Derailing fiscal responsibility

Glasgow is a small cow town in the northeast corner of Montana. During World War II, it was home to an Air Force base, and one could regularly see B-52 bombers flying overhead. Today, this dusty town of a just over 3,100 has little to offer than big sky and wide-open spaces.

But if you're looking for a deal on a train ticket, Glasgow is a great place to start.

Amtrak, which rolls through this and many other tiny towns across Montana and North Dakota, will take you west to the Pacific or east to Chicago for about the same price as one tank of gas in an SUV.

It should come as no surprise, then, that the federally subsidized "National Railroad Passenger Corporation" is losing money. The revenue model just does not make sense.

If you had 23 hours and nothing better to do, you could make the nearly 1,000-mile journey across the Hi-Line of Montana to Seattle for a grand total of $99. But wait, if you call now, Amtrak is offering a promotional fare of $65.10.

Stop for a moment to compare that to what Amtrak would charge John Q. Commuter traveling 310 miles from Philadelphia to Boston: $91 even. And that price comes ahead of the fare increase Amtrak is planning later this fall.

Something is out of whack here.

Riders in the northeast will have to fork over higher fares for one-time trips, but it is commuters that will be hit hardest when their monthly passes increase as much as 30 percent in cost. For people traveling frequently between Washington or New York and Philadelphia -- of whom a good number are traveling to Penn -- this is a major blow.

Amtrak's most recent report to Congress this July showed that 9.3 million riders used Northeast Corridor trains in the first seven months of this year. That's a little less than half of the rail systems' usage nationwide and was down by 200,000 riders from a year ago.

Consumers who use Amtrak's Northeast Corridor service -- the only profitable route in the system, which lost $1.2 billion as a whole last year -- are essentially shouldering the load for those out west. The Empire Builder Chicago to Seattle route costs $75 million a year to operate and serves about 610,000 people.

No wonder that fiscally minded politicians want these long-distance routes shut down.

Don't tell that to Montana Gov. Brian Schweitzer, who spent the summer touring the state via Amtrak to spread the message of how "crucial" train travel is. The first-term Democrat makes the case that rail funding must be increased but provides little in the way of solutions to the actual problems with the system.

In an effort to appeal to constituents, Rep. Denny Rehberg (R-Mont.) has also jumped on the "save Amtrak" bandwagon. Rehberg told the House Transportation Committee this summer how "critical" passenger rail is in his state and said that "Amtrak is one of those entities that cannot entirely be run like a business." The committee then passed a $2 billion measure to keep trains running for another year.

Sure, Amtrak may not operate like any other company. And its service is important to thousands of people who have no other modes of getting from A to B. But these factors do not give Amtrak a mulligan on making bad business decisions.

Take, for example, charging the same fare for a trip three times the length because it does not cross the Hudson River. This is not merely a supply-and-demand issue. Northwest routes run at nearly 100 percent capacity, and since Amtrak is the only option for many people, the demand is price-inelastic. Simply charging a fare more proportional to the distance traveled would bring in millions in additional revenue.

Amtrak isn't getting it. Last year, revenues per passenger in the northeast were $61 and $82 on Empire Builder. For a route that is three times the length, a 34 percent increase doesn't make sense.

Amtrak is also lost in its quest to control costs. Instead of performing much-needed improvements to aging tracks in the Northeast, the train operator spent $28 million to build the parking garage you see next to the new Cira Centre. The only path to financial solvency will be one that realistically prioritizes expenditures.

President Bush has made the case that more Americans should be utilizing public transit systems, and he's right. But if Amtrak goes ahead with the planned fare hike in the Northeast, it will only be giving commuters more reasons to hop in their own cars.

America's passenger-rail system is an important part of the overall transportation network, and one that the government has an interest in maintaining. But that should not be an excuse for poor management.

Jeff Shafer is a senior marketing and management concentrator from Columbia Falls, Mont., and editorial page editor of The Daily Pennsylvanian. His e-mail address is jshafer@wharton.upenn.edu. Par for the Course appears on alternate Thursdays.

Please note All comments are eligible for publication in The Daily Pennsylvanian.