July 12, 2002

Amtrak will continue service with loan

The Congressional bailout of Amtrak, the nation's only national passenger rail system, leaves Chicago students still able to take the train home, although most of them prefer to fly.

Amtrak's $100 million direct loan from the federal government as part of the Railroad Rehabilitation and Improvement Financing (RRIF) program came June 28, after a frantic call on Congress and President Bush from the Chicagoland Chamber of Commerce and testimony by Amtrak President David Gunn before a Senate subcommittee. Amtrak is now seeking an additional $100 million from Congress to continue service until the end of the fiscal year on September 30th. In addition, it is revamping its management system and developing a budget for appropriations for the next fiscal year.

Chicago-based Amtrak recently announced an unsustainable debt of just under $4 billion and was faced with shutdown before the end of the fiscal year. The company, fraught with infrastructural, organizational, and maintenance problems, almost ran itself aground with a budget "based on unrealistic assumptions regarding revenue and expenses," Gunn said.

Discussions between the Board of Directors and the Department of Transport (DOT) have left the immediate loan of about $100 million contingent on improved efficiency, better financial accountability and transparency, and monthly financial reporting to Congress and the DOT. However, Amtrak is seeking further help from Congress before the commencement of the July Congressional recess.

"Amtrak is currently focused on securing an additional $100 million from Congress to operate services till the end of this fiscal year," said Howard Reifs, Amtrak's Chicago spokesman. "We are also aiming for fiscal year 2003 appropriations for seeking $1.2 billion from Congress," Reifs said.

According to Gunn, who took over from former president George Warrington May 15, Amtrak suffered an operating loss of $1 billion this year and last year.

Since its creation in 1971, Amtrak has received over $25 billion in federal subsidies, in addition to laws giving it priority on freight rail as long as it pays certain fees. This gives the private company a veritable monopoly over US intercity train service despite its consistent failure to turn a profit. The company served 23.5 million riders in fiscal year 2001. "Amtrak is recognized as the long distance passenger train service of the country and we will continue to be that. Amtrak will evaluate the situation it is faced with, and work efficiently to improve its services for passengers," Reifs said.

Several management problems have led to Amtrak's current debt. Its system is prone to maintenance deferrals and a lack of much-needed heavy overhauls. One of the stipulations on the loan is that all the money be spent on Amtrak's current service without the planned expansion.

In addition, one out of every 15 Amtrak cars is out of service. Many of these have been defunct since the early 1990s, and the majority were used for long distance travel. Further, Amtrak's administration under Warrington included 85 vice-presidents at the senior, executive, or regional level.

Amtrak has dramatically cut online fares to certain cities from July to September, but officials maintain the sale is not the result of current financial woes. "The slashing of fares is unrelated to the current situation, and was started at the beginning of the year to drive people to use the website and obtain better, more attractive prices," Reifs said.

Internet bookings form a fifth of the total bookings that are made.

Amtrak's uncertain situation has resulted in widespread speculation on the ultimate fate of long-haul passenger rail travel in the US. Chicago is the nation's fourth busiest station, catering to 10 percent of Amtrak passengers. However, students make up less than 5% of Amtrak passengers.

"The fraction of students who ride Amtrak is very small, since for cross-country travel, most people still take flights," said Sylvia Barajas, Branch Manager of STA, the world's largest student travel association. "The East Coast will be most affected, especially the Eastern seaboard. In the Midwest, the smaller routes from Chicago to Milwaukee might be slightly affected," she said.

The University's own travel agent Roy Gogins shared similar views and blamed the relatively longer travel time as the main reason for its infrequent use by students.

"Less than 10 percent of U of C students use Amtrak, due to our location in the Midwest. The Boston-NYC-Washington area is much more dependent on the rail," Gogins said. Yet, several students on campus would prefer that the only national railway service not shut down.

"Yes, it will be very bad if it actually goes out of business. I mean, they are the only train in the country that goes long distance. They cannot just run out of business and eliminate one entire form of public transportation," said Sara Chapman, a rising third-year in the College.

"Trains are a less expensive mode of transport for many people across the country. There's got to be trains to serve the people," said Britt Lundgren, a rising fourth-year in the College.

However, many students and politicians like Senator John McCain (R-Arizona) contend that Amtrak should be revamped as a conventional private company, operating only what is profitable.

"I think that Amtrak's downfall is the best thing for the revival of rail travel in this country," said Will Bouvel, a rising third-year in the College. "Amtrak was poorly managed and its demise will open up the field to the private sector which by economic necessity will provide equally reasonable fares and eliminate ridiculous and unprofitable lines like Chicago to Los Angeles."