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Will Amtrak Make Fares Cheaper as Business Travel Drops?

The national passenger railroad needs to rebuild its ridership. Lower fares seem like a surefire way to lure old and new riders. But greater reliability and faster speeds are factors too.

A person walking down the platform next to an Amtrak train.
A passenger walks to a departing Amtrak train at Union Station in Washington, D.C.
(Rob Carr/TNS)
Jennifer Lugar is the kind of traveler who Amtrak’s Northeast Corridor strategy used to depend on.

Lugar lives in the suburbs of Philadelphia, but her employer is based in northern Virginia. Before the pandemic, she traveled to Washington, D.C., multiple times a month for meetings and check-ins.

“If somebody else is paying, I will do Amtrak every time,” says Lugar. “I prefer Amtrak to driving. And as the Beltway seems to get worse and worse, I’m more likely to choose the train.”

But Lugar hasn’t ridden the rails since the pandemic began. After months of Zoom meetings, she’s ready to visit D.C. again, but it’s unclear if she will need to do so as often. That means her company may be paying for Amtrak tickets a lot less than they did in 2019. For personal travel, especially with another person, the balance often tilts in favor of driving.

“It gets a little more complicated if my daughter’s coming with me because then we’re talking $300,” says Lugar. “Then we usually chose to drive. It’s always an analysis of costs versus benefits.”

2021 will be a defining moment for the future of passenger rail in America. Amtrak faces huge challenges, but the systemic changes to travel and work life wrought by the pandemic also present an opportunity to fundamentally rethink how the agency operates. At the same time, a massive infrastructure bill with tens of billions for railroads is winding its way through Congress with a policy rider that could allow Amtrak’s executives to make paradigm-shifting operational changes — placing ridership over revenues and faster speeds over minimizing costs.

For environmentalists and transportation advocates, there is a near-existential pressure to make Amtrak more accessible, more reliable and more heavily used. In a country where transportation is the largest source of greenhouse emissions, there is no cleaner way to travel than by train.

As Lugar’s story shows, business travel remains severely constrained. With the delta variant raging, and many employers again putting off a return to the office, it is unclear if it will ever recover to previous levels. That means fare policy, especially on the flagship Northeast Corridor line, may have to adapt to a new reality where fewer companies are paying for tickets and personal travel becomes more predominant.

“They are well aware that the business model they had before the pandemic is gone, they have to change the fares, they have to get new types of riders on to a higher speed train,” says Jim Mathews, president and CEO of the Rail Passengers Association.

Outside the Northeast Corridor, price is less of an issue. Instead, it is the infrequency and unreliability of the trains that makes Amtrak uncompetitive. (On these routes, state lawmakers can have real influence.) For some rail experts, fixing the reliability and reach of the service is the main issue: Address those and riders will pay higher fares. But prices can be prohibitive, especially for those traveling as a family. Is there a way for the agency to address all three concerns, getting riders like Lugar to take the train without a company credit card while addressing reliability outside the northeast?

A For-Profit Service That Always Loses Money

In the United States, passenger rail operates at an extreme disadvantage in comparison to its counterparts in other wealthy nations. It is still mired in its storied past, when the railroad companies were ferocious for-profit actors who built the world’s only entirely private rail system. When they began to struggle in the face of competition, there was little appetite to intervene on behalf of corporations who had built up a large reservoir of ill will.

When passenger service was hived off from the freight companies in 1971, under President Richard Nixon, half of the nation’s rail infrastructure was abandoned. Amtrak was created as a holding company for passenger train service, but the administration did not see much of a future for it. Railroad travel seemed antiquated in the world’s first motorized nation, and Nixon figured it would shrivel away.

That’s why the legislation creating Amtrak specifies that it should be operated and managed as a for-profit service, something that no other country’s rail network requires or accomplishes. It was created as a hospice for a dying intercity rail system, and its guiding policy specifies the agency must work to minimize subsidies. Cost recovery, not competition with more carbon-intensive travel, is the order of the day. Fares are priced accordingly.

Governing requested to speak with an Amtrak pricing policy professional, but the agency provided a statement instead.

“Prices are based upon historical data, competitive comparisons and consumer demand,” says Kimberly Woods, public relations manager for Amtrak. “Because Amtrak is operated as a for-profit company and is required by law to maximize revenues, its fares vary based upon demand, like airlines and intercity buses. Passengers who travel during off-peak periods and passengers who book early generally pay the lowest fares.”

Amtrak won’t talk much about pricing publicly, considering it a proprietary internal conversation (airlines do the same). Broadly speaking, they divide fare classes into different cost brackets. The base fare is determined by the popularity of the route, ranging from Acela high speed service on the Northeast Corridor (most expensive) to areas where the market for train travel is less robust. The closer to departure, and the fuller the train, the higher the fare.

That means fare prices are markedly different between the Northeast Corridor and other routes. For a day in advance on a random summer week, at any point throughout the day, it costs $25 to travel the roughly 90 minutes between Chicago and Milwaukee. During peak hours between similarly distanced Washington, D.C., and Wilmington, Del., the cost is almost three times as much. (Late at night, or early in the morning, the price drops to $39.) Some lines, like those in Virginia and Oregon, are cheaper thanks to state subsidies.

In the absence of state-level support, it is all about train capacity and what the market will bear. Historically, there hasn’t been much support for playing with the fare structure to maximize ridership — partly because the Northeast Corridor and many long-distance lines enjoyed high enough demand that they reliably sold out despite steep prices.

Systemic change has been slow in coming because Amtrak’s corporate culture is decidedly conservative. The agency never met its goal of making money, so it must rely on Congressional beneficence — tempered by long-held conservative Republican scorn for subsidized rail service — to keep operating. That’s left Amtrak afraid to experiment. A big drop in ridership that couldn’t be explained by recession or contagion could be fatal to their federal funding.

Mathews of the Rail Passengers Association says policymakers at Amtrak understand the opportunity, and the dangers, confronting them. Last fall, he had conversations with senior leadership who said fares would be reduced to attract riders in the near term and that the policy could be long-lasting.

“They have to stick to their guns, they have to not lose their stomach for adjusting the fare basis,” says Mathews. “If you’re telling people they have to pay $700 for two people to get between D.C. and New York on the Acela, they aren’t going to do it.”

Amtrak’s Reliability Problem With Freight Railroads

Mary-Jo Gellenbeck loves riding Amtrak. Or she did, anyway, before she moved to Raleigh from New Jersey. Now even this transportation advocate, who rides the bus and bikes around North Carolina’s capital city, usually drives when she leaves town.

The service in North Carolina is just too unreliable, she says, largely because Amtrak trains down there don’t run on Amtrak rails. Instead, the agency leases access from freight railroad companies, which prioritize their own trains over Amtrak’s.

That means passengers often have to wait to let freight rush by. It’s not the ticket cost keeping Gellenbeck behind the wheel. A nine-hour drive to New Jersey takes Gellenbeck 12 hours by train.
The exterior of a new train station in Raleigh, N.C.
Raleigh, N.C., has a new train station, but not so many trains. That could change with passage of the Biden administration’s infrastructure bill, which will allocate billions for Amtrak.
“If I’m in the northeast, it’s different, but here in Raleigh it’s because the tracks are owned by CSX,” she says. “I know when I get on that train, we potentially can be second in line. I never know that I’ll arrive on time. The same is probably true in a car. But when you’re in a car, you feel more in control.”

Amtrak only owns the railroad track on the Northeast Corridor, which is why the on-time rates there outpace the rest of the system. Relying on access to another railroad’s tracks hampers reliability and makes running more trains harder, even in markets that are vastly underserved.

America’s fourth most populous city, Houston, only receives six Amtrak trains a week. The fifth largest city, Phoenix, doesn’t get any.

“Passenger rail has to be expanded because so much of our nation has no access,” says John Robert Smith, chair of Transportation for America and former chairman of Amtrak’s board. “I can’t take a train if I don’t have access to a train. We’ll have to expand it to reach many different markets...You solve the frequency and the speed, the price will take care of itself.”

Does Amtrak Have What It Takes to Make Big Changes?

All of this might be moot if it weren’t for the infrastructure bill on Capitol Hill.

The most recent iteration of the bipartisan legislation, which seems to have a strong chance of passage, includes $66 billion for Amtrak and tweaks to the legal charter. Specifically, it would get rid of the Nixon-era language about minimizing subsidies and instead refocus the agency’s mission on expanding passenger rail capacity and adding ridership. Service maximization, not cost recovery, would be the new order of business.

Increasing ridership, and driving down fares, could partly be addressed by simply adding more capacity on the service that already exists. If supply and demand is partly responsible for setting Amtrak’s prices, additional seating will mean cheaper fares, all else equal.

“The flexibility to add and subtract equipment is an asset that aviation doesn’t have,” says Smith. “They sell out the tickets on that flight, they either add another flight or they lose additional revenue. But Amtrak can be very adaptable and needs to think more fluidly about how they add and subtract equipment [railcars] to meet demand.”

There are already plans in the works to expand capacity. Some of Amtrak’s fleet was mothballed during the height of the COVID-19 pandemic shutdowns. The new Acela trains that are set to be brought into service next year will expand seating capacity by 25 percent. But more could be done.

While cheaper trains would attract more riders, so would faster trains. As Yonah Freemark (now of the Urban Institute) pointed out during Barack Obama’s administration, Amtrak’s fares per hour of travel are similar to those of other wealthy nations. But U.S. trains are so much slower that labor, maintenance, and operating costs are higher than they are in countries like France or Japan. To win over more would-be drivers, Amtrak would need actual high-speed trains that were competitively priced, as opposed to the current not-quite-high-speed Acela priced exclusively for business travelers and the wealthy.

In the first half of 2021, fares did fall on the Northeast Corridor. Amtrak lowered prices to win riders back after mass vaccinations began to roll out. But by the summer, as ridership levels began to return to normal, and vacationers traveled within the U.S., prices began to resurge.
Many doubt Amtrak will be able to make the kinds of changes necessary to expand more frequent service to places like North Carolina and cheaper service to the Northeast Corridor. Almost half of the $66 billion for passenger rail in the infrastructure is earmarked for astronomically expensive tunnel projects around New York, which will only hasten trips by a few minutes. In an interview with Slate’s Henry Grabar, the current CEO of Amtrak (an airline alum) said he didn’t see that vast expense as a problem.

But observers like Mathews are still more optimistic than they have been in a long time. The changes to the enabling language could augur changes to the agency’s internal culture. Policy journalists are promoting the idea of hiring Western European or East Asian managers, with experience running actual high-speed rail at reasonable prices. Just as owners of office buildings and commuter rail lines are being forced to grapple with a new reality, perhaps changes to ridership wrought by the pandemic will force policymakers to change.

“I think they have to change the makeup of the train,” says Mathews. “As a taxpayer-supported entity, they can get by on volume. As long as they can add capacity and take on more passengers, that ought to be enough. We have to change who’s on the train to keep it going.”
Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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