BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 

Monday, 11 June, 2001, 18:13 GMT 19:13 UK
US rail giant runs into trouble
Amtrak Acela high-speed train
Acela trains: fast, but, by mistake, built four inches too wide
By BBC News Online's North America Business Reporter, David Schepp

America's national rail service is deep in debt and deeply at odds with its mission to provide national passenger service while breaking even financially.

Amtrak, chartered by the federal government in 1970 to provide passenger rail service, has been hobbled by its huge mandate, which not only requires it to provide passenger and mail services, but oversee major infrastructure improvements as well.

That poses a problem for the agency, known officially as the National Railroad Passenger Corporation, which is in serious financial trouble.

Even though the agency is a private company, the US government holds all shares in Amtrak.

Additionally, the federal government subsidises the rail service to the tune of $60m a year, although that is down substantially from $318m in support in 1999.

Pennsylvania Station

As a measure of its desperate need for cash, Amtrak last week asked the US Department of Transportation for permission to use New York City's Pennsylvania Station as collateral for a $300m (218m) loan to keep the beleaguered train service running.

New York City's Pennsylvania Station
Pennsylvania Station: collateral for a $300m loan
That raised the eyebrows of New York Senator Charles Schumer, who wanted assurances from Mr Mineta that Amtrak's use of Penn Station as collateral would not affect regional train lines' use of the facility.

Aside from Amtrak, New Jersey operates its New Jersey Transit regional rail lines from the station, as does New York's Long Island Railroad.

Amtrak officials said the parts of the station that would be mortgaged would not include tunnels or platforms used by the two agencies.

Serious financial problems

In granting permission for the passenger-rail service to use Penn Station as collateral, Transportation Secretary Norm Mineta told reporters last week that he does not think Amtrak will meet its plan to reach profitability by 2003 and suggested it cut routes as a money-saving measure.

"There's no question Amtrak is facing very, very serious financial problems," Mr Mineta told the Washington Post. "It's obvious that by 2003, they are not going to be self sufficient.

Mr Mineta added that Amtrak should focus its energies on the populous East and West coasts and Chicago, where rail travel is deemed profitable.

Critics of Amtrak for years have called on it to reduce its routes and focus on its profitable Northeast Corridor line, which provides service between Boston in the North and Washington, DC, in the south.

But rail supporters feel, as does Amtrak president and chief executive George Warrington, that Amtrak should be expanding - not contracting.

Step backward

"The secretary's viewpoint represents a step backward in developing a balanced US transportation system," said James Repass, president of the National Corridors Initiative, which seeks to develop high-speed rail transportation.

Amtrak maintains that it has other profitable routes, including a recently introduced line from Oklahoma City to Fort Worth, Texas, and between Los Angeles and San Diego.

In addition, Mr Harrington has expressed absolute confidence in the agency's ability to reach profitability by the 2003 deadline, which is required through an act of Congress passed in 1997.

But there needs to be agreement as to what Amtrak's mission is, he says, adding that its current objective of providing nationwide rail service and making a profit are at odds with one another.

"We need clarity about the mission," Mr Warrington told the National Press Club last month.

"What does America want us to be - what does the US Congress want us to be?"

"The real question is looking out beyond 2003 [is] what do we want the national passenger rail system to be," Mr Warrington said. "And how much do we want to pay,".

High-speed bungle

It is Amtrak's focus on high-speed rail that is partially responsible for its financial dire straits.

Mr Warrington has admitted that the slow delivery of its new Acela high-speed trains crimped profitability.

Acela trains travel at higher-speeds - up to 150 miles per hour - than conventional Amtrak trains and have a higher degree of amenities.

But their delivery was delayed by a year.

And, in what was an embarrassing miscalculation by Amtrak, were built four inches too wide to take advantage of the train's "tilt" feature, which allows it to take corners at higher speeds.

Senate shift

In February, Amtrak made public plans to invest $30bn over the next 20 years to make rail travel a true alternative to America's clogged airports and choked highways.

That initiative has until now received a chilly reception by the formerly Republican controlled US Senate. But the recent switch to Democratic control of the Senate bodes well for Amtrak.

Senator Ernest Hollings of South Carolina, a supporter of Amtrak, who will chair the Senate Commerce Committee, which oversees funding for rail-service provider.

That may be just the edge Mr Warrington needs to steer his company toward profitability.

"With respect to Senator Hollings," Mr Warrington said, "he's always been an extraordinary supporter of passenger rail service and Amtrak."

Search BBC News Online

Advanced search options
Launch console
BBC RADIO NEWS
BBC ONE TV NEWS
WORLD NEWS SUMMARY
PROGRAMMES GUIDE
See also:

07 Jun 01 | Europe
Express TGV links Paris to Med
24 May 01 | Business
Railtrack reports massive loss
18 Mar 01 | Americas
One dead in US train crash
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories