Intercity Passenger Rail:

Amtrak Needs to Improve Its Decisionmaking Process for Its Route and Service Proposals

GAO-02-398: Published: Apr 12, 2002. Publicly Released: Apr 16, 2002.

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In light of its continuing financial deterioration and its stated goal of eliminating federal operating assistance by December 2002, Amtrak undertook several steps to improve its financial condition, including changing in its routes and services. Amtrak has been unsuccessful in implementing its Network Growth Strategy to shift its route and service plans for new routes and expanded services on the freight tracks over which it operates. Two years after announcing the new strategy, Amtrak has only implemented three routes, one of which was later canceled. Amtrak still plans to implement the remaining three routes, although later than planned. Increased mail and express revenues were the cornerstone of the new strategy. However, Amtrak overestimated the mail and express revenue expected. According to Amtrak, this overestimation occurred because (1) it had no empirical basis for its revenue estimates and (2) express shippers were reluctant to enter into contracts for service that did not yet exist. Six of the planned route actions were canceled because Amtrak overestimated the revenues associated with them. Amtrak was unable to reach agreement with freight railroads because they were concerned about (1) Amtrak's plans to operate additional trains in already congested areas, (2) Amtrak's plans to carry express merchandise that might compete with their own business, and (3) compensation that Amtrak would pay for use of their tracks.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Although Amtrak has not pursued any major route or service changes since GAO's report in April 2002, Amtrak has taken action with respect to GAO's recommendation. In particular, since May 2002, the company has (1) followed a practice of apprising the Board of Directors of the risks and capital requirements associated with all major management proposals, (2) developed an evaluation process (contained in Amtrak's FY 2005-2009 Strategic Plan) for evaluating state initiatives to provide improved/increased service on intercity passenger rail corridors, (3) developed annual five-year capital plans that are reviewed by Amtrak's Board of Directors and identify anticipated route and service related capital needs, and (4) focused Board of Director and management attention on congestion and capital needs of the freight railroad-owned national rail network. The evaluation process in item #2 includes ranking criteria that includes whether states have detailed plans in place for planned improvements, whether host railroads have signed-off on such plans, and whether necessary capital funding is in place. Amtrak believes item #4 will also be a critical factor in determining whether there will be any future service changes as well as whether Amtrak can continue to provide satisfactory service on existing routes. These actions meet the intent of GAO's recommendation.

    Recommendation: For any future major route and service proposals, the president of Amtrak should disclose to Amtrak's board of directors any significant risks that could impair the successful implementation of the planned actions and its plans to ameliorate those risks. These potential risks include the expected ability to obtain capital funding and reach agreement with freight railroads to operate over their tracks.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

 

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