WASHINGTON — At a weekly “town hall” telephone meeting with employees on Friday afternoon, Amtrak President and CEO Richard Anderson painted a grim picture of the ways in which the Covid-19 coronavirus crisis has impacted demand. He also addressed funding requests to Congress to keep trains running, and how management plans to trim expenses, including unspecified changes to the long-distance network.
Trains News Wire was provided with a recording of the meeting.
Though he is set to shift to an advisory role when his successor, William Flynn, officially takes over as CEO on April 15, Anderson made it clear that policies recently formulated by the existing management team and Amtrak Board Chairman Anthony Coscia would prevail for the foreseeable feature. They include:
— Reducing planned $2 billion in capital spending by $1 billion to focus only on “state-of-good repair” capital projects. As an example, he cited Baltimore’s B&P Tunnel [see “The Overshadowed Tunnel,” February 2020 Trains]. Amtrak will spend the funds required to keep the existing 1873-vintage tunnels functional, but put engineering for their replacements on hold.
— Starting April 1, cutting management salaries from 22% to 7%, with the amount of reductions decreasing with the pay grade. Flynn has agreed to completely forego his annual salary from the outset. The 401K retirement program match is also immediately discontinued.
— Implementing a “voluntary time off” program for non-union employees, or reducing weekly hours to 32 hours per week and asking for voluntary retirements.
“The goal is to keep as many people employed as possible,” Anderson said. “We’re not doing any retirement incentive, but taking retirement now will open up a job for someone else in the company. Because after we get through this, the economy is going to be in recession, and that means our ridership will be down and we will be curtailing capacity to meet demand.”
Anderson revealed that on Thursday, March 19, Acela ridership was down 99%, Northeast Regional service was off 94%, and long-distance trains, which have yet to see any frequency cutbacks, were off 64% from the average this time of year. He hinted that Amtrak would soon announce that all Acelas would be temporarily discontinued — a move the passenger railroad made on Monday.
“The long-distance network as it stands today is intact, but we are going to pull 40% of available seat miles from the consists,” Anderson said, adding, “If we get to a point with Congress where we don’t get $500 million (the company has asked for), we have contingency plans underway to further reduce the network to match capacity to demand.”
In response to an emailed employee question later in the session, Anderson said:
“There are pieces of the network that ought to be permanently trimmed; you know, I’ve said that for a very long time. And given the amount of cash burn we have, I’m certain the long-distance network is going to be very different longer term. We’d like to avoid it, but if we can’t get the kind of funding out of Congress that we need, then we need to face that issue and will have a contingency plan to do that. But that will be only a worst-case scenario because we don’t want to furlough employees.”
However, when Anderson stated that “over two and a half years it takes about $2 billion to keep the long-distance network operating,” he again used the largely allocated expense figures the company assigns to imply that these are avoidable costs — that is, they would all disappear if the trains were discontinued. His earlier “cash burn” reference also implied that this was the case, a contention that has been repeatedly challenged by the Rail Passengers Association and elected officials along those routes.
Through February in the 2020 fiscal year that began in October 2019, Anderson reported that Amtrak was “running 91% above plan.” Trains News Wire confirmed that in February, the long distance, state-supported, and Northeast Corridor categories all showed sharp increases, with overall ridership and revenue both up an average of 6.5% compared with February 2019.
Now with the outbreak, Anderson said, full year revenues are projected to be down $1 billion and the company projects a $840 million loss even with expense reductions of $110-$150 million.
Though not explicitly asking for relief from a scheduled July 1, 2020, raise for union employees, Anderson concluded the call with the hope that “we have to do what we have to do to come back strong after the pandemic, and will do our level best to not have anyone at Amtrak involuntarily lose their job.”
— Updated at 7:15 a.m. to include suspension of Acela service.
Andrew & Jeffrey – Hopefully they wouldn’t be that STUPID to pull a stunt like that to use this as an opportunity to cut/eliminate the LD routes being as next fiscal years budget has not been finalized thereby incurring the wrath of Congress members whose districts would be impacted. Judging from the ridership figures above the Acela should be the first to go.. down 99% poor performer even before the outbreak.
ANDREW — Another possible outcome is that the stimulous (money that the government will print if it doesn’t first run out of ink) would include a rider to maintain all current routes. What’s a billion or two for Amtrak in a bill that will will total two trillion?
As for Amtrak management, it hardly needs an underhanded “tactic” to use your term for discontuning routes when bookings are down to near zero on some routes and down to a trcikle on the others. Both Amtrak and the airlines are on the verge of a possible total shutdown and the only question is what routes will be re-established.
It sounds like Amtrak management might be using the coronavirus as a tactic to get rid of some routes when that decision should be made on a more rational basis. But I guess that’s the government way.
it is interesting to note that an outgoing executive officer with less than a month of time left in his current
position is stating policies which could affect the organization for a year or more in the future. a lame-duck
president (mr. anderson) should not state policy; that is the job of new president, mr. flynn. if it is deemed
essential that the new policies be articulated immediately, mr. flynn should step in early to do so. but it is very bad form for an exiting ceo to make statements — for example about future employment, positive or
negative — which could be reversed the very first day by the new chief executive.
CURTIS – You speak good and necessary sense (below) at a time of total national insanity. In good times (i.e. three months ago) this nation significantly under-invested in rail infrastructure. That was in good times. Now we are moving into an economy of 100% bailout and 0% investment.
I will give an example. Until the past few weeks, there was a consensus that the federals would refrain from bailing out under-funded state and local pension funds. For example a state pension fund might be under water if its “accountants” based pension payments on the expectation of, say, 8% perpetual return in investments when the actual return was well under.
Now the return is deeply into the negative numbers, so much so that pensions might be forced into bankruptcy in the near future. Don’t you think there will be bail-outs? Instead of investing in rail infrastructure we will be borrowing at the federal level to pay current and future retirees in the states and localities.
I don’t see this country return to normal in our lifetimes, let alone, CURTIS, as you advocate, doing some good. So, CURTIS, you can forget about your sensible position. It ain’t gonna happen.
Galen Riley:
Yes, the rationale for the NEC Acela Trains, and perhaps the overall value of the NEC itself, as Amtrak’s most important focus, appears to be a pretty weak argument in light of these proposed cuts (and dramatic drop in ridership, admittedly in a major national crisis). A comparison of the relative ridership drops (NEC vs. LD Amtrak trains) doesn’t make strong case for the NEC business focus of Amtrak.
Wonder what congress will think about all of this? (Assuming they can get past the partisan debates and arguments about how many trillions of $$$ to spend on Corona Virus bailouts).
Amazing that Anderson’s Golden Child the Acela is the first to fall the obviously weak link in the Amtrak chain yet he turns it around to make it sound as if the LD network is the weakest using the Amtrak voodoo accounting to try and back it up. Two things we need to go away Anderson & the virus.
Rather than cut capital spending, increase it. Seize the window of opportunity caused by reduced traffic. Protect the workers and press on with needed projects.
“. . . long-distance capacity to be reduced. . . ‘There are pieces of the network that ought to be permanently trimmed; . . . I’m certain the long-distance network is going to be very different longer term.'” These are scary scenarios if it means discontinuing entire routes. In this day and age (that is, the status quo prior to coronavirus), once service is gone on a route, it is extremely difficult to get it restored. E.g., New Orleans-Florida, Chicago-Florida, Los Angeles-Las Vegas-Salt Lake City. Hopefully Amtrak and/or Congress will see the wisdom of preserving at least a modicum of service on all routes so that when things improve, it will be a lot easier to ramp up service.
Thus it begins …
Isn’t it amazing that the total amount of federally supported rail capital investment in our lifetimes, plus Amtrak and local operating subsidies for Amtrak and local transit from the federal government, is about five minutes worth of the corona virus bailout.
Hold on tight and get ready to write your Congressional representatives. This virus is just too convenient for them to carry out the slash and burn of the national network that some have been trying for 40+ years.
MIKE – Really? Put a sock in it! Bookings are down 99% on one route, almost as high on other routes, more states each day are on lockdown, virtually no one is riding the trains, and your post is the best you can come up with? What exactly is Anderson supposed to do, run a full schedule of empty trains?
Mike, I don’t like it when people slam my post, even so I’m going to slam yours. You ought to be ashamed of yourself.
Anderson is a liar and a stooge for Trump !
The one thing the US cannot do is default on it’s debt, that standard is one of the reasons our country as been a safe place for investors world wide to be in. If we did default on our countries debt (I am using we because it is our country)the damage would make the COVID virus look like a common cold.
Noel, no one is paying for the bailouts except those that buy government bonds…which when all is said and done can be defaulted on quite easily. It would hurt the individuals that bought them, but the big losers would be all the foreign governments that bought that debt, they’d fight tooth and nail to get us to keep paying…which is when you through the ultimatum at them.
As for Amtrak, yes, they don’t use GAAP and haven’t ever used it, no one, with the exception of their own accounts knows the true cost of the different services. Why the GAO doesn’t force them to turn their numbers over to an independent auditor I don’t know, unless of course that would reveal some back door shenanigans with money and Congressman…
Remember, your government is not paying for the bailouts: your grandchildren are.