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Downs-K.B.Hutchison-Texas Eagle-17Jan97

National Railroad Passenger Corporation
60 Massachussetts Avenue, N.E.
Washington D.C. 20002
Telephone (202) 906-3000

January 17, 1997

The Honorable Kay Bailey Hutchison
United States Senate
Washington D.C. 20510

Dear Senator Hutchison:

Attached you will find a copy of Amtrak's analysis of possible replacement services for the Texas Eagle. I know you have been waiting for these materials, and I'd like to assure you that we have been working hard to provide a thorough presentation of the issues and financial requirements associated with the various options. While I have not fully evaluated the potential of each of these options myself, I felt it was important to share with you and the State of Texas the information as soon as it became available to me.

As you may know, I will be addressing a group of mayors from Texas tomorrow evening, and I plan to discuss these materials with them in a general way. I also intend to express to the mayors my willingness to work with all the parties interested in rail service in Texas, including Texas Department of Transportation officials. In fact, I hope to begin detailed discussions with Texas officials as early as next week.

I appreciate the seriousness and dedication with which you and your staff have approached the difficult challenges Amtrak is facing and the challenge of providing train service to Texas. I hope that we can meet shortly with you and your staff to discuss these materials in greater detail.


Thomas M. Downs
Chairman, President, and
Chief Executive Officer




January 17, 1997

TO: Tom Downs

FROM: Mark Cane

RE: Texas Eagle Service Options

Amtrak has completed a comprehensive analysis of replacement service options that was requested by the passage of the FY 1997 Omnibus Appropriations bill. An Amtrak task force examined the feasibility of numerous service options for the Texas Eagle, the Pioneer, the Desert Wind, the Lake Shore Limited and the Gulf Coast Limited, including more than 14 different scenarios for service through Texas.

The results of the analysis of possible replacement services for the Texas Eagle are attached to this memo and are ranked by estimated level of financial performance. The team looked at alternatives for the Texas Eagle starting with the current operation and tested the financial impact of four variables with multiples of each variable. These variables included: tri-weekly or daily service; service over the existing route or over a new route through Memphis; different terminal points: Fort Worth, San Antonio, Los Angeles; and train sizes: the existing seven-car train, a four-car train and a two-car train. In addition, knowing that resources to cover potential operating losses were scarce at both the state and federal level, we sought out service options that offered the lowest possible operating deficits. In all cases, this was a very basic service with minimal locomotives and coach-only service. Operating deficits will increase significantly with the addition of sleeping and dining cars.

If Amtrak were to continue to operate the Texas Eagle, basically as it does today, as a tri-weekly service with the same number and type of cars, we project that Amtrak would expend $39.4 million annually. The train would generate a projected $10.3 million in revenues resulting in a loss of $29.1 million.

Operating the Texas Eagle as part of the Chicago-New Orleans City of New Orleans through Memphis could conceivably produce a better financial outcome than operating the train on its existing route. This is due to the sharing of locomotive crews and railroad payments with the City of New Orleans between Chicago and Memphis.

However, there is no direct track connection in Memphis between the Illinois Central Railroad line (over which the City of New Orleans operates) and the former Missouri Pacific Railroad line (over which the train would travel between Memphis and Arkansas) at the crossing of these two railroads. The absence of a direct connection makes it impossible to consistently, safely and cost effectively route the Texas Eagle through Memphis in a timely manner while still serving Little Rock, Arkadelphia, and Malvern, Arkansas. Furthermore, no regularly-scheduled rail passenger service has operated over the former Missouri Pacific Memphis - Little Rock line in many years and the track is known to have serious subgrade problems which would need to be corrected in order to accommodate regular Amtrak service. Upgrading the line so that it could safely and expeditiously handle passenger trains is estimated to cost several million dollars as this line is not presently engineered for passenger train speeds. The capital cost of constructing a direct connection and installing the needed signaling systems at Memphis would also cost several million more dollars, resulting in a total estimated captal requirement of $5-6 million. Even if funds were available to do so, this project could not be surveyed, designed and constructed before May 10.

Accordingly, while our cost studies suggest that there could be longer term financial merit for a Chicago-Memphis-Ft. Worth-San Antonio routing of the Texas Eagle, the magnitude of the capital costs, the time required to complete capital improvements, train connection coordination, operating reliability, and infrastructure problems make this routing impractical at this time.

We also considered options that routed service to Texas via Oklahoma City. Based on the results of an extensive study that we completed for the Oklahoma Department of Transportation last spring, we know that in order to route any Chicago-Ft. Worth service via Oklahoma, at least $7 million worth of capital improvements need to be made. These capital improvements would take a minimum of 17 months to complete. Furthermore, last spring's study considered a service from Chicago to Ft. Worth via Oklahoma City which operated as a section of Amtrak's Southwest Chief between Chicago and Newton, Kansas. Since that study was completed, Amtak has begun to operate its Southwest Chief from Los Angeles through Chicago and on to Washington D.C. While this change in operation enables Amtrak to achieve enhanced service levels and significant financial savings, it makes such a connection to the Southwest Chief no longer viable. Given the need to provide the states alternatives for the threatened routes by May 10 and Amtrak's time and resource constraints, it was not practical for us to give further consideration to an option that routed the Texas service through Oklahoma.

The option that is projected to generate the least operating loss, $10.3 million annually, and is able to be implemented by May 10, 1997, is a tri-weekly Chicago to Fort Worth train with coach-only service. The second least costly alternative is a tri-weekly Chicago to San Antonio train with coach-only service. This option is projected to generate an annual operating loss of $11.3 million.

In general, our analysis concluded that losses increase with the addition of passenger cars, operating the service daily or by assuming different terminal points. We project that a daily Chicago to Fort Worth train with coach-only service will lose $16.8 million annually. Extending the service to San Antonio would increase the annual loss to $19.8 million.

Therefore, at this time, based on our current financial situation and outlook, Amtrak would require a commitment of $10.3 million per year of additional funding to continue service between Chicago and Fort Worth, or $11.3 million to continue service to San Antonio past May 10, 1997. This commitment would be required no later than March 15 due to resource allocation lead-time requirements and would provide Amtrak with the necessary lead time to properly market the service. While operating a coach-only service does not represent the ultimate in passenger service, it would allow Amtrak and Texas to preserve the route for future operation of improved passenger service and for other potential commercial opportunities.

We will be communicating this information directly to the states of Texas and Arkansas. The State of Missouri Department of Transportation, which currently provides support for Amtrak service between St. Louis and Kansas City, has already informed us that while it is interested in seeing the Texas Eagle service continued, at this time they are not in a position to provide additional funding for rail passenger service. If Texas and Arkansas were to join forces to provide the necessary financial commitment, we would suggest dividing the operating loss based on a percentage of boardings and deboardings. The total boardings and deboardings for all stations along the Texas Eagle route throughout Arkansas and Texas are attached. On this basis, Texas would assume 88% of the loss and Arkansas would assume 12%.

We are aggressively pursuing various commercial opportunities, including mail and express business, that would preserve a national network of passenger train service. The Texas Department of Transportation has asked Amtrak to investigate rerouting the Texas Eagle via Waco. Amtrak would consider this option should service on the Texas Eagle route continue past May 10, 1997. This option would increase the social value of the service and would marginally improve the financial performance of the train but unfortunately, in and of itself, would not significantly reduce the projected losses.

Even if we are forced by our financial dilemma to discontinue Texas Eagle service on May 10 because of a lack of supplemental funding, we will also continue to identify changes that could be made in federal law to preserve the viability of the Texas Eagle route for passenger service and mail and express opportunities. We hope that Members of Congress could be involved in helping us secure the necessary legislative protection.

Attachment I

Texas Eagle Service Options ($ in Millions)

                                        Operating  Total
Options Scenario    Frequency   Revenue   Cost     P(L)    Comments

  1       CHI-FTW      Tri-Weekly      $2.7     $(13.0)   $(10.3)    2 coaches

  2       CHI-SAS      Tri-Weekly       3.1      (14.5)    (11.3)    2 coaches

  3       CHI-FTW      Tri-Weekly       4.5      (15.9)    (11.5)    4-car-train   

  4       CHI-SAS      Tri-Weekly       7.8      (22.2)    (14.4)    7-car-train

  5       CHI-FTW      Daily            3.6      (20.4)    (16.8)    2 coaches

  6       CHI-SAS      Daily           13.1      (32.0)    (18.8)    4-car-train

  7       CHI-FTW      Daily            9.4      (29.2)    (19.8)    4-car-train

  8       CHI-SAS      Daily            4.2      (24.0)    (19.8)    2 coaches

  9       CHI-SAS-LAX  Tri-Weekly      10.3      (39.4)    (29.1)    Current Operation

 10       CHI-SAS      Daily           13.8      (44.0)    (30.1)    7-car-train

CHI = Chicago
FTW = Ft. Worth
SAS = San Antonio
LAX = Los Angeles

Attachment II

Texas Eagle Service Options ($ in Millions)

                                        Operating  Total
Options Scenario    Frequency   Revenue   Cost     P(L)    Comments

  1   CHI-MEM-LRK-FTW      Tri-Weekly  $4.4     $(14.3)   $( 9.9)    4-car-train

  2   CHI-MEM-LRK-FTW-SAS  Tri-Weekly   5.6      (16.1)    (10.6)    4-car-train

  3   CHI-MEM-LRK-FTW      Daily       10.4      (25.8)    (15.5)    4-car-train   

  4   CHI-MEM-LRK-FTW-SAS  Daily       12.9      (30.4)    (17.5)    4-car-train

CHI = Chicago
MEM = Memphis
LRK = Little Rock
FTW = Ft. Worth
SAS = San Antonio

Attachment III

Fiscal Year 1996 Texas Eagle Ridership

Station Stops             On        Off      Total

Walnut Ridge AR               740         807        1,547
Little Rock AR              4,319       4,383        8,702
Malvern AR                    473         510          983
Newport AR                    104         121          225*
Arkadelphia AR                239         425          664
Texarkana AR/TX             2,010**     1,874**      3,884**
                            -----       -----       ------
                            6,880       7,183       14,063

Station Stops             On       Off       Total

Marshall TX                 1,748      1,526         3,274
Longview TX                 9,120      9,177        18,297
Mineola TX                    350        962         1,312
Dallas TX                  11,495     11,806        23,301
Fort Worth TX               4,652      4,991         9,643
Cleburne TX                   305        311           616
McGregor TX                   528        773         1,301
Temple TX                   1,377      1,361         2,738
Taylor TX                     205      1,146         1,351
Austin TX                   5,412      4,700        10,112
San Marcos TX                 351        442           793
San Antonio TX             16,401     15,801        32,202
                           ------     ------       -------
                           52,949     53,933       106,882

 * Service discontinued.
** Ridership at this station is split evenly between Texas and Arkansas.

Posted: Friday, January 24, 1997.

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