This is Brightline, the first new privately-funded
passenger rail line built in the U.S.
in over 100 years.
It was completed in 2018 and when the entire line
is open later this summer, it'll stretch 230
miles from Orlando to Miami. And it was almost
entirely done the good old-fashioned American
way, with private equity.
The most successful train system in the U.S.
is basically a government run enterprise.
So the Amtrak system from Washington to New York,
the Acela network is a terrific product.
It's one that I've used many, many times.
But frequently used train lines in the U.S.
like Acela, are few and far between, with just 23
million trips in 2022 compared to France with
879 million.
Moreover, the U.S. has zero miles of dedicated
high-speed passenger rail, which is far behind
most developed nations, and they're getting more
expensive to build every year.
If you look at France, you know, who is the European
country that has been doing this the longest,
the first lines were fairly easy, quick and not
that expensive to build.
But nowadays you see the same pattern that they
are. They are becoming more expensive and more
difficult, take longer to build.
The lack of rail infrastructure is in large
part due to the prioritization of highways
to support cars and trucks in the 1950s.
By 1960, over 70 million vehicles had been
registered with motor vehicle bureaus all over
the country.
But now that those roads and bridges are crumbling,
trains are finally getting more attention.
And while the United States is roughly 18 times
bigger than France, the countries have about
21,000 miles and 18,500 miles of passenger rail
lines, respectively.
As part of Biden's trillion dollar
infrastructure plan, $66 billion was allocated to
rail maintenance and expansion, some of which
will be granted to private companies.
We used to be number one in the world in
infrastructure. We've sunk to 13th in the world,
but now we're coming back because we came together
and passed the Bipartisan Infrastructure Law, the
largest investment in infrastructure since
President Eisenhower's interstate highway system.
Congress put in about $65, $66 billion over the
next several years to support the deployment of
regional higher speed rail.
This is the largest investment in passenger
rail since Amtrak was founded, but it still
won't be enough to bring true high-speed rail to
the U.S. So can a privately owned passenger
train company like Brightline make it happen?
The company is planning to build a true high-speed
rail project connecting Los Angeles to Las Vegas
called Brightline West, which it aims to open in
2028. But in the meantime, it is expanding
in Florida. CNBC visited its newest train station
in Orlando, where it's opening a new line
connecting Central and South Florida in August to
explore whether private rail can work in the U.S.
In 2006, Fortress Investment Group made an
investment in the Florida East Coast Railway, which
was built by Henry Flagler in the late 1800s.
This train was originally conceived as a train for
both freight and for passenger.
It was a passenger rail all the way through the
1960s, and I spent quite a bit of time traveling
around the world, and particularly in Europe,
where the trains are a very, very typical form of
transit. And so I thought, you know, why not
a train here?
A team at Brightline looked around the world to
see what works best for profitable passenger
trains in countries where it's a popular way to
travel. And after returning to the U.S.,
they considered which cities would benefit the
most from being connected by rail.
And what we discovered was when you have two big
markets that have an existing demand base of
travel between those two cities, that those cities
are separated between 200 and 300 miles, plus or
minus. There is an opportunity for high-speed
passenger rail to become the preferred method of
travel.
When you look at all the city pairs that exist, the
places around the country that would be attractive
to you, Miami to Orlando jumps off the top of the
page. It's kind of a lousy drive between them.
It's this 230-mile trip between the two places
with lots and lots of trouble in between.
And when he says trouble, he means it.
80 some miles of that drive are on I-95, one of
the deadliest highways in America, with one stretch
in south Florida causing 108 fatal crashes and 123
deaths over the past 20 years.
But with a reliable train, some of these fatal
crashes could be avoided as more and more cars will
be off the road.
I think Brightline is already having a
significant impact on traffic in South Florida.
It's going to have a more broad based impact across
the state as we start the service into Orlando and
we run the full 235 miles.
However, because most of Brightline Florida is
currently operating on existing tracks with train
crossings instead of being elevated above the
road, there have already been around 90 fatal
run-ins with cars since service began.
We looked at the corridor we built between here and
cocoa and we thought this is actually the proper way
to do it because you end up with your own corridor.
You don't have to share with anybody.
You don't have any rail crossings, which is great
from a safety and a speed perspective.
And so there was, again, a lot of lessons learned.
And partly why it was able to get the line up and
running on time was because it shares the line
with Florida East Coast Railway freight.
This model came from Amtrak, which borrows 96%
of its lines from freight. But this has
proven to come with additional difficulties
for Amtrak, like long delays and increasing
ticket pricing.
We started because we owned the freight train at
the time. So the original concept was to take the
existing rail corridor and basically build on
that, enhance that, which we did.
So from Miami to Cocoa Beach, it basically goes
along the same corridor as the Florida East Coast
Railway. And we share that that line with the
freight train.
And the rest of the way from Cocoa Beach to
Orlando is fresh track, boosting the total cost of
the Florida line to about $6 billion.
The vast majority of successful train systems
around the world are nationalized lines,
meaning the government assumes full
responsibility for the rails.
But even Amtrak, the largest operator of
passenger rail in the U.S., is structured as a
private corporation and receives both private and
public funding.
While having privately owned passenger rail is
not the typical method seen in train-dependent
countries around the world, there are some
examples of it working well.
There are a number of private trains that have
been very, very successful, both
public-private partnerships,
government-sponsored trains, the SNCF network
in France or Trenitalia in Italy.
Italo has been a big success. The Eurostar has
been a rip-roaring success. There's plenty of
examples of both public and private ownership and
sponsorship working well.
However, these companies usually have had to use
either government grants to begin their ambitious
infrastructure projects or a bail out somewhere
along the way.
These systems are not risky in terms of
operations, but they're risky in terms of getting
built because you don't know how many years you're
going to be delayed. You could be delayed by
changing politics.
You'd be delayed by something in the economy.
And so it takes a really gutsy private company to
put in billions of dollars and then take ten
years before they get any revenue.
Even the Eurostar, which connects Great Britain to
mainland Europe via the Channel Tunnel, had to
receive a couple of shareholder and French
state bailouts to stay afloat during the
pandemic. Fortress does have a very diverse
portfolio, ranging from ski resorts to clean
energy, which help it pay for expensive projects
like this.
It is possible for private companies to deliver
high-speed rail and also to do it well.
It seems less possible on the basis of the evidence
we have, which generally show that private
companies also are not able to make high-speed
rail financially viable.
So there needs to be a subsidy somewhere.
And that's exactly what Brightline hopes to do for
its upcoming project.
Brightline West, a $12 billion 218-mile line of
high-speed rail connecting Las Vegas to
Los Angeles.
In the case of high-speed rail, not in all projects,
but in case of very risky, big, very expensive
infrastructure projects like high-speed rail, very
often the public sector government ends up
stepping in and saving the project, no matter how
it was delivered, whether it was delivered by a
private company or a public company.
And Brightline West still expects this to be the
first completed true high-speed rail project in
the U.S., with trains running over 186 mph.
But it might not be able to get by without a little
help from Uncle Sam.
In order to be a part of Biden's infrastructure
initiative, Brightline West has to be built with
unionized labor, American resources and use 100%
renewable energy, which is why it's pursuing a
$3.75 billion federal grant in partnership with
the Nevada Department of Transportation to get the
project rolling, so to speak.
No highway exists based on fully private funding.
No airport exists based on private funding.
And moreover, those roads need to be maintained
every single year by additional investments
made by the public sector.
It also plans to build the line in the median of I-15
with land leased from the California Department of
Transportation.
Brightline West choosing to use existing
transportation corridors is what we've found to be
the secret sauce. It's what we've found to be
helpful and we've been working with states,
cities and counties.
They like it too.
And so if you can create this private-public
partnership, it really aligns us and creates
win-win results.
This differs from the other major high-speed
rail project in the U.S., the California High-Speed
Rail, which is building from the ground up and not
along a major interstate.
Acquiring land has historically been one of
the biggest hurdles for passenger train
development in the U.S.
Because Brightline is using pre-approved land,
it's been able to move quickly and cheaply.
The whole approval stage is often really stretched
out in time and hard to go through, and there are
many hoops that you have to jump through.
And it can be frustrating for the people who are
planning the project and who want to deliver the
project, but it gets even harder once you get to
delivery because that's when you really face
people in the real world, like the people who own
the land that you're going through and the
neighbors and so on.
But Brightline thinks that makes being a private
company a logistical perk.
One of the advantages of us being a private sector
entity is we are able to both make decisions
quickly and then act on those decisions quickly.
And when you do that, you're able to move the
ball forward in a very direct way.
That's one of the virtues of sort of the
entrepreneurial spirit of a private company.
And this is a company built on an optimistic
viewpoint of the future.
At this point, it's practically derivative to
say that car culture is synonymous with the United
States. It's literally built into the fabric of
the country, with 92% of households having access
to at least one car.
But if private companies like Brightline continue
to expand, would Americans actually use it?
This idea that Americans love their cars and are
never getting out of their cars is a little bit
of a nostalgic idea.
Number one, the statistics will bear that
out. The age at which people get their driver's
licenses has materially been getting older and
older. The number of people that get a driver's
license that feel the car is that important in their
life is diminishing over time.
So this is not the 1950s.
Gas is not 25 cents a gallon.
And the interstate highway system isn't brand
new. This is a different world.
They're different sensibilities about all
kinds of things, personal priorities, their view
against the ecological impacts of the decisions
that they make. All of these things favor the
future of traveling by train as a smarter way to
get around.
Brightline is optimistic about its abilities to get
people off the roads and into its trains.
Reininger said they expect to transport up to
8 million people a year with the Florida line.
Ticket prices from Miami to Orlando are expected to
cost $39 for kids and up to $149 for premium seats.
And it's something that doesn't just impact our
city, our state and our country.
It actually impacts the world because many of the
people that come here to the state of Florida are
coming either to Miami, Orlando or both.
Brightline estimates 35 million people travel
between Orlando and Miami every year, with most
currently driving on I-95 and the Florida Turnpike.
The U.S. is blessed with the best interstate
highway system in the world. That's probably one
of the things that has retarded our growth in the
passenger side. But there's real limitations
in these big cities as to how many more lanes of
traffic you can support.
And so with that, I think you need a different
solution. I think train travel is a big part of
it.
And Brightline West will eventually be serving a
pair of cities that has 50 million visitors making
the trip every year.
85% of those people are driving.
Those people that are driving are limited to
qone road. And that results in, not
surprisingly, extreme congestion on that
roadway. And it makes for a very challenged transit.
Driving along that one roadway.
That screams for another alternative.
Because Brightline West is also being built in the
median of where people are traveling and we're
taking them out of our cars, we are the best
billboard for our future success.
People have to pass us for the four years that
we're being constructed and every time they're
sitting in traffic one way or the other, or every
time there's a backup, they're going to say, I
want to take that train as soon as it's open.
And leadership in the company thinks both
projects can garner enough riders to be
profitable.
Brightline West has the opportunity to run 10 or
11 million people a year based on the size of the
market and the propensity of those people to move
back and forth between those marketplaces.
That will make it a very profitable entity.
It will be profitable at significantly less
ridership than that. The threshold is much lower
than what our aspirations are.
They have already shown that if you provide a
super high-quality service and experience,
that the people will show up by the millions and
they have.
Brightline doesn't yet have any other private
companies directly competing with its plans
to create rail lines across the U.S.
Texas Central is another hopeful project seeking to
connect Dallas and Houston via rail, but
plans have seemingly stalled after it ran into
land acquisition challenges.
Certainly we're the clubhouse leader having
built the first train in this country in the last
125 years and hopefully the second one here
shortly, but I expect there will be lots of
competition over time because this is a
compelling business opportunity.
As Brightline West could be the first high-speed
rail line in the U.S., it's essentially viewing
the project as a proof of concept, both for it and
future competitors.
I'd call it the blueprint for America's high-speed
rail industry. And so what that means is we are
building in America, we are utilizing American
Union labor, and we'll create about 35,000
construction-related jobs and a thousand permanent
jobs after all that are localized within the
region that we're building in.
We believe this is a great demonstration
project and a proof of concept so that we can
build and work with others to build other
systems in the future.
It's been able to achieve its deadline so far with
Brightline Florida and aims to break ground by
the end of the year for Brightline West and
complete the project before the LA 2028
Olympics.
There's nothing that says private is necessarily
better or worse.
They can be very complimentary to each
other. I do think that in terms of developing and
building things, private enterprise is probably a
little more nimble than a government agency would
be.
But it does hope to work in conjunction with and
connect its lines to government-subsidized
trains like Amtrak or the California High-Speed Rail
Project in the future.
Thinking of all this as a network, as opposed to the
Amtrak system versus a public-private partnership
system, but making sure it's all connected.
If we're going to have a national system in the
future, that's the only way we're going to be able
to think about this.
Brightline West and the California High-Speed
Rail, we're complements of one another.
We actually have the same goal and the same mission.
We want to see a unified high-speed rail network in
America. And so we're starting on the West Coast
to do that. But we're rooting for them and
they've been rooting for us. And together, I
believe we're going to do that.