks and facilities in the NEC.

Along with the tracks, Amtrak also came into possession of rail yards, maintenance facilities, and all the stations along their new routes. The real estate included Pennsylvania Station in New York City and 30th Street Station in Philadelphia, along with some 100 smaller station properties, and half interests in Chicago’s Union Station and in Washington, D.C.’s Union Station. With these acquisitions, Amtrak employment nearly doubled, to 16,500, as the company assumed new operations and maintenance responsibilities.

The capital investments made to reduce travel time in the Northeast Corridor by rebuilding tracks and introducing new equipment received most of the attention during the late 1970s. But development was begun on another high-speed corridor, between Los Angeles and San Diego, and other corridors were being studied for high-speed potential.

During the last half of the 1970s, Congress changed the way it financed Amtrak’s capital improvements. Instead of loan guarantees, which had amounted to $900 million between 1971 and 1975, or a designated source of income as was provided for highways and airports, Amtrak began receiving direct capital grants, which had to be requested and approved annually, making it difficult to plan and finance capital investments. Amtrak continued to receive separate annual operating grants.

The company’s annual revenue during the decade averaged $252 million, and represented less than 40 percent of its operating expenditures. The growing deficits led the Carter Administration to push for more efficient operations and cuts in costs. Proposals to eliminate routes as a means of reducing costs generally went nowhere as Senators and Representatives fought to keep trains running in their states, whether the routes were profitable or not. In fact, by 1977, the number of miles in the Amtrak system had grown to 27,000. Finally, under restructuring in 1979, several routes were dropped as the basic network was cut to 24,000 miles.

1980s —Amtrak’s Second Decade

During the 1980s, Amtrak continued to move from supervising to operating the nation’s passenger rail system. Early in the decade, Amtrak installed its new Arrow reservation system, with faster computers, and acquired the last non-Amtrak intercity passenger train, the Rio Grande Zephyr, from the Denver and Rio Grande Western.

In 1983, Amtrak, for the first time, directly employed engineers, conductors, and their assistants, beginning on Northeast Corridor trains. The takeover of the operating crews continued for the next several years, until, by 1987, Amtrak employed most of the crews operating passenger trains around the country. After 1982, under Amtrak’s bargaining agreements, crews were paid based on a 40-hour work week, not on mileage and other factors as had been the case with the freight lines.

The company also expanded its position in the commuter train business, taking over the commuter trains in the northeast previously operated by Conrail. The company set up a wholly owned subsidiary, Amtrak Commuter Services Corporation, to oversee its commuter operations.

Amtrak’s partnerships with various states improved passenger service in their jurisdictions. Under Section 403(b) of the legislation that established the NRPC, Amtrak could operate intercity trains or routes funded by states. California, for example, paid for more trains between Los Angeles and San Diego, in the San Joaquin Valley, and, eventually, between San Jose and Sacramento. New York was one of the first to take advantage of Section 403(b), improving passenger service for the New York-Albany-Buffalo corridor.

But the core route and services faced financial cuts as the Reagan Administration convinced Congress to significantly reduce both the operating and capital grants each year. As President Reagan told an audience, “On the New York to Chicago train, it would cost the taxpayer less for the government to pass out free plane tickets.”

Most historians agree that things would have been even worse for Amtrak except for Graham Claytor, a lawyer and railroad executive and the new president and CEO of Amtrak. According to Stephen Goddard, “The grandfatherly attorney left his comfortable office ... to give Amtrak what it needed— credibility before Congress, in whose hands the troubled railroad would rise or fall.” Yet even as the cuts were being made, when Reagan fired the striking federal air traffic controllers, people turned to intercity trains.

In 1981, Congress told Amtrak to make better use of all its resources to minimize federal support. In addition to revenues from the commuter and 403(b) trains, by 1981, Amtrak’s real estate revenues were generating about $9 million a year. In 1984 the company acquired the remaining one-half interest in Chicago Union Station.

To help increase its assets, the company established a corporate development department. One of its ventures was to lease the NEC right-of-way to telecommunication companies for installing fiber optics communications systems. MCI Communications was the first company to enter into such a lease, with MCI providing Amtrak with specific fibers and communication circuits as well as with cash. Amtrak used those high capacity circuits for their own network and marketed and leased them to large telecommunication users. Amtrak also turned to mail and express freight service for additional income.

In 1985, Amtrak’s supporters argued that shutting down Amtrak completely would result in costly drops in productivity due to traffic jams and crowded airports in the major corridors, especially in the northeast. The prospect of more cars and planes (and the resulting pollution) effectively dampened enthusiasm for eliminating all support for Amtrak, at least for a while.

In 1986, Amtrak became the dominant carrier between New York and Washington, with 38 percent of the total air-rail market. In 1989, the company began another period of capital investment, as Amtrak purchased 104 short-distance passenger cars to alleviate crowding on routes in the Midwest and in California’s San Joaquin Valley.

By the end of the decade, Amtrak operations were bringing in more than $1.2 billion in revenues. But with operating expenses in fiscal 1989 of nearly $2 billion, it continued to have an operating loss larger than the $554 million operating grant it received from the federal government. The general capital grant fell from $221 million in fiscal year 1981 to $2 million in fiscal 1986 then averaged $34 million for the rest of the decade.

1990s—Moving Toward Self-Sufficiency

In 1994, Congress and the Clinton Administration demanded that Amtrak operations become self-sufficient by 2002. To accomplish this, the company, under new CEO Thomas Downs, adopted a strategic and business plan for the period 1995 to 2000. As part of the plan, Amtrak decentralized itself into three business units to increase accountability and responsiveness: Northeast Corridor, covering services from Virginia to New England; Amtrak West, which operated state-supported corridor trains and the long-distance Coast Starlight on the West Coast; and Amtrak Intercity, responsible for most of the longdistance routes as well as corridor trains in the Midwest. The company also began raising fares, cutting routes and service, and implementing cost reduction programs for its operations.

But Amtrak needed new rolling stock to replace old equipment, to achieve better travel times, and to meet the requests from states for new intrastate rail services. Through 1990, Amtrak had spent $1.6 billion for cars and locomotives and the capital investment continued during the decade with the delivery of new diesel locomotives, 195 bi-level Superliners, and, in 1996, 50 Viewliners, the first single-level sleeping cars made in the United States in 40 years. In California, 14 new dual-level dining cars were introduced on the state-supported routes, and in Washington, three pendular “tilt” Talgo trains were ordered by Amtrak and the Washington Department of Transportation for delivery in 1998. Trains able to travel 150 miles an hour were for service on the Northeast Corridor beginning in 1999.

Although revenues increased to $1.6 billion in fiscal year 1996, debt and capital lease obligations were almost $1 billion. By 1997, Amtrak was in danger of going bankrupt (in December of that year Downs resigned as CEO and a search was underway for his successor). Congress debated the company’s request to designate one-half cent of the Interstate Highway Trust for capital expenditures, but instead passed a tax rebate package of $2.3 billion for Amtrak capital spending over two years and adopted a package of reforms changing various labor requirements, allowing Amtrak to alter the basic system of routes inherited in 1971, setting a cap on liability costs, and establishing a new Reform Board. Funding for the Department of Transportation for fiscal year 1998 included $344 million for Amtrak operations and $250 million for Northeast Corridor capital. It also included $23 billion for highways, $9 billion for aviation, and $4 billion for transit.

On the issue of federal subsidies, there appeared to be agreement that Amtrak should receive support for its equipmentand facilities. But Congress still did not establish an ongoing, dedicated source for that payment.

Whether Amtrak would achieve operating self-sufficiency by 2002 was not certain, and several voices were involved in the debate as to what intercity rail passenger service should be. Amtrak’s own strategic business plan shifted resources to routes having the greatest growth potential and increased support for key state-funded routes and mail and express freight contracts. Rail advocates believed there were alternatives to eliminating routes or cutting back on service. A special Working Group on Intercity Rail established by Congress recommended that 1) there be passenger rail service in all densely populated corridors with traffic congestion and poor air quality and 2) public/private development of periodic overnight passenger service in historic, scenic, or cultural regions. Others have suggested separating the Northeast Corridor completely from Amtrak. Despite many changes and improvements since its birth in 1971, Amtrak continued to generate as much controversy as it did passenger miles.

Further Reading

“25 Years of AMTRAK—A Look Behind the Smoke and Mirrors,” Mobility Dallas, http://www.altinet.net/’mobdaldm/md092896.htm.

“Amtrak Legislative Update,” Friends of Amtrak, November 18, 1997 http://www.trainweb.com/crocon/amtrak.html.

“Amtrak’s Future,” http://www.trainweb.com/travel/future.htm.

“Amtrak Source Book,” Washington, D.C.: National Railroad Passenger Corporation, 1991.

Bradley, Rodger, Amtrak: The U.S. National Railroad Passenger Corporation, Dorset, England: Blandford Press, 1985.

“Congress Acts to Preserve America’s National Passenger Railroad System,” Amtrak Press Release, November 13, 1997, http://www.amtrak.com/bulletin.html.

“Different Tracks,”(broadcast transcript) http://www.pbs.org/newshour/bb/transportation/march97/rails_3.31.html.

Goddard, Stephen B., Getting There: The Epic Struggle Between Road and Rail in the American Century, New York: Basic Books, 1994.

Hosansky, David, “Struggling Amtrak Seeks Share of Federal Highway Money,” Congressional Quarterly Weekly Report, March 29, 1997, p. 737.

Johnson, Bob, “States Show Amtrak the Way,” Trains Magazine, July 1997, p. 36.

“Losing Steam,” (broadcast transcript) http://www.pbs.org/newshour/bb/transportation/july-dec97/amtrak_l1-12.html.

Mitchell, Matthew, “About Amtrak,” Delaware Valley Association of Railroad Passengers, http://www.libertynet.org/dvarp/dvarp.html.

“A New Vision for America’s Passenger Rail,” Committee on Transportation and Infrastructure Working Group on Intercity Passenger Rail, June 1997, http://www.house.gov/transportation/rail/railrpt.htm.

“Perspective—Derailing Amtrak,” Investors Business Daily, November 6, 1997.

Vantuono, William C., “Blue-Ribbon Panel Spells the Blues for Passenger Rail,” Railway Age, August 1997, p. 161.

Wilner, Frank N., “Amtrak at 25: The Railroad That Just Won’t Quit,” Railway Age, May 1996, p. 39.

—Ellen D. Wernick

National Railroad Passenger Corporation (Amtrak)

80 Massachusetts Avenue N.E.
Washington, D.C. 20002
U.S.A.
Telephone: (202) 906-3860
Toll Free: (800) USA-RAIL
Fax: (202) 906-3864
Web site: http://www.amtrak.com

Private Company
Founded: 1971
Employees: 22,000
Sales: $2.07 billion (2003)
NAIC: 482110 Rail Transportation

The National Railroad Passenger Corporation, better known as Amtrak, is the United States' national rail passenger service, providing train transportation between major cities as well as commuter service and delivery of mail and express freight. A private corporation, Amtrak is almost wholly owned by the U.S. Department of Transportation.

The Creation

On May 1, 1971, the first passenger trains operated by the National Railroad Passenger Corporation pulled out of stations around the country, beginning what was depicted as a two-year federal undertaking to revive (and save) long-distance, intercity rail passenger service in the United States.

Congress had created the company the previous year with the passage of the Railroad Passenger Service Act. The Act established a private company, incorporated in the District of Columbia. Most of the new company's stock was owned by the Department of Transportation, and it was governed by a board of directors made up of the Secretary of Transportation, the head of the corporation, and 11 other members, the majority appointed by the president. During its first year of existence, the corporation was known as Railpax. After it began operations, the nickname was changed to Amtrak, a contraction of the words America and track.

Amtrak was charged with accomplishing three goals, described in the Amtrak Source Book as: "To operate rail passenger service on a for-profit basis; to use innovative operating and marketing concepts to fully develop the potential of modern railway passenger service to meet intercity transportation needs; and to provide a modern, efficient intercity rail passenger service." Congress authorized grants of $40 million for operations and loan guarantees of $100 million for new equipment. Direct funding was to last only two years, by which time the corporation was to be completely self-supporting.

Background

By the time Congress created Amtrak, intercity rail passenger service in the United States had been in a 20-year decline. Until the 1950s, railroads were the only way to travel long distances. But during that decade, the federal government began financing the interstate highway system, a $41 billion, 16-year project, and, as jet airplanes were introduced, significantly increased its support for the construction and improvement of airports.

Airplanes, personal automobiles, and buses began competing with the country's railroads for long-distance travel. The railroads responded to the competition with new equipment on their prestige long-distance routes, replacing steam locomotives with diesel engines, and introducing lightweight stainless steel passenger cars with air-conditioning and double glazed windows. But as the number of passengers continued to drop, the rail companies had little incentive to make major capital investments to upgrade their tracks, signaling, stations, and maintenance facilities. Why, they thought, should their profitable freight business subsidize a means of intercity transportation that was competing with systems receiving federal and state tax dollars? By 1958, rail service accounted for just 4 percent of intercity travel.

The decline in rail passenger service and the deterioration of passenger facilities continued during the 1960s. By the end of the decade, the number of passenger trains had dropped to 500, down from more than 20,000 some 40 years earlier, and only 12,000 passenger cars remained in service. Losses from passenger service operations in 1970 came to more than $1.8 billion dollars in 1997 dollars. Most of the loss was on long-distance, intercity travel. Commuter and suburban lines obviously were less affected by airlines and, at least during the 1960s, lost little ridership to buses and private cars. Many of the railroad companies filed applications to get out of the intercity service on most or all of their routes. Among the most critical was the proposal by Penn Central (the merged Pennsylvania Railroad and New York Central Railroad) to eliminate all its passenger service in the Northeast and Midwest.

Federal Action

The Railroad Passenger Service Act allowed the railroad companies to transfer their money-losing passenger operations to Amtrak in exchange for either a tax write-off or Amtrak stock. Only three lines, the Denver & Rio Grande Western, the Rock Island, and the Southern, did not join Amtrak, opting to continue their own passenger service.

The basic network of routes for the new corporation was developed by the Transportation Department with assistance from the Interstate Commerce Commission, the railroad unions, 15 railroad companies, 43 states, some 3,000 members of the public, and numerous U.S. Senators and Representatives. Factors considered in selecting the routes included existing routes, cost, ridership potential, size of the terminal cities (had to have a population of at least one million), and the condition of the tracks and facilities (no funds were allocated for improving these).

Between January and May 1971, as the new corporation got itself organized, a major argument developed regarding the company's objective: was it to reintroduce the traditional, and well-known, long-distance routes of the past, such as the "Empire Builder," "San Francisco Zephyr," and "Super Chief," or should it concentrate on introducing high speed (150 mph) rail corridors? Those two visions of passenger service in the United States would haunt Amtrak for decades.

The 1970s: Amtrak's First Decade

Although it operated in 43 states over 24,000 miles of track, the enterprise Amtrak began managing on May 1, 1971 was hardly a national transportation system. Essentially, Amtrak was a travel broker. It operated 119 passenger trains, a multi-colored assortment of some 1,200 cars—coaches, diners, sleepers, and observation cars—with an average age of 20 years. The individual railroads donated some cars to Amtrak but continued to own the stations, terminals, yards, locomotives, and maintenance facilities, and employed all the people who worked on the passenger trains and in the stations and yards. In its first year, Amtrak leased the crews and equipment, along with the seat reservation, booking, communication, and dispatching systems from the various freight lines. In 1972, Amtrak began buying the diesel locomotives from the railroads and initiated a program of rebuilding and refurbishing the engines to improve on-time performance.

The tracks Amtrak's "rainbow" trains ran on also were owned by the freight companies. For access to the rights of way, which was guaranteed by the legislation, Amtrak paid the freight companies a rental charge. That charge was determined by a formula established in the federal statute. The legislation also gave Amtrak trains priority dispatching over freight trains, but did not address the issue of liability in cases of injuries. Despite the logistical problems and uncomfortable rolling stock, Amtrak was able to keep the passengers it inherited in 1971, and during its first two years even increased ridership.

The creation of Amtrak seemed to generate three conclusions. Some people believed the new entity was really expected to revive intercity rail traffic. The more skeptical seemed to think that this was a last gasp effort and that once the equipment finally gave out, that would be the end of it. Others within the industry and among the passengers saw it as a ruse to eliminate routes in sparsely populated areas while keeping rail service along corridors between major cities in the Northeast and on the West Coast.

None of these occurred after Amtrak's first two years because OPEC, the cartel of oil-producing countries, cut back the production of oil. The resulting energy crunch in 1973 and 1974 caused the price of gasoline (and airline tickets) to increase and lines at gas stations to grow long. Many Americans (and politicians) increased their support of alternative means of transportation, including rail passenger service. Congress approved funding for fiscal years 1972 and 1973 totaling $179.1 million in grants and $100 million in guaranteed loans. In 1973, Amtrak began ordering new equipment.

The new silver trains with the red and blue Amtrak logo attracted more riders and marketing became easier. A centralized and computerized reservations system also helped improve service. During the decade, the company purchased 600 Amfleet and Amfleet II cars and 284 Superliners, including locomotives, coaches, lounges, sleepers, and dining facilities.

Amtrak also began to take control of yard and station facilities, reservation offices, and all personnel except for train and engine crews. In 1972, Amtrak employed about 1,500 administrative and clerical workers. Within two years, as the company assumed responsibility for more of the passenger service operations, employment climbed to 8,500.

Company Perspectives:

We are America's passenger railroad. Our mission is to consistently deliver a high-quality, safe, on-time rail passenger service that exceeds customer expectations.

The Northeast Corridor (NEC)

As Amtrak was placing its equipment orders, the major freight lines in the Northeast were going bankrupt. As creditors, shareholders, railroad unions, and other railroads (who shipped to and from the East) cried for some action, the federal government took a step that would have a huge impact on Amtrak. The Regional Rail Reorganization Act of 1973 created Conrail (Consolidated Rail Corporation), a federally supported freight company made up of seven bankrupt railroads operating in the Northeast. The legislation also supported funding for preliminary engineering work to improve the Northeast Corridor to cut passenger travel times between Boston, New York, and Washington, D.C.

Three years later, following the passage of the Railroad Revitalization and Regulatory Reform Act in 1976, Amtrak acquired 621 miles of right-of way from Conrail. Most of the routes, about 450 miles, were in the Northeast Corridor, from Washington, D.C. to Boston. The acquisition also included lines from Philadelphia to Harrisburg, Pennsylvania; from New Haven, Connecticut, to Springfield, Massachusetts; and from Porter, Indiana, to Kalamazoo, Michigan. For a switch, now freight trains would have to pay Amtrak to use these rails. As part of the legislation, Congress authorized $1.9 billion over five years to rebuild and improve the tracks and facilities in the NEC.

Along with the tracks, Amtrak also came into possession of rail yards, maintenance facilities, and all the stations along their new routes. The real estate included Pennsylvania Station in New York City and 30th Street Station in Philadelphia, along with some 100 smaller station properties, and half interests in Chicago's Union Station and in Washington, D.C.'s Union Station. With these acquisitions, Amtrak employment nearly doubled, to 16,500, as the company assumed new operations and maintenance responsibilities.

The capital investments made to reduce travel time in the Northeast Corridor by rebuilding tracks and introducing new equipment received most of the attention during the late 1970s. But development was begun on another high-speed corridor, between Los Angeles and San Diego, and other corridors were being studied for high-speed potential.

During the last half of the 1970s, Congress changed the way it financed Amtrak's capital improvements. Instead of loan guarantees, which had mounted to $900 million between 1971 and 1975, or a designated source of income as was provided for highways and airports, Amtrak began receiving direct capital grants, which had to be requested and approved annually, making it difficult to plan and finance capital investments. Amtrak continued to receive separate annual operating grants.

The company's annual revenue during the decade averaged $252 million, and represented less than 40 percent of its operating expenditures. The growing deficits led the Carter Administration to push for more efficient operations and cuts in costs. Proposals to eliminate routes as a means of reducing costs generally went nowhere as Senators and Representatives fought to keep trains running in their states, whether the routes were profitable or not. In fact, by 1977, the number of miles in the Amtrak system had grown to 27,000. Finally, under restructuring in 1979, several routes were dropped as the basic network was cut to 24,000 miles.

1980s: Amtrak's Second Decade

During the 1980s, Amtrak continued to move from supervising to operating the nation's passenger rail system. Early in the decade, Amtrak installed its new Arrow reservation system, with faster computers, and acquired the last non-Amtrak intercity passenger train, the Rio Grande Zephyr, from the Denver and Rio Grande Western.

In 1983, Amtrak, for the first time, directly employed engineers, conductors, and their assistants, beginning on Northeast Corridor trains. The takeover of the operating crews continued for the next several years, until, by 1987, Amtrak employed most of the crews operating passenger trains around the country. After 1982, under Amtrak's bargaining agreements, crews were paid based on a 40-hour work week, not on mileage and other factors as had been the case with the freight lines.

The company also expanded its position in the commuter train business, taking over the commuter trains in the northeast previously operated by Conrail. The company set up a wholly-owned subsidiary, Amtrak Commuter Services Corporation, to oversee its commuter operations.

Amtrak's partnerships with various states improved passenger service in their jurisdictions. Under Section 403(b) of the legislation that established it, Amtrak could operate intercity trains or routes funded by states. California, for example, paid for more trains between Los Angeles and San Diego, in the San Joaquin Valley, and, eventually, between San Jose and Sacramento. New York was one of the first to take advantage of Section 403(b), improving passenger service for the New York-Albany-Buffalo corridor.

But the core route and services faced financial cuts as the Reagan Administration convinced Congress to significantly reduce both the operating and capital grants each year. As President Reagan told an audience, "On the New York to Chicago train, it would cost the taxpayer less for the government to pass out free plane tickets."

Most historians agree that things would have been even worse for Amtrak except for Graham Claytor, a lawyer and railroad executive and the new president and CEO of Amtrak. According to Stephen Goddard, "The grandfatherly attorney left his comfortable office … to give Amtrak what it needed—credibility before Congress, in whose hands the troubled railroad would rise or fall." Yet even as the cuts were being made, when Reagan fired the striking federal air traffic controllers, people turned to intercity trains.

Key Dates:

1971:

The National Railroad Passenger Corporation is created by an Act of Congress to supervise the country's rail passenger train service.

1981:

Congress petitions Amtrak to cut back on federal support dollars.

1983:

Amtrak shifts from a supervisory to an ownership role of the rail services, employing crews and centralizing reservations.

1994:

Given the company's impressive revenues, Congress demands that Amtrak become a self-sufficient corporation.

1997:

On the verge of bankruptcy, Amtrak continues to rely on federal subsidies.

2000:

Amtrak debuts the Acela Regional passenger service linking Boston, New York, and Washington, D.C.

2004:

Amtrak avoids insolvency, being approved for $2 billion a year in assistance for six years.

In 1981, Congress told Amtrak to make better use of all its resources to minimize federal support. In addition to revenues from the commuter and 403(b) trains, by 1981, Amtrak's real estate revenues were generating about $9 million a year. In 1984 the company acquired the remaining one-half interest in Chicago Union Station.

To help increase its assets, the company established a corporate development department. One of its ventures was to lease the NEC right-of-way to telecommunication companies for installing fiber optics communications systems. MCI Communications was the first company to enter into such a lease, with MCI providing Amtrak with specific fibers and communication circuits as well as with cash. Amtrak used those high capacity circuits for their own network and marketed and leased them to large telecommunication users. Amtrak also turned to mail and express freight service for additional income.

In 1985, Amtrak's supporters argued that shutting down Amtrak completely would result in costly drops in productivity due to traffic jams and crowded airports in the major corridors, especially in the northeast. The prospect of more cars and planes (and the resulting pollution) effectively dampened enthusiasm for eliminating all support for Amtrak, at least for a while.

In 1986, Amtrak became the dominant carrier between New York and Washington, with 38 percent of the total air-rail market. In 1989, the company began another period of capital investment, as Amtrak purchased 104 short-distance passenger cars to alleviate crowding on routes in the Midwest and in California's San Joaquin Valley.

By the end of the decade, Amtrak operations were bringing in more than $1.2 billion in revenues. But with operating expenses in fiscal 1989 of nearly $2 billion, it continued to have an operating loss larger than the $554 million operating grant it received from the federal government. The general capital grant fell from $221 million in fiscal year 1981 to $2 million in fiscal 1986 then averaged $34 million for the rest of the decade.

1990s: Moving Toward Self-Sufficiency

In 1994, Congress and the Clinton Administration demanded that Amtrak operations become self-sufficient by 2002. To accomplish this, the company, under new CEO Thomas Downs, adopted a strategic and business plan for the period 1995 to 2000. As part of the plan, Amtrak decentralized itself into three business units to increase accountability and responsiveness: Northeast Corridor, covering services from Virginia to New England; Amtrak West, which operated state-supported corridor trains and the long-distance Coast Starlight on the West Coast; and Amtrak Intercity, responsible for most of the long-distance routes as well as corridor trains in the Midwest. The company also began raising fares, cutting routes and service, and implementing cost reduction programs for its operations.

However, Amtrak needed new rolling stock to replace old equipment, to achieve better travel times, and to meet the requests from states for new intrastate rail services. Through 1990, Amtrak had spent $1.6 billion for cars and locomotives and the capital investment continued during the decade with the delivery of new diesel locomotives, 195 bi-level Superliners, and, in 1996, 50 Viewliners, the first single-level sleeping cars made in the United States in 40 years. In California, 14 new dual-level dining cars were introduced on the state-supported routes, and in Washington, three pendular "tilt" Talgo trains were ordered by Amtrak and the Washington Department of Transportation for delivery in 1998. Trains able to travel 150 miles an hour were added to service the Northeast Corridor beginning in 1999.

Although revenues increased to $1.6 billion in fiscal year 1996, debt and capital lease obligations were almost $1 billion. By 1997, Amtrak was in danger of going bankrupt (in December of that year Downs resigned as CEO and a search was underway for his successor). Congress debated the company's request to designate one-half cent of the Interstate Highway Trust for capital expenditures, but instead passed a tax rebate package of $2.3 billion for Amtrak capital spending over two years and adopted a package of reforms changing various labor requirements, allowing Amtrak to alter the basic system of routes inherited in 1971, setting a cap on liability costs, and establishing a new Reform Board. Funding for the Department of Transportation for fiscal year 1998 included $344 million for Amtrak operations and $250 million for Northeast Corridor capital. It also included $23 billion for highways, $9 billion for aviation, and $4 billion for transit.

Growing Budgets and High Speed Service in the 2000s

Despite the shakeup at the top and numerous skeptics, Amtrak survived. The company continued its efforts to improve service, spending $26.6 million to overhaul 212 passenger cars. Buttressed by the Taxpayer Relief Act of 1997 Amtrak launched a $360 million capital improvement program. They spent $100 million for eight new five-car train sets for San Diego service, purchased eight locomotives, 64 carriers, 43 coaches, several improved refrigerator cars, and numerous expensive equipment updates. New lines and improved travel times resulted in several cities. In December 1998 Amtrak agreed to purchase 44 RoadRailer Mailvans. Acting President and CEO George D. Warrington cited increasing rail revenues—which had been rising 10 percent each year—as reason for the investment, which he stated could only bolster their bottom line.

In January 1999 the Department of Transportation released a report accusing Amtrak of underreporting its losses, stating specifically that the 1998 year's loss was not the reported $95 million, but $854 million. A brief flap followed, but some in Congress pointed out that it was difficult for Amtrak to succeed when expectations for them constantly changed. Warrington continued to assemble a new management team, envisioning an Amtrak that featured high speed rail corridors across the country and high-quality service. Statistics backed up Warrington's assertions that Amtrak continued to improve—between 1998 and 1999 the percent of riders was the highest it had been in a decade, on-time arrival was the highest it had been in 13 years, and passenger revenues had topped $1 billion for the first time.

In March 2000 Amtrak introduced the Acela Regional passenger service, creating the long-awaited electrification of the Northeast Corridor linking Boston, New York, and Washington, D.C. The result was a reduction in travel time from Boston and New York by up to 90 minutes. Further improvements were unveiled in November 2000, after months of delay. The Acela Express, the nation's first high-speed rail system began travelling the Northwest Corridor's tracks at up to 150 miles per hour, reducing a Boston to New York trip to 3 hours and 15 minutes, a New York to Washington, D.C. trip to 2 hours and 28 minutes. The Acela beat its projected profits by 12 percent in the first quarter of 2001 and launched Amtrak into its most profitable year yet. The success prompted Congress to reconsider a controversial bill to allow Amtrak to issue bonds to raise $12 million dollars for the high-speed rail system.

Rail use rose significantly due to security concerns in the wake of the terrorist attacks of September 11, 2001, and Congress allocated over a billion dollars to improve Amtrak's security. Yet Congress had legislated a time bomb for Amtrak in 1997 that was set to go off by December 2002. Amtrak was to attain self-sufficiency by that December or prepare for liquidation. By December 2001, CEO Warrington was told by the federally appointed Amtrak Reform Council that he would have to prepare a liquidation plan. Amtrak was absolved of the responsibility to prepare its own liquidation plan by a defense act signed into law by President Bush in early 2002, but was told they still needed to attain self-sufficiency. Numerous ideas were floated by congressional agencies, including breaking Amtrak up into separate privatized industries.

In July 2003 two competing funding plans warred for prominence. The Bush administration announced that it would allocate $90 million, while a house committee approved a bill that would fund the company for $6 billion over the next three years. Congressional debate continued, with Senator John McCain and the Bush administration arguing for breaking Amtrak up and selling it. They faced stiff opposition from both Democrats and other Republican congressional leaders. By February 2004 the Amtrak supporters had won, and Amtrak was approved for $2 billion a year for six years.

Amtrak had won at least a reprieve. By the fall of 2004 it looked as though the company would remain intact, though it still faced significant hurdles. Throughout its history it was funded at a rate tens of times lower than the rate at which Congress has funded highways and aviation, and continued to own little of its own track. Still, with the new high-speed trains, rising passenger rates, and improved funding, the future looked, if not rosy, then far more promising than it had in many years.

Principal Competitors

Greyhound Lines Inc.

Further Reading

Bradley, Rodger, Amtrak: The U.S. National Railroad Passenger Corporation, Dorset, England: Blandford Press, 1985.

DePalma, Anthony, "Amtrak Tries to Learn How to Run a Railroad," International Herald Tribune, February 4, 2002, p. 2.

Goddard, Stephen B., Getting There: The Epic Struggle Between Road and Rail in the American Century, New York: Basic Books, 1994.

Hosansky, David, "Struggling Amtrak Seeks Share of Federal Highway Money," Congressional Quarterly Weekly Report, March 29, 1997, p. 737.

Johnson, Bob, "States Show Amtrak the Way," Trains Magazine, July 1997, p. 36.

Miller, William H, "Amtrak's Unforgiving Timetable," Chief Executive (U.S.), December 2001 p. 29.

"Perspective—Derailing Amtrak," Investors Business Daily, November 6, 1997.

Vantuono, William C., "Blue-Ribbon Panel Spells the Blues for Passenger Rail," Railway Age, August 1997, p. 161.

Wilner, Frank N., "Amtrak at 25: The Railroad That Just Won't Quit," Railway Age, May 1996, p. 39.

—Ellen D. Wernick

—update: Howard A. Jones

National Railroad Passenger Corporation

VARIANT NAME: Amtrak

Contact Information:

HEADQUARTERS: 60 Massachusetts Avenue N.E.
Washington, DC 20002
PHONE: (202)906-3000
FAX: (202)906-3306
TOLL FREE: (800)872-7245
URL: http://www.amtrak.com

OVERVIEW

Amtrak provides inter-city rail service for the United States. It operates approximately 600 facilities in 46 states utilizing a rail network encompassing 22,000 miles, most of which is owned and operated by freight railroads. Amtrak pays a fee to the freight railroads in exchange for use of their networks. Amtrak's most important service areas are the Northeast Corridor, which extends from Massachusetts to Virginia, and Amtrak West, which operates primarily in California, Oregon, and Washington. Amtrak operates about 265 passenger trains every day and serves more than 20 million passengers each year. In addition to its regular passenger service, Amtrak acts as a contractor for various commuter rail lines, performing rail and train maintenance, and in some cases operating the service. Although it was originally founded to provide passenger rail service, freight and mail delivery have become important to Amtrak's selection of services.

Amtrak is a private corporation, owned by the U.S. government through the Department of Transportation. The President of the United States appoints the Amtrak board of directors. They appoint the president of the company. The company is organized into four strategic business units (SBUs) set up along primarily geographical lines. The Northeast Corridor SBU manages Amtrak's eastern seaboard service that serves Boston, New York City, Philadelphia, Baltimore, and Washington DC. The Amtrak West SBU runs Amtrak's West Coast service, which includes daily schedules in southern California and the Pacific Northwest. Amtrak's Intercity SBU operates the vast rail network in the center of the nation, including traffic into and out of Amtrak's Mid-Western hub in Chicago and its long-distance service between the coasts and the Gulf of Mexico. The fourth SBU, Mail and Express, operates Amtrak's freight and mail transport business.

COMPANY FINANCES

Amtrak reported revenues of $2.1 billion for 2001. Amtrak had 23.5 million passengers in 2001 and ticket sales accounted for more than one-half of the firm's total revenues. In 2000 Amtrak's revenues totaled $2.11 billion. That year the Northeast Corridor SBU alone was responsible for more than 50 percent of Amtrak's revenues. Broken down by activity, passenger traffic accounted for approximately $1.28 billion of Amtrak's 2000 revenues, more than 60 percent of the total. The greatest growth in the passenger sector took place in Amtrak's Northeast Corridor service. Commuter service brought in about $274 million. Mail and freight shipping accounted for $122 million in 2000 revenues, an increase of 24.8 percent over 1999. Other activities, mainly the provision of maintenance and operational services to other railroads, real estate operations, and rail access fees, brought in about $326 million in 2000.

Amtrak had operating expenses totaling $2.88 billion in 2000, up 8 percent from $2.66 billion in 1999. In its 30-year history, Amtrak has never had a year in which it turned a profit. In 2000 only a single service route, the high-speed-rail Metroliner between New York City and Washington DC generated a profit. Amtrak recorded a net loss of $768 million in 2000, up from 1999's loss of $702.2 million. In 2000 about $112 million of Amtrak's revenues came from the federal and state governments. The federal subsidy was the lowest in the company's history. Amtrak has publicly stated its belief that some level of financial support from the U.S. government will always be necessary. However, a law passed in 1997 requires Amtrak to operate without benefit of aid by the beginning of 2003. If it cannot achieve this goal, the company can be reorganized or liquidated.

ANALYSTS' OPINIONS

The General Accounting Office's (GAO) outlook for Amtrak is bleak. Like the rail service itself, the GAO is convinced that the company will not be able to support its operations without ongoing financial support from the federal government. A GAO report in mid-2001 pointed out that between 1996 and 2001, Amtrak was able to move $83 million closer to self-sufficiency. However, the firm would have to make up another $281 million in order to be completely self-sufficient by the end of 2002, as mandated by federal law. "The outlook for it achieving operational self-sufficiency," the GAO report commented dryly, "is dim." The GAO went so far as to question the very basis of Amtrak's existence, maintaining that the benefits sometimes attributed to a passenger rail system might be illusory. Passenger trains play only a minor part in the U.S. transportation system; Newsweek once estimated that Amtrak carries less than one percent of intercity travelers in the United States. "If that role were greater", the GAO writes, "Amtrak would have to make its prices, schedules, and travel times competitive with airlines, buses, and other transportation modes. That would entail putting more trains and faster trains into service, a large investment Congress might be unwilling to make without an honest, comprehensive study of the future of passenger trains in the United States."

HISTORY

Amtrak was founded by Congress as a response to the collapse of the U.S. passenger rail industry after World War II. By 1970 train riding had fallen to about one-half of its 1940 level. Railroads were losing millions of dollars annually and wanted out of the business; however, in order to operate their profitable freight services, they were required by law to offer passenger service as well. President Richard Nixon suggested the formation of a semi-public corporation that would take over all passenger rail service in the United States. Proponents of the plan claimed that if the company reorganized, about 80 percent of the existing U.S. system could operate profitably. In October 1970 Congress passed the Rail Passenger Service Act which established the National Railroad Passenger Corporation. Amtrak was officially launched in April 1971.

Plans for streamlining the U.S. passenger service were challenged almost immediately. Various members of Congress demanded priority for their respective states when rail services were being restored. Some states contributed funds of their own to guarantee that service would continue. The first Amtrak trains ran on May 1, 1971. The first year was difficult. Under-funded, under-staffed, and unable to compete with airlines, the railroad flirted with bankruptcy. In 1975 Amtrak estimated that it would lose $75 million a year even if it sold every seat on every train. Only the geographically compact Northeast Corridor, where trains offered a viable alternative to the airlines, was relatively successful. This sector represented only two percent of the entire rail system. In 1975 a plan to bring European or Japanese-style high-speed trains to the Corridor routes was developed; the first high-speed trains went into service in December 2000.

In 1979 Amtrak's president proposed, unsuccessfully, that Congress undertake a radical reexamination of Amtrak's mission and allow it to be run as a public service rather than as a money-making venture. Recommendations from the Secretary of Transportation and the Office for Management and Budget urged the government to cut Amtrak's subsidies. The corporation continued to operate after President Ronald Reagan assumed office. In 1985 the Director of Management and Budget, David Stockman, called for its complete dissolution. An alliance of Congressmen, railroad workers and train buffs took action and persuaded Congress to renew Amtrak's subsidy in 1986. The mid-1990s saw a jump in Amtrak riders, from 149 million to 441 million. Nonetheless, financial shortfalls continued to threaten the service with discontinuation.

Despite a general organizational restructuring, Amtrak's losses grew in the latter half of the 1990s. The Amtrak Reform and Accountability Act of 1997 altered the mission of the service substantially. The Act repealed the requirement that Amtrak operate a "basic route system" which enabled the company to unilaterally shut down unprofitable lines. The law also permitted the company to use contractors for certain work and established the Amtrak Reform Council to evaluate Amtrak's performance.

Still plagued by losses, Amtrak's future was very much in question in early 2002. Still bound by the requirements of the 1997 Reform and Accountability Act, the company needs to operate independently by January 2003. If this does not happen, the Reform Council could recommend closing down the service. In 2002, Congress urged President George W. Bush to formulate a plan for the railroad's future. Various Congressmen proposed plans including options for higher subsidies, privatization, and dissolution of the service.

FAST FACTS: About National Railroad Passenger Corporation

Ownership: National Railroad Passenger Corporation is a private company almost wholly-owned by the U.S. government.

Officers: George D. Warrington, Pres. and CEO; Edward V. Walker, Pres. Amtrak Inter-city; E.S. Bagley, Jr., Pres. Northeast Corridor; Gilbert O. Mallery, Pres. Amtrak West

Employees: 24,000

Chief Competitors: Some primary competitors include Greyhound, Delta Airlines, and AMR.

CHRONOLOGY: Key Dates for The Amtrak Corporation

1970:

Congress passed the Rail Passenger Service Act establishing the National Railroad Passenger Corporation

1971:

First Amtrak trains run

1979:

Amtrak asks to be restructured as a public service rather than a profit-making company

1985:

David Stockman calls for Amtrak's dissolution

1986:

Special interest alliance persuades Congress to renew Amtrak's subsidy

1997:

Congress passes Amtrak Reform and Accountability Act

2002:

Congress urges Bush administration to formulate a plan for Amtrak's future

STRATEGY

Amtrak's Network Growth Strategy, inaugurated in 2000, was a plan to expand and diversify the firm's rail services. A new business unit created Mail and Express to oversee Amtrak's growing freight and mail transport business. The company also entered into an agreement with ExpressTrak LLC that provided Amtrak with 350 refrigerated railcars over a 15-year period. In 2000 Amtrak expanded its Northeast Corridor service with the addition of the United States' first high-speed train, the Acela Express, running between Boston and Washington DC. In 2002 Amtrak proposed a series of strategic cutbacks as a way out of its finance crisis. If put in place, the cutbacks would abolish virtually all of Amtrak's long-distance routes.

INFLUENCES

The terrorist attacks on September 11, 2001, caused Amtrak's number of riders to increase temporarily. It declined after the government approved an aid package for the airlines. The firm's 30-year financial crisis will come to a head in 2002 as it nears the self-sufficiency deadline, mandated by Congress in 1997. Various plans have been proposed as alternatives if the company does not achieve financial independence by the deadline. Amtrak mortgaged part of Penn Station in New York City for $300 million and threatened to end long-distance rail service in the United States in response to the seriousness of its financial situation.

CURRENT TRENDS

A large part of Amtrak's plan for the future is the introduction of high-speed rail service, similar to services offered in Europe and Japan. High-speed rail, which means that trains travel at up to 150 miles per hour on special tracks, is a key element in Amtrak's plan to make rail service competitive with airline travel. Amtrak began testing high-speed rail service in 2000 and by early 2002 had 20 trains in service between Boston and Washington DC. Amtrak hopes to eventually introduce high-speed service on the West Coast and in other important intercity lines in the country.

PRODUCTS

In addition to its passenger, mail, and freight services, Amtrak offers its 30 years of equipment expertise to railroads and other rail-related bodies. Its services include equipment design and engineering, locomotive and passenger car repairs and overhauls, specialized train components, and wreck repair. Its customers include three railroads, six commuter rail authorities, a state department of transportation, and two private rail companies.

GLOBAL PRESENCE

Amtrak offers daily rail service from Chicago and Detroit, through Southeastern Ontario to Toronto, Canada. Amtrak also partners with the Canadian National Railroad for mail delivery.

GETTING STATES INVOLVED

Individual states have proven to be valuable partners to Amtrak. Rather than lose local rail service altogether, some states stepped in with money of their own to supplement Amtrak's declining federal subsidies. Washington State, for example, owns its own trains and pays Amtrak to operate inner-state lines. Similarly, North Carolina owns an entire railroad and hires Amtrak to run the trains and maintain the stations. Other states, like Texas, provided financing so that Amtrak would not discontinue its existing service.

EMPLOYMENT

About 90 percent of Amtrak employees are unionized, and more than half of Amtrak's annual budget is for salaries, wages, pensions, and other benefits. Amtrak offers its onboard employees comprehensive training in guest services.

SOURCES OF INFORMATION

Bibliograhpy

amtrak home page, 2002. available at http://www.amtrak.com.

arnold, lawrence. "proposed long-distance cuts would spell end to national rail system." associated press business news, 5 february 2002.

clinger, robert. "amtrak reformists should learn from uk." financial times, 8 march 2002.

"coming soon: the death of passenger trains?"u.s. news & world report, 29 april 1985.

hecker, jayetta z. "intercity passenger rail: the congress faces critical decisions about the role of and funding for intercity passenger rail systems." washington dc: general accounting office, 2001.

Hightower, Brendan. "Break-up and Partial Sell-off Put Forward as Way to Rescue U.S. Railways." Financial Times, 14 February 2002.

"Intercity Passenger Rail." Washington, DC: General Accounting Office, 1998.

"McCain Proposes Abolishing Amtrak, Turning Rail over to Private Sector." Associated Press, 15 February 2002.

Moore, Stephen. "Scamtrak." The Weekly Standard, 24 December 2001.

Noah, Timothy. "How Amtrak Can Save Itself?"Slate Magazine, 25 November 2001.

Perlman, Ellen. "Rail's Resurgence." Governing Magazine, September 1999.

Samuelson, Robert J. "The Parable Of Amtrak."Newsweek, 3 November 1997.

——. "Why Amtrak Must Go." Newsweek, 7 March 1988.

Sanchez, Humberto. "Senate Committee Leaders Push Bush Administration for Rail Plan." Bond Buyer, 15 March 2002.

Shaw, Russell. "Amtrak Offers Budget Cuts to Avoid the End of the Line." Insight on the News, 23 January 1995.

Sobel, Robert. The Fallen Colossus, New York, 1977.

Vranich, Joseph. Derailed. New York, 1998.

——. "Q: Should Congress Phase Out the Amtrak System Within the Next Two Years?; Yes: Halt Amtrak's Money-losing System and Let Private Operators Handle the Rails." Insight on the News, 24 November 1997.

For an annual report:

on the Internet at: http://www.amtrak.com/about/reports.htmlor write: Amtrak, 60 Massachusetts Avenue N.E., Washington, DC 20002

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. National Railroad Passenger Corporation's primary SIC is:

3743 Railroad Equipment

Also investigate companies by their North American Industry Classification System codes. National Railroad Passenger Corporation's primary NAICS code is:

482111 Line-Haul Railroads

National Railroad Passenger Corporation

60 Massachusetts Avenue NE
Washington, D.C. 20002
USA
Telephone: (202) 906-3000
Fax: (202) 906-3306
Web site: www.amtrak.com

LIFE ON ACELA CAMPAIGN

OVERVIEW

By the late 1990s the National Railroad Passenger Corporation, popularly known as Amtrak, was ready to embrace high-speed rail transportation. High-speed trains had been in operation for years in Europe and Japan, and Amtrak had come off poorly in comparison with those systems. The initial Amtrak high-speed train-sets (consisting of high-speed engines and redesigned coaches) were to run in the Northeast Corridor, between Boston and Washington, D.C., the area in the United States where train usage was heaviest. The new trains, named Acela (pronounced a-cell-a), were to replace the diesel and electric Metroliners, which had served customers for years. In 1998 Amtrak chose the ad agency DDB Needham to handle the rebranding and market the new trains to the public.

The rebranding campaign had an initial annual advertising budget of $20 million. The Acela rebrand actually encompassed all of the Northeast rail service, not just the high-speed trains. The initial advertising campaign for the new trains, dubbed "Life on Acela," emphasized the comfort and amenities on the new passenger cars in addition to the convenience of shorter traveling times on the express and regional trains. The first four spots began appearing in Northeast movie theaters on June 4, 1999; they were run prior to feature films with the purpose of familiarizing the public with the Acela name. Those initial spots were coupled with Star Wars: Episode I—The Phantom Menace. One of the commercials, titled "Unwind," featured a man suddenly relaxing amidst the rush-hour crush. The tagline was "Find a better place. Life on Acela." The theater spots were followed by posters placed at heavily trafficked sites—including air-ports—in Boston, Manhattan, and Washington, D.C.

Because of a number of delays in rolling out the trainsets themselves, gauging the effectiveness of the "Life on Acela" campaign proved difficult. By the time the Acela trains did begin running (the Regional in January 2000 and the Express the following December), passengers were aware of the new brand, though it often caused confusion because the Acela name, which many associated with high-speed rail travel, was used for the entire spectrum of Northeast rail service.

HISTORICAL CONTEXT

There were a number of factors that influenced Amtrak's decision to adopt the Acela service. First and foremost was the success of the European and Japanese high-speed trains, which reached speeds in excess of 150 miles per hour. Because railway stations tended to be more conveniently located than airports, these bullet trains had been trumpeted as the modern, comfortable mode of travel for the savvy customer. Americans had endured slower trains for years with a resultant falloff in ridership.

The second reason for Amtrak's decision to convert to Acela was far more quotidian: finances. Since its establishment on May 1, 1971, Amtrak had never achieved the ideal of financial self-sufficiency. In fact, despite receiving ever-increasing annual federal subsidies, it continued to lose money. After U.S. Congress passed a law in 1997 that would end the federal operating subsidies by 2003, Amtrak hoped to win back riders with a new, improved service—at a higher cost for travelers.

Huge investments were made to upgrade not only the trains but also the tracks themselves, especially the stretch of tracks from New Haven, Connecticut, through Providence, Rhode Island, to Boston, where diesel engines had previously been running. The tracks were electrified as part of the changeover to Acela service. Tracks along the less popular routes in the Northeast remained unelectrified, however.

TARGET MARKET

The target market consisted of travelers in the northeastern United States. The Northeast was chosen because it had the highest daily train ridership in the country and thus was potentially the most profitable. This market was divided into three segments. The primary segment consisted of business travelers going back and forth between Boston, New York, and Washington, D.C. As Judith Schoolman reported in the New York Daily News, Amtrak's share of business travelers between Washington and New York was already competitive with airlines. It lagged far behind the airlines, however, in transporting business travelers between Boston and New York. In October 1999 Amtrak also announced tentative plans to extend the express service to Richmond, Virginia.

The second segment of Acela's target market was regional travelers—those traveling within a given region of the Northeast, such as southern New England or the mid-Atlantic states. Regional ridership in the Northeast had been increasing throughout the 1990s, a trend that was expected to continue once Acela was installed. The final segment of the Acela target market consisted of daily commuters. Because Acela ticket prices would not be competitive with prices for existing commuter trains, this was the least profitable and most problematic group.

BREAKING THE RECORD

On October 11, 1999, during testing in Rhode Island, a high-speed Acela train set a new U.S. train-speed record of 168 miles per hour. Back in March 1999 an earlier version of the Acela also reached a speed of 168 mph, but that was on a closed test track. The October record was reached on a stretch of track between Warwick and Kingston, Rhode Island. The previous record, set by a Metroliner during testing decades earlier, was 160 mph.

COMPETITION

Amtrak faced stiff competition from airlines, interstate bus companies, regional train companies, and another important in the compact Northeast, America's car culture. Each of these modes of transportation posed a different stumbling block to Amtrak's goal of financial independence. Though more expensive than trains, airlines cut traveling time greatly between the major cities along the Northeast Corridor. Interstate bus companies and local and regional train services (such as Metro North and New Jersey Transit) offered lower rates than Amtrak. In the case of the latter, the trains often ran on the same tracks as Amtrak trains. Automobiles offered the double bonus of less expense and the convenience of door-to-door service.

Airlines lured customers—business travelers in particular—with short hops between Boston and New York City. A person could conceivably fly to a business meeting in one city in the morning, a second meeting in another city in the afternoon, and return home by evening. Not even the fastest train could match that.

MARKETING STRATEGY

To counteract the competition's various selling points, DDB devised the "Life on Acela" campaign. The first task for DDB and Amtrak was to overcome customer unfamiliarity with the brand. This was done initially through movie-theater spots, which began airing in June 1999, and the subsequent poster campaign. The idea was to familiarize people with the new brand name, Acela, which played off the word "accelerate."

The campaign also needed to make consumers aware that Acela was actually two different services that served three segments of travelers. Acela Express, with a top speed of 150 miles per hour, had all-new cars and amenities and catered primarily to business travelers, while the Acela Regional, which also ran on the electrified tracks at a top speed of 125 miles per hour, was intended to serve commuters and occasional travelers.

In a 1999 article in the New York Times Stuart Elliott interviewed Barbara Richardson, who was then Amtrak's executive vice president for marketing. Describing the philosophy behind the campaign, she said, "It's not just about a train ride. Acela is a big departure for us, representing a really new change in direction…. The campaign is meant to signal to people who have not considered us previously that we offer a service they perhaps had not expected from us previously."

In that same article Abigail Kolodny, an account planner at DDB, explained the campaign's approach vis-à-vis the competition, noting, "Travelers for the most part said that travel by car or plane interrupts their lives. But Acela lets you continue your life while traveling, working, eating, meeting." The "Life on Acela" campaign thus argued that Acela trains met the traveler's needs better than other modes of transportation. The Acela Express trainsets featured redesigned coaches. The new amenities included larger windows, chairs that swiveled, conference tables for conducting business, bistro-like café cars with improved menus, and a quiet car where cell phones were not allowed.

The posters, which appeared in June 1999, employed what Elliott described in his article as "surreal imagery" coupled with pithy slogans that alluded to Acela travel for businesspeople. These included "Arrive at a decision," "Be productive. Do nothing," "Brainchild on board," "Find lost time," "Return your mind to its upright position," and "Transfer between left and right brain." Discussing the posters, Ken Shuldman, group creative director at DDB, explained to Elliott, "What we intentionally tried to do was to create an Acela 'language,' visual and verbal, to interpret this new mindset of traveling. It's very optimistic, reflecting the feeling of what the train means to Amtrak." He further commented, "At the heart of the campaign is the human benefit of travel … You can walk into a meeting and say something intelligent because the ride didn't dehumanize you."

In late summer 1999, because of delays in starting up the Acela service, the campaign's emphasis shifted slightly. Amtrak had originally scheduled to begin the yearlong phase-in of Acela before Christmas 1999, but during tests in Colorado it was discovered that there was a problem with the suspension system, which caused the wheels to wear down quicker on curves. The initial Express service was rescheduled for spring 2000. As reported by Russell Garland in the Providence Journal-Bulletin, Amtrak officials themselves were taking to the road to promote the delayed Acela service, reinforcing the Acela brand to 40 major corporations in Providence alone. Among those officials was then-president of Amtrak's Northeast Corridor, Stan Bagley, who declared that the Acela Express would sell itself once regular service began between Boston and Washington, D.C.

WHAT'S IN A NAME?

The name Acela was developed by the design company IDEO in conjunction with Amtrak managers. According to Brent Oppenheimer, creative director of IDEO, the word was a combination of the words "acceleration" and "excellence." The name "Acela" was one of 400 original possibilities, but the short list came down to three. Of the other two words, one retained the "metro" prefix—already in use for Amtrak's Metroliner—while the other suggested relaxation. Before it was chosen as the new rebrand, "Acela" passed three hurdles: focus-group tests, Amtrak officials, and whether or not it had negative connotations in other languages. As to the latter, some pointed out that, though it was simply a neologism, "Acela" seemed etymologically related to the Spanish verb acelerar (to accelerate).

In an article by Sharon Klahr in Advertising Age's Creativity, Steven Landsberg of DDB pointed out that the campaign's "real focus is on creating anticipation of Acela's arrival. Rather than taking a more conventional approach and talking about speed and how it minimizes the time, we wanted to talk about how Acela maximizes time. It's a really smart, subversive way to look at it."

OUTCOME

Not everyone responded positively to the Acela advertising campaign, especially the posters. Some thought the message was lost in the strangeness, prompting Joseph T. DiVincenzo, a senior vice president for marketing at Amtrak, to come to ads' defense. "We want people to stare at it and question it and scratch their heads and say, 'What is this?'" he told Chip Jones of the Richmond Times-Dispatch.

In fact, public awareness and anticipation (though some of it was cynical) grew in the months during the delay of the first Acela trains. Thus, when the Acela Regional made its debut on January 31, 2000, there was much fanfare. The train departed from Boston's South Station heading for New York City by way of Providence and New Haven. Because of the electrification of the lines between New Haven and Boston, the trip was "seamless"; there was no change of locomotives in New Haven from diesel to electric. Furthermore, the electric train ran faster than the diesel, cutting travel time between New York and Boston from about five hours to slightly less than four.

In mid-March Amtrak reported that 43,028 riders had boarded the four Acela Regional trains in operation during the first month of service. This represented an approximately 50 percent increase in ridership compared to February 1999. Amtrak also noted that Acela's on-time rate was 85 percent during its first month. Once the bloom was off the Acela Regional, the percentage increase shrank. Nevertheless, by October 2000 ridership was up 11 percent, and revenues had increased by 22 percent.

Meanwhile, the much-anticipated, $1.7 billion Acela Express was delayed yet again. And despite the effort of the "Life on Acela" campaign, the focus of the Express was still on the high-speed aspect. As Amtrak lobbied Congress for $10 billion for high-speed rail improvement, critics began to question whether the high-speed aspect would be enough to make rail service competitive with air travel.

An inaugural run of the Acela Express took place on November 16, 2000, and regular service began on December 11, 2000. The first regular Acela Express left Washington, D.C., at 5 a.m. and arrived at New York City's Penn Station at 7:47 a.m., just three minutes behind schedule. The run from New York to Boston was 12 minutes behind schedule.

Even before the terrorist attacks in New York and Washington, D.C., on September 11, 2001, which briefly grounded and then extensively crippled airlines, Amtrak ridership in the Northeast was on the increase. For the third quarter of 2001 Amtrak's share of the Washington-to-New York market was 53 percent. The company also saw its share of the New York-to-Boston market increase to 35 percent. Amtrak as a whole fared worse. By the end of 2004 it still had not reached self-sufficiency and in fact posted a net loss of $1.3 billion for the year, with sales and employee growth each down more than 10 percent. Furthermore, Amtrak was never able to resolve the confusion engendered by the Acela rebrand for Regional as well as Express services and dropped the Acela name from the Regional service in 2003.

FURTHER READING

"Amtrak Trumpets Ridership on New Acela Regional Train." Associated Press State & Local Wire, March 16, 2000.

Cassedy, Kathleen. "Case Study: Amtrak." ATME (Association of Travel Marketing Executives) 2002 Travel Marketing Conference Report. Available from 〈http://www.atme.org/pubs/members/PF_75_307_1302.cfm〉

Elliott, Stuart. "An Offbeat Campaign for Amtrak Introduces a New Rail Service." New York Times, June 4, 1999.

Garland, Russell. "Amtrak Earmarks $20 to Promote High-Speed Service in Northeast." Providence Journal-Bulletin, September 22, 1999.

―――――――. "Amtrak Seeks New Image with New Name, High Speed Train." Providence Journal-Bulletin, March 12, 1999.

Holcomb, Henry J. "Delivery of High-Speed Trains for Amtrak's Northeast routes Delayed." Philadelphia Inquirer, September 2, 1999.

Johnson, Greg. "Amtrak Train Hits 168 mph, but Service Still Stuck at Station." Associated Press State & Local Wire

Jones, Chip. "Amtrak Welcomes Attention to New Ads." Richmond (VA) Times-Dispatch, November 15, 1999.

Klahr, Sharon. "The Little Campaign that Could." Advertising Age's Creativity, November 1, 1999.

Lewis, Raphael. "Amtrak Announces Start Date for High-Speed Train between Boston, Washington." Boston Globe, October 19, 2000.

Machalaba, Daniel. "Amtrak to Begin Movie-Theater Ads to Promote Acela." Wall Street Journal, June 4, 1999.

Schoolman, Judith. "Amtrak Up to High-Speed: Train Zooms Along as Fog Zaps Airport." New York Daily News, December 12, 2000.

Sharkey, Joe. "The Acela Express May Not Be as Competitive with Airlines as Was First Thought by Many." New York Times, September 27, 2000.

                                                Frank Caso