Amtrak unveils plan for fleet replacement

Amtrak's fleet "plan" is a very peculiar document. Several questions come to mind:

1.  Since (they say that) Acela is "profitable," why does the "plan" need federal grants to buy more Acela cars? Why not apply the "profits" to this?

2.  Since Acela load factors hover under 50%, why does Acela need more cars in the first place?

3.  Where are the new Superliners to handle the spontaneous demand for four-figure fares on western sleeping cars? THOSE trains are (statistically) sold out, yet the "plan" calls for no growth in capacity there. Why not?

4.  

Amtrak's fleet plan relies exclusively on federal (and state) largesse, aka handouts, thereby placing Amtrak's success and growth at the whims and tender mercies of Congress, the OMB and state governments. That's not a very rational way to fund a long-term procurement plan.

It's strange that even airlines under bankruptcy protection can lease new equipment. Furthermore, Amtrak claims that in FY2010 its passenger-related revenues climbed nearly 9%, while all expenses (including charges for depreciation) rose 6%. (The 9% doesn't include federal or state subsidies. 9% increase represents what willing customers paid Amtrak for their transportation. See the FY2010 Annual Report.) Surely there's an equipment lessor somewhere who would contract with Amtrak based on the strength of these revenues. Reasonable minds might also conclude that targeted investments in rolling stock and traffic growth in the right sectors would allow the company to grow its way to (relative) prosperity.

Perhaps some wise old head can address the question above: why doesn't Amtrak lease equipment?  Unless you are a control freak, it usually seems sensible to rent equipment especially when it could become outmoded fairly rapidly, and many equipment manufacturers will also do the service work on contract. Just another unanswered question of Amtrak.

Considering that Amtrak does not now operate at a profit, it is not at all surprising that it does not lease rolling stock.  Lessors are in business to make a profit.  They will set lease rates high enough to jprovide that profit even if Congress were to cut off Amtrak subsidies.

Actually, it does not always make economic sense to lease rather than own.  Lease rates, as pointed out above, always will be high enough to guarantee a profit to the lessor. There is no such thing as a free lunch.  Lessor owners that perform maintenance do so at prices that provide them with a profit.  Amtrak quite probably has a large enough fleet that it is cheaper for it to perform its own maintenance.

Larry, I do exaggerate sometimes to raise a point.  Given the age of most Amtrak equipment, I am sure it is all depreciated to zero and is not in the equation. I am thinking more about new purchases which would increase capacity & frequency thereby allowing Amtrak to afford leased equipment which would be as sound an investment as any government backed security? I just remember those secure plates on the sides of the old NHRR engines which named the lease owner being such and such a bank. The NH was bankrupt at the time. Just some alternative thinking perhaps lost in the whole discussion of whether or not Amtrak as structured can and should exist.

I'll stick with my earlier comment, particularly as I also was thinking in terms of future acquisitions, not anything purchased or leased in the past.  I, too, remember the metal plates telling the world who actually owned New Haven (and most other railroads') power.  I claim no particular financial expertise, but do know that railroads always were able to lease new equipment, just as airlines do today, because the rolling stock always can be repossessed, a form of guarantee that lease mayments will be made.  Carrier credit rarely was good enough to support a purchase - besides, they didn't have the money to buy - but there always was someone ready to take over a lease.  Anecdotally, when Penn Central went into the tank, I had a call from an analyst who wanted to know if I thought PC would default on a batch of its equipment debt.  I pointed out that if it didn't have the power, it wasn't really in business, so you couldcount on the lease payments being made as scheduled.  The analyst expressed disappointment because he had a client who was hoping to pick up the equipment if PC defaulted.  Bankruptcy courts routinely authorize debtors to make such payments, using debtor-in-possession (DIP) financing.  For those who question the wisdom of that, I would point out that under the bankruptcy law, DIP financing goes to the head of the line of those to be paid, which is why those with money are willing to make it available to bankrupts.

Amtrak's problems don't really fit our mutual understanding of bankruptcy.  It is financed by the government and could be cut off at any time the tea party crowd were to gain control in Congress.  It may still have some preferred stock in the hands of freight railroads and be maintaining the myth that it is a private railroad company and not a creature of government, but it is my understanding that those who hold the stock have written it down to (0).

Thanks Larry, good information.

I mentioned leasing equipment to Amtrak at GE Railcar and got an unexpected invitation to pitch it.  Well, I only had the concept; but not enough information, especially the willingness of Amtrak or government, to get anything going back in the early 1990s.  The problem always has been that there has been enough opposition to kill any long-term funding commitment for Amtrak.  Perhaps a company like GE has the political clout to press for long-term funding as a 3P darling?

The extreme train weight and minimal streamlining are substantial limitations to non-electrified high speed performance for next-generation Amtrak equipment.  One US senator has questioned the need for a 125-mph diesel locomotive; and as a practical matter, there are few places with the grade-separated right-of-way where 15 miles of 125 mph would save one minute over 110-mph running.  Even McCormick Place (Chicago, IL) - Homewood, IL is questionable with curves limiting bi-levels to 100-mph even if other improvements can be made on this grade-separated CN line.

A 6-car bi-level consist with 498 seats, a 4,200 horsepower locomotive at each end, the train weighing 807 tons, and with 7,535 horsepower for traction is calculated to attain 79 mph in 1.8 miles, 110 mph in 5.9 miles, and 125 mph in 10.5 miles.  

By comparison, an 18-car Talgo with a comparable seating capacity for 450 coach class and 44 business class passengers weighing an estimated 594.7 tons with a 4,200-hp locomotive at each end could accelerate to 79 mph in 1.3 miles, to 110 mph in 4.4 miles, and to 125 mph in 8.2 miles.  Furthermore, Talgos would be unrestricted for the curves at Hyde Park and the Calumet River for sustained 125-mph running and consume less distance for speed recovery.