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Before I start, I want to quickly mention that I started a podcast with Brian from Real
Engineering called “Showmakers.”
In the very first episode which is out now we chat with none other than Hank Green.
I’d really appreciate if you give it a try and the link is down in the description.
Trains are expensive.
So expensive, in fact, that on three of the most travelled routes in three countries—New
York to Washington in the US, Edinburgh to London in the UK, and Paris to Lyon in France—they’re
pretty much the same price as the plane.
These routes start at $49, £30, and €30 respectively on the train and $52, £13, and
€53 on the plane.
On a longer route like New York to Chicago, the difference is even more pronounced: $59
for the plane, $108 for the train.
And that’s keeping in mind that trains are subsidized or government run in almost every
country while airlines are highly profitable commercial enterprises.
The planes flying between DC and New York are $49 million dollar machines, while the
trains traveling the route cost no more than $10 million total.
The plane has to burn 1.7 gallons of fuel per mile flown (3.9 liters per km) while the
train relies on cheap, clean electric power.
All this therefore begs the question, why are trains so expensive?
Now, I mentioned that fares between DC and New York start at $49, but that’s far from
the average price—$73.
Let’s look at the expenses that go into that fare.
The single largest expense for Amtrak is staffing.
Trains require a lot of people to operate.
85,000 passengers journey on Amtrak daily, but for that Amtrak employs 20,000 people
meaning that, daily, Amtrak requires one employee for every four passengers.
On top of that, the majority of those working for Amtrak are highly specialized, unionized
workers who demand high salaries.
Amtrak’s financial reports tell us that they spend $105,000 per employee, but that’s
not to say that everyone at Amtrak is making six figures.
Taxes and benefits typically cost an employer 30-40% of a salary so the actual average salary
for an Amtrak employee is around $75,000.
These salary costs are so high that they account for over a third of the ticket price between
DC and New York—$25.82 total.
The cost of employees is so high for train operators largely because trains are so slow.
For a flight from DC to New York, an airline would only have to pay employees for an hour
of work while Amtrak has to pay their employees for three and a half hours of work.
The difference is even more striking on long-haul routes—Chicago to Los Angeles for example.
An airline would have to pay for four hours of work, while Amtrak pays for 44 hours of
work.
In addition, trains have physical infrastructure to maintain along the journey—the rails.
Airlines also have infrastructure to pay for on each end—the airports—but between those
they just use the sky, which is free.
Amtrak only owns 730 miles of the 21,000 miles of track they use, but they still indirectly
pay for the employees who maintain those 20,000 miles of rented track through the fees charged
by the track owners for their use.
The next largest cost for train operators is that of the trains themselves.
Trains aren’t that expensive compared to airplanes, but they still cost millions of
dollars.
The locomotive pulling the train from DC to New York costs $6.5 million dollars and then
each one of the passenger cars costs an additional $400,000.
With a seven car train, that works out to $9.4 million dollars which accounts for $9.67
on this particular ticket.
The other part of infrastructure—rails—costs Amtrak an additional $3.66 on this ticket.
Railroad tracks are extraordinarily expensive to build—typically more than $1 million
per mile—but on routes like DC to New York, they’re just used so much that the per train
or per ticket cost is negligible.
Amtrak is a business, so it also needs to pay to run the business.
$2.15 of this ticket goes to administrative costs, and then another $1.31 to advertising.
Moving on, trains are extremely safe compared to cars, but you’re still more than 3 times
as likely to be killed on or by a train than a plane.
Trains do occasionally crash, and they also crash into people.
When this happens, Amtrak often has to pay a settlement to the victims, and the fees
associated with that account for $0.79 of the DC to New York ticket.
That does mean that when traveling between DC and New York, in essence, you’re paying
$0.79 in order for Amtrak to kill or injure people.
Those were all the major costs to run a train, but there’s still another $5.91 on that
ticket that just represents other minor costs.
So the total expense for Amtrak to run that train is $50.14.
The remaining $22.86 is pure profit.
You see, the train from DC to New York, the Northeast Regional, is one of the few Amtrak
routes to make a profit.
The demand, speed, and frequency of the train helps it succeed financially where other routes
failed.
Per passenger per mile, Amtrak makes eight cents of profit on the northeast regional,
the low speed train, and 29 cents per passenger mile on the Acela Express, the high-speed
train.
These profitable routes help pay for Amtrak’s unprofitable routes… and there are a lot
of them.
Some routes like the Sunset Limited between New Orleans and Los Angeles lose as many as
21.7 cents per passenger per mile, and when passengers can travel 2,000 miles on that
route, that’s a lot of loss.
As I mentioned, that $49 fare is not the average ticket price to travel between DC and New
York.
The $49 fare is the price at which Amtrak starts selling tickets, but as the date of
travel nears, the price can increase to hundreds of dollars.
That might seem like price gouging, but its actually a way to make sure everyone can afford
a ticket.
That’s not to say Amtrak and other train companies are these altruistic organizations
trying to bring travel to the masses—it just makes more money.
Especially with trains where it costs the operator roughly the same to transport 5 passengers
as it does to transport 500, the operator always wants to have as many seats as possible
filled, even if that means selling cheap tickets.
In a perfect world for the operator, they could ask every potential passenger what the
maximum amount they’d be willing to pay for a journey is.
If they adapt the ticket price to every passengers maximum price then they can fill each seat
with passengers paying the highest possible amount.
However, in practice, nobody would ever answer the question truthfully so it would never
work.
Ticketing systems, however, try to ask this question subliminally.
Going back to that route from Edinburgh to London, the operator, Virgin Trains East Coast,
sells three types of tickets—advance, off-peak, and anytime.
The advance tickets range anywhere from 30 pounds to 140 pounds, the off-peak fares cost
137 pounds, and the anytime fares cost 148.50 pounds.
For the advance fares, there are a certain unknown number of tickets at different price
levels on sale and once they’re gone, they’re gone.
For example, there might be 15 tickets at 30 pounds and once they’re sold, the price
would increase to 35 pounds, then 40, 45, and so on a so forth.
That encourages those who can buy early to buy early.
Normally that means tourists.
Tourists tend to plan far in advance and are more budget conscious since they’re paying
their own costs.
They’re also more likely to travel down to London on the often cheaper plane since
they’re less attracted by the convenience of the train.
These advance fares are only valid for the exact route, day, and time bought which is
fine for leisure travelers, but business travelers typically want more flexibility.
Buying advance fares often doesn’t work for business travelers since their plans are
only made a few weeks or days in advance and, since they don’t personally pay for their
tickets, its no problem for them to pay for the convenience of taking the train on a flexible
ticket.
That’s why they often pay £148.50 for an anytime ticket.
With these, you can just hop on a train whenever—it doesn’t matter if its in 10 minute or 10
days.
You just step on the train and take a seat.
The middle ground between those two is the off-peak single which lets you take any train
that arrives in London after 11:17 am or is on the weekend.
These fares are still geared towards business travelers, but by restricting against the
early morning trains they give a discount to those who can avoid the busiest morning
trains..
For each of these fares there are equivalents in first class—the advance first fares range
between 40 and 200 pounds, the off-peak fares are 185.50 pounds, and the anytime fares are
236.50 pounds.
On top of that, young, disabled, and elderly people get up to 1/3 off their fares with
a rail-card.
This all means that there are essentially 12 different types of tickets for sale and
that one person heading to London might be paying 20 pounds while the person sitting
right next to them is paying 200 but what they’re really paying for is convenience.
Now, back in the US, if Amtrak only operated profitable lines, their route map would look
like this, but the routes that don’t make money are the ones that really matter.
Amtrak serves over 500 destinations in 46 states—many of which are small towns with
no other means of public transportation.
While trains are normally the more expensive means of transport, they are less expensive
than planes to service small communities.
The small airports in the rural parts of America are extraordinarily expensive to operate.
Even if there are just two or three flights a day, they still need a runway, terminal,
security, and air traffic control while a rural train station needs barely any infrastructure
or maintenance.
In fact, it’s cheaper to fly from Chicago to London ($741) than it is to fly from Havre,
Montana to Chicago ($811 May 17-22) whereas Amtrak brings passengers from Havre to Chicago
for only a few hundred dollars—much more in budget for the average resident of Havre
who makes only $22,000 per year.
Of course this is a political issue, but a part of why trains are so expensive is to
allow train operators to fulfill obligations to serve small communities who need solid
transport links.
Research has shown that ease of access to transport has a stronger influence on whether
someone will earn more than their parents did than the level of crime in their area
or whether they grew up in a two-parent household and so keeping trains running through rural
America is incredibly important.
Next time you take the train from DC to New York, just keep in mind that that $22.86 of
profit goes to making sure that someone from Havre can get to Chicago for less than you
can fly to Europe.
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