(The Boston Globe published the following story by Keith Reed on its website on July 14. Material from Bloomberg News included in this report.)
BOSTON — The stakes were high for Amtrak when the struggling railroad decided in April to cut fares by 22 percent on the Boston-New York segment of its most lucrative route. The railroad had posted a record loss of $2.2 billion for the fiscal year ended Sept. 30, 2002, and it was facing an uphill battle in Congress for funds.
In a salvo at the airlines, similarly struggling and heavily subsidized, it dropped fares on its flagship Acela Express trains from $127 each way to $99. The move worked — sort of.
Amtrak reports that ridership is up. The number of passengers taking the Acela between Boston and New York jumped 13 percent in the first five weeks under the new fare structure, compared with the five weeks immediately before the price cut. But there’s a cloud overhanging the good news: Amtrak has been sliding backward in the larger fight for market share against the airlines, and there’s no clear sign the trend has been reversed.
Since wresting as much as 49 percent of New York-to-Boston passengers away from the airlines in the quarter immediately following the 9/11 attacks, Amtrak’s share has been slipping. In its 2003 first quarter, which ended Dec. 31, its share slipped 4 percentage points, to 33 percent, a post-9/11 low. (The airlines had the other 67 percent.) Since Amtrak’s market share data are delayed by about 6 months, no clear data on share are available for the Acela promotion period.
Dan Stessel, a spokesman for the railroad, concedes that some passengers who had stayed off airplanes fearing terrorism, or because of empty wallets, have gone back.
”There’s been a return to air travel post-9/11,” Stessel said. ”When you look at what happened since then, we’ve still picked up at least 10 points.” But he added, ”The airlines are picking up their people again.”
When Amtrak cut Acela fares, it did so knowing the airline industry was taking a beating. The war in Iraq had just begun, discouraging air travel while major airlines were already languishing financially.
While Amtrak was enjoying newfound competitiveness along its Boston-to-Washington Northeast Corridor after launching Acela Express in 2000, the airlines were suffering in the same area. Airlines carried 2.5 million passengers between the cities that year, a number that plunged 29 percent in 2001 to 1.8 million, and by 13 percent last year, to 1.6 million, according to BACK Aviation Solutions, a New Haven consulting firm that supplies data to both Amtrak and the airlines.
Feeling the squeeze, Delta Air Lines and US Airways trimmed their shuttle schedules this spring. US Airways halted three New York departures between 9 a.m. and 1 p.m. from Logan International Airport; Delta cut four. At the same time, American Airlines added four shuttle trips to its schedule.
Seeing opportunity, Amtrak lowered fares and launched its advertising campaign. The reasons were obvious: struggling Amtrak derives most of its ridership and political support from the Northeast.
The move succeeded in winning passengers like Laura Scanlon of Somerville, who took her first Acela trip to New York on the 12:33 p.m. train from South Station on Thursday.
Scanlon said she checked Delta’s website for a flight, but opted for the cheaper train ticket instead.
”It was the price,” she said. ”I knew people that have taken it in the past and they liked it, plus it’s really relaxing.”
”If they say that they’re stealing passengers from the airlines, they just might be doing that,” said John Weber, vice president of worldwide sales at BACK. ”It’s 200 bucks round-trip, which certainly you would pay, or more, for a shuttle ticket. Plus the fact that with Amtrak, you can sit and work, which you cannot do on an airplane.”
Still, Amtrak faced its own uphill battles. The Acela, billed as a high-speed train service, reaches its top 150 miles-per-hour speed only along a short stretch of track, and frequently arrives at its destinations late. Amtrak also suffered huge publicity blows last summer when mechanical problems sidelined the Acela locomotives.
To boot, Amtrak has suffered a string of losses of around $1 billion a year. On Friday, a House subcommittee voted to cut Amtrak’s funding by 45 percent, to $580 million, in the next fiscal year. The subcommittee’s funding plan is significantly lower than the $900 million proposed by President Bush.
”This bill would cause Amtrak to shut down,” said Representative John Olver, a Massachusetts Democrat who serves on the subcommittee. Amtrak depends on the government for 40 percent of its operating cash.
With the war over, US Airways and Delta returned to hourly frequency of their shuttle flights last month, throwing gasoline on the competitive fire.
”Boston, New York, and D.C. are three very important business markets in the Northeast. We had always planned to make the return to hourly service as soon as possible,” said Amy Kudwa, a US Airways spokeswoman.
US Airways and Delta declined to disclose their own passenger tallies since reinstating hourly shuttles at Logan.
In the long run, specialists say, Amtrak’s focus on improving its own business is more important to its long-term survival than winning passengers away from airlines.
”I don’t know that the shuttles coming back is that big of a deal,” said Ross Capon, executive director of the National Association of Railroad Passengers, a Washington-based group. ”I think that the main thing that’s going to determine how well they do in the market is how well they’re doing in terms of on-time performance.”
Summing up the fare promotion, Henry Harteveldt, a principal analyst at Forrester Research in San Francisco, said, ”I would say it’s not been a victory.”
”I think it’s encouraging that Amtrak has seen the 13 percent increase in ridership. But while I’d say it’s great, I don’t think they’ve done a good job by any means, and they’re not out of the woods.”
Harteveldt said he thinks the pricing strategy was misguided, producing a ridership increase too slight to justify the loss of revenue. Instead, the railroad should consider charging higher fares, and develop marketing that touts Acela’s strengths.
”It’s not like Amtrak has a dog product with Acela Express,” he said.
(Material from Bloomberg News was included in this report.)