Amtrak’s Economy Seat Plan Won’t Increase Revenue

This article first appeared on the Cato Institute site.

Amtrak’s co-CEO Wick Moorman has announced that the passenger railroad is thinking of offering a new service to compete with the airlines: economy seating that is crammed together as tightly as airline seats.

This was immediately blasted by Senator Charles Schumer (D-NY), saying, “Amtrak should not throw out one of the best things about Amtrak and train travel — that is, you at least get a seat you can sit in and be comfortable.”

In fact, this idea makes no sense, not because heavily subsidized train travelers somehow deserve more comfortable seats but because it would cost Amtrak more in lost revenues than it will save.

Airlines fill 85 percent of their seats and on lots of flights they fill 100 percent. Amtrak fills only 51 percent of its seats, so cramming more seats into a railcar will simply mean more empty seats.

GettyImages-486372720 A conductor checks tickets aboard an Amtrak train, September 3, 2015 in Washington, DC. Alex Wong/Getty

According to USA Today, Amtrak seat pitches–the distance from the back of one row of seats to the back of the next–are 39 inches for day trains and 50 inches for overnight trains. Airline seat pitches are 30 to 33 inches while buses are 28 to 31 inches.

That means Amtrak could squeeze in four rows of seats where it now has three on day trains and five rows where it now has three on overnight trains.

Amtrak’s overnight trains rarely have more than four coaches. Substituting one economy coach for two regular coaches would save a little bit on fuel and maintenance and results in an overall loss of seating capacity.

Many coach riders on the overnight trains are price sensitive, so most of the people attracted to the economy coaches would have otherwise taken the regular train. Thus, Amtrak is likely to lose more revenue than it gains by attracting few people away from buses or planes.

Outside the Northeast Corridor, most of Amtrak’s day trains also tend to have about four coaches, so the same logic applies. Northeast Corridor trains may have eight coaches or more, so it is possible Amtrak could substitute three economy coaches for four regular coaches, saving the cost of one car.

That wouldn’t be enough to make Amtrak more competitive, as Amtrak’s real competition in the Northeast Corridor is not the airlines but the bus companies, especially Megabus and Bolt.

Right now, the cheapest Amtrak fare from Washington to New York is $49, and if you want to go tomorrow the price is as high as $180. Megabus fares start at $1.50 and top out at $27.50, though when I looked even many buses tomorrow have fares as low as $15.50.

That means, to be competitive, Amtrak would have to reduce the fares for its economy class by at least two thirds and probably a lot more while its costs would go down by, at most, one quarter.

If it only reduces the fares by a quarter it will end up drawing most of its economy customers away from its own regularly priced trains, not from the bus companies. Thus, economy seating would minimally lower costs but significantly reduce revenues.

Moorman, who was formerly CEO of the Norfolk Southern Railway, may not have been serious about this suggestion, but it is disappointing that he made it at all because I can’t see any way for Amtrak to win from it.

Moorman, who was made CEO last September, has already been replaced by former Delta Airlines CEO Richard Anderson. To insure a smooth transition, the two are acting as co-CEOs until the end of this year.

While Anderson is obviously familiar with the passenger industry, his only tenuous connection to the railroads is that his father was an office worker for the Santa Fe Railway.

Amtrak’s real problem, which neither Moorman nor Anderson can afford to admit, is that it has no reason to exist. Too slow to compete with the airlines and too expensive to compete with buses, passenger trains are simply not competitive in any market without huge subsidies, and even then either buses or airlines attract far more passengers.

In 2016, federal and state Amtrak subsidies  per passenger mile were more than ten times subsidies to airlines or buses. For those subsidies, Amtrak carried about 1 percent as many passenger miles as domestic airlines and about a third as many as scheduled intercity buses.

The Northeast Corridor, whose trains supposedly make money, in fact has, by latest count, a $38 billion maintenance backlog, which wouldn’t exist if the trains were actually profitable. To pay that off in 20 years would require more than a doubling of fares (with no loss of riders) on Amtrak trains as well as all commuter trains that use the Northeast Corridor, and by the end of that time there would be more things that need to be replaced.

Neither Moorman or Anderson will be able to solve these problems. Instead, they are going to have to depend on the political winds blowing in their direction, which is never a safe place to be.

Randal O’Toole is a Cato Institute Senior Fellow.