Amtrak's Subsidy Needs Cannot Be Reduced Without Reducing Service

Amtrak's operating costs have outstripped its revenues, and increasing federal subsidies are required for continued operations. Amtrak planned service reductions because it received less money from Congress than it requested in 1977. Congress provided some additional funding, but Amtrak stated that it was still not adequate and that substantial service curtailments will be needed if additional funding is not approved.

Amtrak can improve its operating efficiency but this would not substantially reduce its subsidy need. The following areas require attention: (1) direct labor costs are high because of certain union work rules; (2) maintenance costs are the largest single area of expense and could be better controlled; and (3) losses on food and beverage service are substantial. Amtrak's route profitability system (RPS) provides reasonable estimates of its route-by-route revenue and costs, but it could be further improved. Amtrak's classification of its costs as avoidable or unavoidable is reasonable. Its 1977 5-year plan contained improved estimates, but the improved methods were not explained. Amtrak's ridership and revenues have not kept pace with its growth. It has not been permitted to exercise the route and service criteria Congress approved as a method of evaluating and eliminating routes if necessary. Since Amtrak cannot operate its present route system for much less than it has requested, Congress can give Amtrak what it has asked and allow it to continue the present system, give it less than it asked for and allow the system to be reduced, or give it more money to allow expanded service.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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