Intercity Passenger Rail:

Prospects for Amtrak's Financial Viability

RCED-98-211R: Published: Jun 5, 1998. Publicly Released: Jun 5, 1998.

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John H. Anderson, Jr
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Office of Public Affairs
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Pursuant to a congressional request, GAO reviewed: (1) Amtrak's current financial status; and (2) the outlook for its long-term financial viability.

GAO noted that: (1) during the last 3 fiscal years, Amtrak reduced its annual net loss by only $72 million--from $834 million in fiscal year (FY) 1994 to $762 million in FY 1997; (2) Amtrak projects that its net loss will grow to $845 million this fiscal year, resulting in a cash-flow deficit of up to $200 million and contributing to substantial deficits in the next 2 years; (3) in response, Amtrak's Board of Directors approved a revised strategic business plan in March 1998 that would use about $800 million of anticipated federal capital appropriations over the next 5 years for maintenance expenses, which traditionally have been treated as operating expenses; (4) according to Amtrak, the flexibility to use appropriated capital funds to pay for maintenance would provide it with stability over the next several years, thereby averting a possible bankruptcy; (5) however, using these federal funds for maintenance expenses will correspondingly reduce the funding available for Amtrak's proposed capital improvements that are needed to enhance its long-term viability; (6) Amtrak recently initiated a market-based analysis of its route system that is important for its long-term viability because Amtrak's current route systems will continue to incur substantial annual net losses; and (7) Amtrak remains heavily dependent on federal funding to pay its operating and capital expenses and will remain so for the foreseeable future.

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