AMTRAK looks beyond passengers in pursuit of revenue
Thursday, July 5th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Amtrak is branching out in pursuit of new income to stay in business, from souvenirs to cell phone service, real estate development to express package delivery.
In fact, the national railway now gets 43 percent of its revenue from non-passenger business, up from 29 percent in 1990.
``Congress has basically said to us, 'Start running yourself like a business,' and that's what we're doing,'' said Amtrak's acting chairman, Michael Dukakis, the former governor of Massachusetts.
Congress has given Amtrak until 2003 to wean itself from annual government subsidies, something the railway has failed to do in its 30-year history.
So Amtrak is turning more and more to businesses other than carrying passengers. It carries fruits and vegetables now, and lets telecommunications companies share wires that run along some tracks.
A national rail system ``by its nature is not profitable in a classic commercial sense,'' Amtrak President George Warrington said in a recent speech. He said Amtrak needs ``to exploit and develop every conceivable method of generating revenue and income to help us support a national system.''
The Amtrak Reform Council, created by Congress as a watchdog, has encouraged the railway in carrying mail and freight but says the system is wearing too many other hats.
The council has proposed replacing the railway as owner of the tracks and stations in the Northeast that Amtrak uses for many of its business ventures.
``Its core business is simple: running trains that carry passengers, mail and express, from Boston to San Diego,'' said Gilbert Carmichael, the council's chairman.
Amtrak's revenue from passenger trains grew by 10 percent last year, to $1.2 billion, while revenue from other ventures grew by 15 percent, to $886 million, according to Transportation Department Inspector General Kenneth Mead.
The outside ventures included operating or maintaining commuter railroads for state or regional authorities.
But the railroad's expenses are also growing fast, fueled largely by interest from debt to buy new equipment. Amtrak's 2000 operating loss of $944 million was the largest in its history.
``Amtrak's financial condition remains precarious and it is urgent that it reduce expenses,'' the inspector general wrote in a report.
Subsidizing passenger train service with other business ventures is not a new idea. The Postal Service once was a major customer for passenger trains, sorting mail on board for delivery to post offices strategically built next to stations.
Warrington says the decline in American passenger rail, which prompted the government to create Amtrak, was caused in part by the post office turning to automobiles and airplanes to move the mail.
Amtrak has continued to carry small amounts of mail. And it took a leap into the delivery business in 1998 when the Surface Transportation Board, a federal regulatory agency, ruled it could carry time-sensitive packages and freight shipments.
Now Amtrak carries packages, periodicals, first-class mail and dry freight. In a new venture, Amtrak carries lemons and oranges from California, and apples from Washington state, to the East Coast in refrigerated cars.
Last year, Amtrak's Mail and Express division generated $122 million _ 6 percent of the railway's total revenue.
``We're focusing on markets where we have a clear, competitive advantage, and that is primarily in the long-haul, transcontinental service,'' said Lee Sargrad, president of Amtrak Mail and Express, formed last October.
Not all Amtrak's ventures have succeeded. In April 2000, Amtrak launched a route linking Chicago and Janesville, Wis., primarily to seek freight business. Hardly any passengers rode the train, and the business opportunities did not pan out. Amtrak has announced the route will end Sept. 22.
Amtrak's ventures generally are offshoots of its passenger train operations. On land near 30th Street Station in Philadelphia, Amtrak turned a former bowling alley into a 100-space valet parking lot, which sells out each weekday at $35 per car.
The railway also has expanded stores, added cash-dispensing machines and increased advertising at its stations.
``Anything you see in a station that you pay for, somebody pays us,'' said Sally Bellet, Amtrak's vice president for real estate development.
Amtrak's newly expanded offering of branded merchandise includes a wood train set and a travel bag.
``Amtrak basically represents train travel, and it has a nostalgic connection to a lot of people. There's equity in that,'' said Deborah Varnado, hired last fall as Amtrak's first director of merchandising.