How Amtrak's CEO Plans to Spend $66 Billion
Congress is nearing passage of the largest investment in public transit ever. About $66 billion of that money is slated to go to Amtrak, America's passenger rail company. Amtrak's CEO sat down with Ryan to talk about where he intends to spend that money.
Ryan Knutson: Congress is getting close to approving an infrastructure bill that would be the largest federal investment in public transit ever. A big chunk of that money is earmarked for Amtrak, which operates America's passenger rail system. The person who will oversee that money is Bill Flynn. He took over as the CEO of Amtrak last year, and he and his family loved trains.
Bill Flynn: Both my dad and my uncles were locomotive engineers. Two of my brothers have also worked on Amtrak. I can remember back to 1971, I was in high school and my dad and uncle were talking about this new company Amtrak being formed. So I have deep memories and I grew up in Connecticut so I grew up riding the train to and from New York and to and from Boston. There's a deep family connection there. Beyond that, I just believe in Amtrak's mission. I believe in the services we provide and I'm excited about the growth opportunities the company has.
Ryan Knutson: But for Amtrak to grow, it needs to repair its outdated networks, add new routes and make train travel faster. Bill says the money in the infrastructure bill could be just the ticket.
Bill Flynn: If it becomes law, it will represent the largest infusion of cash in Amtrak in our first 50 years of being in business.
Ryan Knutson: Welcome to The Journal, our show about money, business and power. I'm Ryan Knutson. It's Thursday, August 26. Coming up on the show, Amtrak's CEO on how he plans to upgrade America's passenger rail. The infrastructure bill currently stands at about $3.5 trillion, and Amtrak is supposed to get about 66 billion of that. Why does Amtrak deserve all this money?
Bill Flynn: Well, we're the national railroad. We provide a very good service and we've been doing that for 50 years. We've demonstrated that our service is valued. We've been able to grow our customer base. I'll just give you an example of how I am for the value here. If you look at the service between Washington and New York and look at Amtrak riders compared to passengers on the shuttles between Washington and New York, and you add those up as a single market, Amtrak has an 84% share of that market. So to me, that's a demonstration of value. It's not just the Northeast Corridor. In California where we operate services on behalf of the State of California and also long distance services, we have over 8 million riders a year, and that's our second corridor.
Ryan Knutson: But Amtrak right now isn't necessarily a very common way that Americans get around. I mean, it's driving and it's flying. A lot of the routes that Amtrak has are between rural parts of the country or they're long haul networks, or even if you want to go between some big cities, I was just looking last night, if I wanted to go between Chicago and Cleveland, let's say, which does seem like a route where I might want to choose the train over driving, it takes longer to take the train than it does to drive. There's very limited options about when I can depart.
Bill Flynn: Well, that's exactly the point and I agree with you. It's got to be convenient. It's got to run at a time of day when people are going to want to use it and it's got to be reasonably trip time competitive to the alternatives, taking a bus, driving it yourself. So those are all the elements. If those elements aren't there, it's not a service that is going to be attractive to many riders.
Ryan Knutson: So let's talk now about what could happen if you do get the money that Congress is talking about. What are you going to prioritize between fixing things that need fixing and investing in new infrastructure?
Bill Flynn: Well, frankly, some of that will come directed, right? So of the money that's in this bill, about $30 billion will be for the Northeast Corridor. Those are the lines between Washington, D.C. and Boston. Very densely operated. There are over 2,200 trains a day somewhere on that track infrastructure during pre-COVID times and I'll say post-COVID times as well. Critical parts of the infrastructure are very, very old and need to be replaced.
Ryan Knutson: Like what?
Bill Flynn: There's a tunnel in the City of Baltimore, the Baltimore Potomac Tunnel. It went into service in 1873. President Grant was president. Edison hadn't yet invented the light bulb. That's the tunnel that's still in service. I mean, it was great construction when it was done, but it's time to be replaced. So a large percentage of the funding, about $30 billion of the $66 billion that's in the infrastructure bill, would go to desperately needed infrastructure work on the Northeast Corridor.
Ryan Knutson: So half the money will go towards fixing things and doing maintenance. The other $36 billion?
Bill Flynn: We have limited service in the South, limited service in the West. When we were founded in '71, population of the country was 207 million people. Today, 338, pick a number. The majority of that 130 million growth occurred in the South and the West where we have limited, in some cases no service at all. The money will be used also to expand so that we can provide reliable frequent trip time competitive service between the key cities. So recently, we were working with various mayors and other officials in the State of Arizona, for example. There is no passenger rail service between Phoenix and Tucson, by way of example. This is the growth strategy, that just one example. Our estimate is that we could deliver three round trips a day in that route trip time competitive with driving it.
Ryan Knutson: In a year or two years, am I going to start to see high-speed rail between metropolitan areas in the U.S.?
Bill Flynn: It'll take more than a couple of years, but yeah, you'll see... First of all, you'll see what I call conventional speed rail, 110, 120 mile an hour. In some corridors, we can get to the higher speeds of 180 miles or greater. We just signed an agreement with Siemens, with their California-based rail operation. Now, we've ordered 83 new train sets, which will begin to deliver in 2025 through 2029. That will really remove most of the trains that you see today, reducing the time between these points of origin and destination stations.
Ryan Knutson: For current Amtrak riders, what are the biggest changes that they're going to experience after this infusion of cash?
Bill Flynn: Well, over the next number of years, you're going to see new equipment, modern equipment, which will provide a better experience and provide for more capacity. Then over a period of time, outside of the Northeast Corridor, you will see more intercity, competitive, attractive intercity rail service that you're going to want to use at a reasonable price, that is trip time competitive. Higher speeds on the corridor produce the ability to run more trains than we currently run, which create the capacity for more riders.
Ryan Knutson: How many more riders do you think there are who are willing to take Amtrak? How big of a demand do you think there is out there for the new services that you're looking to provide?
Bill Flynn: We think that over the next 15 years, we on an annualized basis could add another 20 million riders. So 32 to 52 million riders. I would say at the end of 20 years with a robust investment we're describing, we could probably, I imagine we'd be closer to 60, 62 million riders, something near doubling, which would be significant.
Ryan Knutson: It's very significant. Where you think these riders are going to come from?
Bill Flynn: They're going to be younger riders and they're going to be in different parts of the country than we serve today. We'll have more riders on the Northeast Corridor, 20% of the U.S. population lives on that corridor, but we'll have more riders in other parts, in California, for example, in the 20 or so major metropolitan areas where we have virtually none or no passenger service today. Phoenix, fifth largest city in the country, we don't offer passenger rail.
Ryan Knutson: What makes you think that younger riders are going to be drawn to Amtrak?
Bill Flynn: It has to be a good service, right? It's got to be on time. It's got to be a good service. The equipment needs to be a reasonable, attractive service. It has to have wifi and other attributes of the travel that might make it better, but you can get on a train and go from point A to point B, use your wifi. You can go in a relaxed way and you will absolutely minimize your impact on the environment. For sure, that's the consistent feedback we get from our younger riders, that they are conscious of the environmental impact and of their own footprint. An Amtrak train on a per passenger mile basis, let's say Washington to New York, emits 83% less greenhouse gas than driving, 73% less than flying.
Ryan Knutson: Younger riders are also more cost-conscious probably than older people. I mean, the Acela, going from New York to D.C. can be a couple of hundred dollars depending on when you're going. Is Amtrak going to be affordable enough?
Bill Flynn: Yes. Amtrak will be. The Acela is higher speed, but our NEC, our Northeast Regional, the tickets are in the 30 to $35 range and that's 15 minutes, 18 minutes longer. It's a different train. We're replacing all of those. Those would be all brand new equipment by '28 or '29. The price point has to be right, right for the rider and right for Amtrak. I think that price point exists.
Ryan Knutson: How much pressure are you under to spend all this money in the right way? It's a lot of money. As you said, it's more money than Amtrak has gotten from the government throughout its entire history.
Bill Flynn: Right. Well, we have to absolutely be good stewards of the public moneys, the investment that's being made in the company. Absolutely.
Ryan Knutson: After the break, how Amtrak thinks if it's a financial responsibility. Amtrak has historically not been profitable. So is that something that you think is part of Amtrak's responsibility is to be profitable or at least break even?
Bill Flynn: So Amtrak is chartered to run on a for-profit basis, but at the same time provide the essential services the country needs. I want to break that down. It's not Amtrak his chartered to run at and achieve profit on a gap basis. In fact, there's no railroad system in the world that does. Railroad passenger systems around the world are considered to be essential in the economy, provide utility, and that the utility that the rail passenger services provides has a larger impact more broadly in the economy. So the long distance services do not generate operating income, the Washington to Boston Corridor does. Then our state services run generally at a breakeven. But there is strong support from our owners, the U.S. government, and shareholders, Congress, to continue to operate the long distance services because of the belief and the expectation of the larger economic value those services create.
Ryan Knutson: Even though a business looking at its balance sheet would see that long haul lines and say, "These aren't profitable. We should cut back on these." You feel like it's something that because you report to Congress.
Bill Flynn: It's not just because we report to Congress, Ryan. It's that transportation creates a utility. We also shoulder a much larger burden of the cost than other modes do. For example, we own the station, we own the tracks and have to maintain them. Airlines don't own the airport. They don't own the runways. They only pay for a percentage use. But in order to provide our service, we have the full infrastructure burden. So it is a philosophical discussion. Does the transportation service that Amtrak provides have enough value creation and enough value creation impact that it's worth to continue to invest in? Congress on a bipartisan basis has said yes. Successive administrations have supported it as well.
Ryan Knutson: What would you say to taxpayers who might see $66 billion going to Amtrak and think that doesn't seem like a good use of taxpayer dollars?
Bill Flynn: Well, people do say that, right? There are certainly voices that suggest that we don't need intercity passenger rail. I would say if one steps back and looks at the total impact that Amtrak does and can provide, it's a good investment. We're talking about infrastructure investment that's year kind of investments. Money we're getting today that's going to play out over 10 years, right? So I believe we can demonstrate the value and utility that this investment will create.
Ryan Knutson: Do you think that Amtrak runs as efficiently as it could? Or are there areas where you need to cut cost and increase efficiencies?
Bill Flynn: Oh, I think every company can be more efficient. I don't believe that Amtrak is wasteful or spendthrift or has sloppy operations. I don't believe that at all. But can we continue to improve? Sure. The operations are designed to provide the best utility at the lowest cost. So when you're not running on time, by definition, you're running at higher cost because you're trying to catch up. What about customer satisfaction scores? What are your customers telling you about? What's the condition of the train, the stations, all of the other elements that go into the experience of taking a train.
Ryan Knutson: So your vision of Amtrak as its new leader is that you want to just do what Amtrak does but better. You don't think it needs a kind of a revolution or an overhaul on how it operates.
Bill Flynn: Oh, it does need a revolution. Part of the revolution, Ryan, is that infrastructure we've just talked about. Then the other element of revolution is running a high-speed train service. Then the third part of evolution or revolution is expanding Amtrak service to communities we don't really service today. Our route network looks very much the way it did in 1971 when Amtrak was created. So we're very excited about the potential for the infrastructure bill becoming law. It's the economic impact. It's the environmental impact. I think it reflects the changing nature of how people want to travel.
Ryan Knutson: That's all for today, Thursday, August 26th. The Journal is a co-production of Gimlet and The Wall Street Journal. Special thanks to Ted Mann for his help on today's episode. Thanks for listening. See you tomorrow.
This article originally appeared on Wall St Journal