How to lose money on $9.50 cheeseburgers

Amtrak food service
How to lose money on $9.50 cheeseburgers





JOHN MICA, the Republican chairman of the House Transportation and Infrastructure committee, has held many hearings on Amtrak, America's government-run passenger rail company, over the past few years. Few, though, have drawn as much attention as an August discussion of—what else!—hotdogs and beer, when Mr Mica noted that, over the past three decades, Amtrak has not once broken even on its food offerings.

Why would Amtrak continue running a service that has cost it $834m over the past ten years? And how can it possibly lose that much money selling what I can testify are very expensive hotdogs, beers and sandwiches? Andrew Briggs at the American Enterprise Institute, a conservative think-tank, suggests that Amtrak's labour costs are to blame. (Amtrak employees actually make less money than comparable private-sector workers, but like many government employees, they have access to superior health and retirement benefits.)

Labour costs are part of Amtrak's problem, but they're not the heart of it. That honour goes to the company's unprofitable, unpopular, slow and generally indefensible long-haul routes. Like most of Amtrak's problems, the food-service losses—even the labour-cost portion of them—stem mostly from long-haul services. The food car on the Acela Express from New York to Washington, DC, is not the problem—it's the food service on trains like the Empire Builder and the Texas Eagle that really puts a strain on Amtrak's budget. According to testimony from Amtrak's inspector general (PDF), a full 87% of the railway's food-service losses are incurred on long-distance services. At $78m annually, the labour costs alone associated with providing food on Amtrak's long-haul routes exceed total revenue from food service ($57.9m) on those routes. That's not true of food service on north-east-corridor trains, where the company loses a comparatively tiny $9m annually after accounting for both food and labour costs.

Amtrak loses a lot of money providing food service on its long-haul routes because it loses a lot of money on almost everything related to those routes. Long-haul passenger train trips, especially at Amtrak speeds, are for hobbyists, people with lots of time and very restricted budgets, and people who are afraid of flying. No private-sector company without Amtrak's political and legal obligations would continue to operate its long-haul routes without substantial changes. In a world where members of Congress actually cared about making Amtrak more viable, they would be focusing on pushing the company to scrap or drastically alter its long-haul services, and not suggesting that serving food to people is the heart of the problem.


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