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  • Amtrak Records $834 Million Loss on Food Sales Over Past Decade

    Amtrak spent $1.70 for every dollar it earned on food and beverage sales last year, leading to a loss of $84.5 million on the service, according to information provided to the House Transportation and Infrastructure Committee this week.

    Committee Chairman John Mica (R-FL) blasted the “inefficient and wasteful” record of the nation’s rail line, pointing out the substantial cost to taxpayers occurring with each transaction.

    “Over the last 10 years, these losses have amounted to a staggering $833.8 million,” said Mica. “It costs passengers $9.50 to buy a cheeseburger on Amtrak, but the cost to taxpayers is $16.15. Riders pay $2 for a Pepsi, but each of these sodas costs the U.S. Treasury $3.40.”

    Mica estimated the per-employee loss on Amtrak’s food and beverage service—approximately $85 million—at a whopping $68,476. Amtrak employs 1,234 in its concessions service. The division collected $121.4 million in revenue but recorded a loss of $206 million.

    Congress has required Amtrak’s food and beverage services to be revenue positive since 1981. Since 1999, Amtrak has contracted out the management and logistics of the division, but sales remain within the domain of Amtrak employees. The sale of food and beverages aboard Amtrak trains has not broken even—once.

    The losses revealed Thursday are no surprise, according to previous reports from both Amtrak’s inspector general and the U.S. Government Accountability Office. The Amtrak OIG report from June 2011 detailed $61 million in losses recorded by the food and beverage service in fiscal year 2010. It also noted that Amtrak had not made significant progress on “long-standing internal control weaknesses and gaps that continue to make on-board food and beverage revenues and inventories vulnerable to fraud, waste and abuse.”

    Among other findings, the OIG report estimated that between $4 million to $7 million of the sales could be at direct risk of theft. Other examples of waste, fraud, and abuse cited by the report included inflating first-class meal checks (the meals in first-class are free) and selling the items to other passengers for cash, shorting cash register sales, and stealing inventory.

    Efforts to reform and improve the food and beverage service would provide only cosmetic benefits, compared to the staggering annual losses and the requirement that Amtrak prevent losses that have added up to almost $834 million in just one decade.

    Amtrak President and CEO Joseph H. Boardman touted the improved “financial efficiencies” within the food and beverage services. Amtrak’s goal, Boardman said in prepared testimony, is to recover 70 percent of costs associated with providing food and beverages on all trains by 2015.

    Boardman defended the food and beverage service as a revenue enhancer that bolstered Amtrak’s business model.

    “Part of what attracts people to Amtrak services is the availability of food, and the manner in which it is offered. If we were to eliminate food and beverage services, we would actually lose more money, because of the loss in associated ticket revenue,” wrote Boardman. Boardman makes a point, but this does not obscure the red ink staining Amtrak’s budget ledger – either with this particular service or with respect to its overall operations.

    Mica expressed disappointment at the lack of progress in returning the Amtrak service to profitability, and eliminating the cost to taxpayers.

    “Unfortunately, this outrageous cost to hard-working Americans continues. These losses have been mounting for each of the last three years. What makes this more astonishing is that Amtrak food and beverage service is legally obligated to operate on a breakeven basis. Despite this requirement… Amtrak has still lost over three-quarters of a billion dollars in the last ten years,” Mica said. “We have to end these unbelievable losses to the taxpayers.”

    President Obama would double down on spending on Amtrak, despite it being a chronic money-loser. That kind of irresponsible spending cannot continue, nor can we justify asking taxpayers to keep subsidizing Amtrak, especially when its service makes up less than one-half of one percent of interstate passenger travel. These particular food and beverage service losses only underscore that reality.

    Posted in Featured, Ongoing Priorities, Scribe [slideshow_deploy]

    21 Responses to Amtrak Records $834 Million Loss on Food Sales Over Past Decade

    1. This article seems to have overlooked another number in the equation: AmTracks cost of packaging the food distributed on trains. They could do it a lot cheaper!

    2. Tom Kulaga says:

      Let me be a little more clear Mr. Mica, using your accounting method, we the people better shut down Congress! You in Congress cost the country Trillions over Revenues to run the country last year did you not?

    3. Bobbie says:

      I can't believe this exploding level of business incompetence isn't intentional. A paper boy could handle all the books, business, customers and finances at the age of 10! (NO COLLEGE DEGREE NECESSARY!)…just the ability to catch on and be accounted for!
      All of a sudden everyone has their hand out as if their business insight or their college degrees gave them no forewarning to avoid their financial instabilities from getting out of control! This is criminal! Take responsibility for YOUR FAILURE and leave those uninvolved, uninvolved and come what may for amtrak and those that fall short from their duties. No bailout! Criminal charges and jail time!

    4. Mike D says:

      How can a Hamburger cost Amtrak 16 bucks?
      Someone is getting mighty rich off this crap.
      This is the problem with government running anything.
      And you fools actually think the government running health careis going to make is cheaper?

      • Pragmatic says:

        They include the costs of labor in this calculation. They noted that, including labor, Amtrak spends $1.70 per $1 in revenue. So, they say the effective cost of the burger is 9.5*1.7=16.15. All of the real cost is in labor.

        The problem problem is that Amtrak won't stop serving food. This is independent of healthcare, and no one is getting rich off of this, but the tax payer is eating the cost for no reason.

    5. RagnarB says:

      I love AmTrack.
      I use it back and forth between DC, Baltimore, NY & Boston.
      I still drive on occasion, but dig the train.
      I take it back and forth from NY to Chicago.
      For the price of one way, non-stop air, I get a compartment, with meals.
      The stewards are very professional, very nice and helpful.
      It's a delight. It's a rolling office me, the same as working in my home office.
      Who wants to fly and deal with air ports and security?
      I arrive fresh and non stressed.

      • Jeff says:

        Well goody for you! And who pays for your low coach and compartment fares? Hmmmm? Let's remove your head from the sand, big guy, and before you stick it back in, give you a dose of reality: TAXPAYERS WHO DON'T RIDE THE TRAIN! Now, let's put that $830-plus million, and billions more wasted on running the railroad, to only the track/infrastructure, fire the failures now running the thing, sell off Amtrak's route monopoly rights, and get some competition on those rails in areas where risk-takers want to take risk. Qs for you, well, until we show some black ink, you can ride the bus!

    6. Neil G says:

      AmTrak has always and will always lose money. Neither the government nor the private sector can make money with passenger service. There is not enough density along most of their routes to support the service. Couple density with the competitive factors of other transportation modes and you have a model for loss.

      How effective is it to support a service that takes nine hours to travel from Cincinnati, OH to Chicago, IL. A car can travel the distance in nearly half the time. Not to mention that this train service is only offered three days per week and one has to depart Cincinnati after 1 in the morning. Taxpayers, thru the actions of Congress, have been stuck with this inefficient passenger mode for far too long.

      • Ken Marx says:

        Unfortunately, passenger air service isn't really profitable either without public ground facilities and air traffic control. When you consider that cars, trucks and buses don't begin to cover the cost of highway construction and maintenance (which runs in the hundred's of billions of dollars annually, when all levels of expenditure are included), there really is no profit in ANY transportation system. Maybe Amtrak, at less than $2 billion, isn't such a bad deal after all. Just think what it could be if the route structure, frequencies, and average speeds were expanded and increased.

        • kalamawashinton says:

          The taxes levied on cars and trucks to use the highways WOULD cover all the costs necessary to maintain the roads if all those taxes went to roads instead of "art work", "mass transit", and other non-road locations. Another case of the "filtering" of money out of one account to another for a "special interests" desires, rather than putting the money that highway users pay into the highways. DUH!!!!!!!!

          • Pragmatic says:

            Mass transit – there's not need to put this in quotes – also helps support the highway system if it is utilized. More people on trains and subways means less people on the roads which improves the efficiency of both. That benefit is hard to quantify though. This isn't as simple as "special interests".

            • Bobbie says:

              that's right pragmatic. Lots of people would have to drive out of their way to get to that depot to catch the train that leaves at the same times for everyone to get to it's destination according to it's eta. Efficient for inanimate objects maybe. Sounds like timely congestion! Not only that but the shorter your auto commute the more pollution emitted. How efficient is it really? Look at all those construction jobs no longer needed. There should be no such thing as "special interests" coming out of tax dollars when the interested is obviously a minority who can pay for their own interests or find other ones that doesn't cost anyone else!

    7. bill e goat says:

      If Ted Alves did not gut his audit and investigative staffs and replace them with federal retired loads maybe he would have an experenced staff to handle this problem…they should investigate that Alves load he had used taxpayers money to build new office space at 10 g street and inflate salaries at taxpayers expense…the whole joe blow boardman cirus needs to come to an end…

    8. Deb says:

      Amtrak-
      The bigger question is… Where all of the rebates from Pepsi (and I' m sure other vendors who supply Amtrack)
      being applied? This can equate to millions of dollars each year.
      I I worked in food service for a global company for 25 years, in upper management. Suppliers would inflate prices to the end user in order to send a huge rebate check to their customers corporate office. (this rebate was not applied at the local level, as a result, the increased cost to the end user caused the local operators to increase prices to their customers or reduce other services. You would not believe what the rebates ate often utilized for. On second thought. you probably would, Most corporate mongrels are truly politicians at heart.

      Let me have 15 minutes with Amtraks food service profit and loss statement and I will show you how they can turn a profit.

    9. TexasMan says:

      Someone is skimming off the top! They can go to WalMart and buy a case of soda pop LOTS less expensively.

    10. How can one can of soda cost that much when you can buy a case of sodas for about that same price when they are on sale and they are a little over $5 for a case otherwise. The prices for the items to get them to sell is ridiculous.

      • kalamawashinton says:

        Not only that, I worked for the nation's largest snack food company for over 30 years, and the more you order of a certain product, the better "per each" rate you get. I have had small companies, who would place small orders (80 cases per delivery, for example), that the large customers (1500 cases per order, for example), can sell the product cheaper than he could buy it. Do you think that Amtrak would be a "large order", or "small order" customer?

        We need someone with some business experience in charge here. (Like Deb above)

        Maybe we need someone with some business experience in charge of the country, too. Oh, yea, someone like that is running.

      • Pragmatic says:

        Amtrak isn't paying a lot per can of soda, in fact, it is probably paying less than we can at the store per can. They have to charge high prices to cover labor costs (and you're a captive consumer on the train). Even with the high prices, they still aren't covering costs which means they should either raise prices or stop offering the service.

    11. Ken Marx says:

      Everybody loves to slam Amtrak at every turn. Let's face it. Transportation does not pay for itself in any mode. The only airline that has consistently shown profits is Southwest. This, despite the fact that all airlines benefit from taxpayer provided ground facilities, security services, and air traffic control. Southwest has no food service, other than peanuts and beverages.

      Highways cost the taxpayers at state and federal levels well above $100 billion annually for construction and maintenance. The cost of operating cars, trucks and buses is above that. Where's the profit?

      So we like to condemn Amtrak based on the myth that it was created to make passenger trains profitable "again". And we begrudge spending around $2 billion a year on capital and operations. Boardman is correct. The food service may not make money in isolation, but it does act as a draw to bring in passengers who might otherwise not ride. Those free meals for sleeping car passengers are more than paid for in the high accommodation charges they must pay in order to have a bedroom.

      Conservatives like to put down Amtrak as wasteful. I am a conservative, but I recognize the truth in all this. Passenger transportation does not pay for itself, not in the air, on pavement, nor on the steel roadway (railroad tracks). When I add up the cost of operating my car, depreciation, maintenance, gas, lubricants, and maintenance, that train trip looks enticingly inexpensive. Taxpayers, you're getting a bargain with Amtrak!

    12. Blair Franconia, NH says:

      Is this anyway to run a railroad? No, it's not. Privatize Amtrak.

    13. drobbo says:

      Why not franchise it out to smaller (Mom & Pop) operators? They would pay Amtrak a reasonable fee (ensuring Amtrak at least break even) and operate to set standards and conditions thereby releasing Amtrak of the burden. You can be sure smaller operations would cut down on fraud, theft and waste if they are ultimately responsible for turning a profit.

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