# Private Rail Service on the NEC - Is it Possible?



## B757Guy (Sep 12, 2016)

Decided to mix it up a bit, and take the local commuter rail line to EWR for work today. I typically make the trek up the turnpike, and park at the employee lot at the airport, and found the train to be a decent alternative and back-up plan should the New Jersey Turnpike be fouled up. Struck up an interesting conversation with an attorney, who worked for a large private equity firm in Manhattan. We got on to the topic of NJ Transit and Amtrak, and he mentioned at one point, a few of these private equity firms looked into trying to compete with Amtrak on the northeast corridor, with an all first class type service that would travel from Penn Station, only making stops in Philly to DC.

That got me thinking, can a private firm lease track and capacity from Amtrak? I believe they own the entire stretch of the NEC? Could something like this be successful? I can't imagine the economics behind start up costs and such, as I'm just a lowly airline pilot, and not a finance guy, but it seemed to me, it would be a flop, with out subsidies or an even more outrageous fare than the Acela charges.

From what I've gathered, the Acela is almost always sold out (his words) and he suggested if Amtrak could increase capacity, would be fully profitable in the Northeast, even after infrastructure costs, salaries, maintenance, etc... No clue if this is realistic, but fun to consider...


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## jis (Sep 12, 2016)

Actually at present it is very near impossible due to various overlapping jurisdictions and lack of adequate cost accounting to even be realistically able to lease operating slots. However, the NEC Commission has be tasked to bring enough uniformity in NEC to be eventually able to price and lease slots of different qualities, which is an essential prerequisite for being able to even think of enabling additional operators.


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## Seaboard92 (Sep 12, 2016)

That and Amtrak doesn't like to play with private operators as well


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## west point (Sep 12, 2016)

There cannot be any private NEC service from the south to NYP in addition to Amtrak until the tunnel situation to NYP is resolved. Up to 15 years from now. From the north how to get MNRR on board ?


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## Hal (Sep 12, 2016)

B757Guy said:


> Decided to mix it up a bit, and take the local commuter rail line to EWR for work today. I typically make the trek up the turnpike, and park at the employee lot at the airport, and found the train to be a decent alternative and back-up plan should the New Jersey Turnpike be fouled up. Struck up an interesting conversation with an attorney, who worked for a large private equity firm in Manhattan. We got on to the topic of NJ Transit and Amtrak, and he mentioned at one point, a few of these private equity firms looked into trying to compete with Amtrak on the northeast corridor, with an all first class type service that would travel from Penn Station, only making stops in Philly to DC.
> 
> That got me thinking, can a private firm lease track and capacity from Amtrak? I believe they own the entire stretch of the NEC? Could something like this be successful? I can't imagine the economics behind start up costs and such, as I'm just a lowly airline pilot, and not a finance guy, but it seemed to me, it would be a flop, with out subsidies or an even more outrageous fare than the Acela charges.
> 
> From what I've gathered, the Acela is almost always sold out (his words) and he suggested if Amtrak could increase capacity, would be fully profitable in the Northeast, even after infrastructure costs, salaries, maintenance, etc... No clue if this is realistic, but fun to consider...


The private service would flop if they ran an all first class service that only stopped at Philly. They would be bankrupt pretty fast.

As for the suggestion that Amtrak increase Acela capacity, they have ordered the train sets to do exactly that. More trains and more passengers per train.

Sent from my iPad using Tapatalk


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## FormerOBS (Sep 12, 2016)

First, you would employ a lot of expensive lawyers just to negotiate the various overlapping and competing jurisdictions. Then you would have to obtain equipment, maintain it, hire and train your employees, develop schedules, make logistical arrangements for supplies, fuel, etc., establish a marketing scheme, develop a ticketing structure, etc. Of course you could contract a lot of his out, which would increase your expenses. It reminds me of the advice given when somebody asked how to make a small fortune operating a hobby shop: "Start with a large fortune."

Tom


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## railiner (Sep 13, 2016)

A private equity firm seriously considering running a passenger service on the NEC? If they had the deep pockets necessary to really undertake something like that, they would be better off trying to start up a new airline....you probably are aware of how successful those usually turn out....


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## Anderson (Sep 13, 2016)

Mechanically, the only way I could see something like this happening would be if one or more of the commuter operators buried it under one of their slots (e.g. someone was somehow able to talk NJT and SEPTA into coordinating the sublet of a slot). Realistically? That would only happen in some off-peak slot if the operator had a ton of political connections.


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## FormerOBS (Sep 13, 2016)

The cynic in me says the bribes alone would bankrupt you.

Tom


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## B757Guy (Sep 13, 2016)

Pity Amtrak has a lock on the NEC, either directly, or indirectly.... Thankfully, with the security posture being what it is, I don't see the airlines ever being able to fully recap the market share lost to Amtrak in the northeast... However, if TSA introduces similar security screening, that may be the death of Amtrak in the NE. Let's hope that never happens....


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## fairviewroad (Sep 13, 2016)

I'm not even clear what the problem is they are trying to address. Acela isn't "almost always sold out." Granted, this is a limited data set, but every single Acela departure for the rest of the day today, as well as all day tomorrow, has space available in both directions between NYP and WAS....in virtually every case in both Business and First Class. Obviously some Acela departures DO sell out, but that must surely be a relatively small percentage over the course of an entire year.

It sounds to me like a millionaire's daydream. If they want to burn a lot of money getting between New York and Washington, there are certainly other ways to do that.


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## neroden (Sep 13, 2016)

I oppose "lemon socialism". This is where everything profitable gets privatized so that greedy leeches can extract money, but everything necessary and unprofitable gets dumped on the taxpayer.

In short, if "private rail service" is possible in a few locations but not everywhere, then it is a scam against the taxpayer and a terrible idea.


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## Seaboard92 (Sep 13, 2016)

Pretty much. There are plenty of decent routes once you get really to Nashville. And one thing that could fix Atlanta is if they built a flyover over the major junction downtown with CSX and NS.


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## ScouseAndy (Sep 16, 2016)

In Italy it works - The national rail company has direct competition with Railalto which offers a better service in 1st (at a premium) then the nationalised service and a no frills economy service which is on a par to standard class on the key Milan - Florence- Rome - Naples route.

It works but then there is extra capacity on this route compared to the NEC which has a number of pinch points such as the tunnels into NY and the limit on trains per hour up to Boston


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## MARC Rider (Sep 20, 2016)

B757Guy said:


> Pity Amtrak has a lock on the NEC, either directly, or indirectly....


Why? The service Amtrak provides is certainly better (in terms of frequency, speed, and comfort for coach passengers) than what was offered by the last private operator. True, the PRR had lower fares (in real dollar terms), dining cars and fancy first class service ("drawing rooms," anyone?). On the other hand, give me a Northeast Regional cafe car any day over the old PRR "snack bar coach."

Another nice thing about the Good Old Days was that everything was run by one operator -- the PRR between Washington and New York, and the New Haven between New York and Boston. You could ride the regional trains with a commuter ticket. But there was a lot of freight traffic, too.


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## Bob Dylan (Sep 20, 2016)

Not to mention the Metroliners which I still liked better than Acela!


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## railiner (Sep 21, 2016)

Bob Dylan said:


> Not to mention the Metroliners which I still liked better than Acela!


Me too! I even like the name better....


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## dlagrua (Oct 23, 2016)

Amtrak is doing an excellent job on the NE corridor. The system runs on time or close to on time on a regular basis. Quite frankly I cannot see private passenger rail happening on the NEC. What I can see is government using an independent contractor to operate and run their trains, as it is being done in IL, MA, Fl and other states...... but only IF it saves money..


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## FormerOBS (Oct 23, 2016)

Not likely to save much, if any, money. The transportation product is essentially the same. The personnel, training, and equipment needs are essentially the same. Maintenance is (or should be) about the same. If the service standards are the same (food, etc.), then the costs for those will be about the same. what increases is the cost of adding an extra layer of overheard to cover the Contracting company's expenses and profit margin.

Tom


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## dlagrua (Oct 24, 2016)

FormerOBS said:


> Not likely to save much, if any, money. The transportation product is essentially the same. The personnel, training, and equipment needs are essentially the same. Maintenance is (or should be) about the same. If the service standards are the same (food, etc.), then the costs for those will be about the same. what increases is the cost of adding an extra layer of overheard to cover the Contracting company's expenses and profit margin.
> 
> Tom


That could well be the case but it still does not specifically answer why many states contract out the operation of regional rail to private contractors. If it doesn't save money then why is it being done? I am not a proponent of using private contractors to run and operate the NEC. Amtrak runs efficiently and on schedule the majority of the time. I just wonder why many states do it?


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## railiner (Oct 24, 2016)

dlagrua said:


> FormerOBS said:
> 
> 
> > Not likely to save much, if any, money. The transportation product is essentially the same. The personnel, training, and equipment needs are essentially the same. Maintenance is (or should be) about the same. If the service standards are the same (food, etc.), then the costs for those will be about the same. what increases is the cost of adding an extra layer of overheard to cover the Contracting company's expenses and profit margin.
> ...


Why??

A good question...but close scrutiny should be applied to any time politicians award government contracts to private parties for obvious reason...


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## Eric S (Oct 24, 2016)

With regards to commuter rail services, generally speaking (and yes, there are exceptions) the larger systems are directly operated and the smaller systems are operated by contract. Also, generally the older/legacy systems are directly operated and the newer/startup systems are operated by contract. (Perhaps not surprisingly, the larger systems tend to be older, the smaller systems younger.)


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## jis (Oct 24, 2016)

Very often whatever is already in place continues as is, hence the legacy systems that are in place tend to be departmentally operated. There are exceptions like MBTA Commuter service which was transitioned from departmental to contract. There has been an undercurrent of opinion in NJ to do the same with NJTRO. A significant part of NJT's bus operations, specially longer distance routes, is contract, and two of the three LRT operations are DBOM contract. There is significant probability that NJTRO might be dismantled and reorganized as a contract management organization, but we'll see.

It would make sense to set up the relationship between Amtrak and federal government more in the form of Amtrak as an independent corporation that enters into specific contracts for specific service with the federal and state governments and possibly other entities too. but right now, as we all know, the setup is a mess allowing too much tinkering and micro-management by know nothing politicians.

In all this the challenge remains as to how the central facilities are funded and who provides them, which is the other side of the coin of what the significant part of the so called allocated costs are and what do they actually fund.


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## Eric S (Oct 24, 2016)

Was MBTA ever directly/departmentally operated? I may well be mistaken but I thought that MBTA has always contracted with some other entity, be it B&M, Amtrak, Keolis, etc, to operate their Commuter Rail services.


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## FormerOBS (Oct 24, 2016)

railiner said:


> dlagrua said:
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> 
> > FormerOBS said:
> ...


Why? A cynic might suggest its's simply a means of politicians lining the pockets of Contractor friends and,indirectly, their own. Personally, I would never suggest such an outrageous thing.

Tom


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## jis (Oct 24, 2016)

Eric S said:


> Was MBTA ever directly/departmentally operated? I may well be mistaken but I thought that MBTA has always contracted with some other entity, be it B&M, Amtrak, Keolis, etc, to operate their Commuter Rail services.


You are correct. MBTA Commuter Rail was never run departmentally. It was run by B&M then Guilford followed by Amtrak, then MBCR and finally currently Keolis.

I suppose it is just NY MTA (LIRR and MNRR), NJTRO and SEPTA RO that are run departmentally, except for MNRR West of Hudson service which is operated under contract by NJT RO.


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## Eric S (Oct 24, 2016)

And then there's Metra, which is a combination of both approaches.


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## railiner (Oct 24, 2016)

FormerOBS said:


> railiner said:
> 
> 
> > dlagrua said:
> ...


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## dlagrua (Oct 25, 2016)

By bringing an excellent and intelligent analysis of the private vs government vs combo approach being discussed here ; I have found this topic to be very interesting. Jis raised some very good points. This discussion is important as it may relate to possible future changes with Amtrak or state commuter lines. Whatever changes lie ahead, it is hoped that the American people will be presented with a cost effective solution that will result in improved service, but sadly, more often than not, political cronyism usually prevails.


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## west point (Oct 25, 2016)

Cynic ? You bet I am.

Yes a private operator can make a profit on the NEC. All the US government has to do is allow access only charges and USA the upgrades and ROW maintenance that is desperately needed. Also all the now Amtrak overhead and reservations costs be covered by the USA. Give the NEC rolling stock to a private operator and when the equipment wears out the private operator can declare bankruptcy and sock the USA the costs of new rolling stock.


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## jis (Oct 25, 2016)

It all depends on how the legal framework is setup. In UK there has been very few cases of a franchise being dumped and the Rail Regulators have been able to re-franchise those to someone else. In general it is the franchisees that have been ordering new rolling stock to meet their franchise obligations. But the framework in the US at present is uniquely screwed up, which is causing Amtrak to not work all that well and likely will not work much better with other franchisees either.


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## bretton88 (Oct 25, 2016)

Isn't this basically what the house has been proposing? To have USDOT take over the NEC and then charge track access fees to operators like they do in Europe? My biggest concern with such a proposal is while is helps consolidate access to the corridor, is the problem SNCF is running up against, the government is starting to charge exorbitant track access charges.


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## jis (Oct 25, 2016)

The actual cost of maintenance is not going to magically become less. The Federal Government will have to make a political decision of how much it will fund out of general funds and how much from user fees. It will have to be some reasonable mix of the two. Currently it gives a grant of about $300 million per year give or take for NEC maintenance and upkeep, separate from any one time capital improvement grants. This is to cover for both Amtrak's usage and shortfall in usage fees collected from Commuter Agencies. It is believed that the fees paid by Commuter Agencies are already slated to go up somewhat dramatically. So irrespective of what else happens the feds have to make a political decision on how they will handle this.


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## Palmland (Oct 28, 2016)

I wonder if part of the answer as to how a private contractor can manage a service more effectively than Amtrak has to do with overhead costs. As Amtrak has grown over the years, so has their Washington HQ staff. If that cost is allocated to a train's operation, the cost might be inflated. A leaner private contractor could take advantage of that with their lower overhead costs. A private operator might also be more inclined to increase the top line, revenue, through more effective marketing. For whatever reason Amtrak seems reluctant to do that, although what they do does seem to be more oriented to the NEC rather than LD trains.


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