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By Julie Sneider, senior associate editor
In early March, Amtrak announced William Flynn would succeed Richard Anderson to become the national intercity passenger railroad’s next president and chief executive officer. The former CSX senior vice president and Atlas Air Worldwide Holdings Inc. CEO began his new job on April 15 as Amtrak — like other transportation service providers — braced for an extreme financial crisis brought on by the global COVID-19 pandemic.
How quickly times had changed. At the end of fiscal-year 2019, Amtrak delivered what its executives described as its "best operating performance," logging 32.5 million passenger trips and $3.3 billion in total operating revenue. And with strong ridership and revenue levels in first-quarter 2020, the railroad was on track to achieve another high-performing year.
Prior to the Flynn announcement in March, Amtrak had submitted to Congress the railroad’s annual grant request for FY2021 in the amount of $2 billion. The proposed grant took into consideration Amtrak’s projections for another successful year of ridership growth.
Then the pandemic hit, and the railroad faced a sudden and dramatic drop in business, as cities and states declared stay-at-home restrictions in an effort to slow the spread of COVID-19. Amtrak’s ridership plummeted from 2.6 million passengers in March to just 197,000 in April, making it clear to Amtrak executives that the $2 billion grant request wouldn’t be enough to cover the railroad’s pandemic response and recovery for the next fiscal year.
After Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in late March, Amtrak received $1.018 billion in emergency funding to get through the immediate crisis. In May, Flynn — by then on the job for just a few weeks — wrote to Congress to request another $1.475 billion in supplemental funding to address the longer-term impacts of the pandemic and economic recession. (That request comes on top of the pending $2 billion grant request for FY2021.) In the letter, Flynn acknowledged that Amtrak now estimates ridership will be down 50 percent next fiscal year.
Last week, Flynn talked with Progressive Railroading about his and Amtrak’s response to the crisis. His answers to interview questions have been edited for length.
What have the first few months on the job been like for you? What were your priorities coming into the position and how have they changed in response to the pandemic?
The first couple of months were all about the great team at Amtrak coming together to understand what the pandemic means and how we adjust our services in response to these dramatic changes in ridership. More important, Amtrak is an essential service, so we had to determine what we needed to do to protect employees and passengers.
So, our Day 1 priorities were in response to understanding and thinking through what the future looks like over the next couple of months and how we look to FY2021 and beyond.
What we have at Amtrak is a tremendous amount of progress and development the company has been able to achieve, particularly during the five years prior to the pandemic. In FY2020, Amtrak was on track to break even or better on an adjusted operating income basis.
On Feb. 29, Amtrak reached the highest level of ridership, the highest level of customer satisfaction and the highest level of on-time performance overall. That demonstrates the strong foundation that’s been built, which is critical for Amtrak to be able to respond to the challenges of the pandemic. And that’s the foundation we build upon for the balance of this fiscal year and planning into 2021.
Where is Amtrak’s ridership currently?
Our ridership levels have recovered somewhat. From late May, through June and into the Fourth of July, we were at 18 percent of ridership, and we are comparing our ridership levels today to FY2019 because that was the last full year of our normal operations in a year that had about 2.5 percent growth in ridership.
But since mid-July, ridership levels have plateaued. I think in part the resurgence of COVID-19 has put a damper on ridership.
What is the railroad doing to encourage riders to return to the trains?
There are a number of things we are doing. The first is: It’s all about safety. We’ve implemented several cleaning protocols and social distancing.
We continue to research from a cleaning/environmental experience and are learning and adapting. We’ve been able to provide social distancing on our trains by not selling more than 50 percent of capacity, so you have the ability to sit alone or with a family member without someone sitting next to you.
There’s also the air exchange. As we’ve learned about COVID over these past several months, airborne transmission is critical. The exchange of fresh air on our trains sets us apart. [Editor’s note: Amtrak requires its passengers to wear masks. Also, all Amtrak trains are equipped with onboard filtration systems with a fresh air exchange rate of every four to five minutes, according to Amtrak’s website.]
We continue to do research and are working with academic institutions to understand air flow in our cars and what we can do to mitigate risk and/or suppress the transmission of the virus.
Everything is being done to create as safe an environment as we can. We’ve moved to a touchless experience now, and are pushing a number of apps so that you can manage your entire travel experience on your phone today.
And, in May, our marketing department began doing outreach to our customer base to gain perspective on what their travel plans are, when they might travel again, what their travel frequency might be and their purpose of travel. There’s not a lot of business travel that we’re seeing, but we’ve been seeing families beginning to travel and go via rail.
We’ve been experimenting with some marketing strategies. One example: pricing. On the Northeast Corridor, we have a number of discounted fares pushing into the market and [through that] we’ve gained a lot of first-time customers.
How is Amtrak being affected by states’ quarantine policies for people traveling across state lines?
It’s different state by state and it’s evolving. At New York Penn Station, for example, over the past several days, both the city and the state have representatives at the train station and are advising passengers arriving that there are quarantine obligations. That’s in New York City and we’ll see how that evolves.
The proliferation of quarantine notices will impact our ridership, but we haven’t measured that yet.
How has Amtrak responded to the pandemic-related loss in revenue?
We have reduced our level of operations in response to the dramatic drop in ridership. The largest reductions in operating frequencies have been on the Northeast Corridor and state-supported services. We have maintained the long distance service essentially intact, with some adjustments. But we’re essentially operating seven days currently in long distance services.
We have not furloughed anyone so far up to this point. We’ve looked at every element of cost across the company. As you would imagine, we eliminated discretionary spending and challenged every dollar of expense.
We also postponed some capital projects with an emphasis on preserving cash. We do need to resize the company to reflect the level of ridership that we anticipate in 2021, and no one has great visibility into what 2022 might look like.
We implemented and offered a voluntary separation plan [to management and certain other employees] and north of 500 people took those packages.
We announced that we intend to go to three-days-a-week service [in FY2021] across the long distance network except for the Auto Train, which we will continue to run daily, and a combination of the Silver Star and Silver Meteor services, as we combine the two so that we have three-day-a-week operation on one and four-day a week operation on the other.
We’ll evaluate the long distance network ending January into mid-February 2021 across several criteria to determine if there is enough support, as we look to future bookings, to begin to restore those services back to seven days a week as we come into late May and early June 2021.
We remain fully committed to the long-distance service, that I want to make clear. But at this point in time, the levels of ridership we expect to see in November, December, January, February and March indicate to us that moving to three-day-a-week service at that period of time is the right thing to do for [Amtrak] and for our owners, the government.
That’s our plan for now. We’ll also likely have to have furloughs in FY2021.
What capital projects have been postponed?
It wasn’t necessarily larger projects around infrastructure. In fact, we’ve been able to make huge progress on our key engineering projects on the Northeast Corridor, given the lower level of activity among trains riding across the network [during the pandemic]. We postponed some projects in IT that we felt we could prudently defer and get to later.
Has the pandemic impacted the timeline for Amtrak’s large capital projects?
Our funding [from Congress] is confirmed year to year; we don’t have an intercity passenger-rail trust where we have clarity on multiyear funding. So that’s a question we have every year, whether we have a pandemic or not.
Our belief is that the work that needs to get done on track infrastructure, bridges and tunnels absolutely needs to progress. We have the opportunity to do that work and it should be funded and it should move forward.
The challenge we have is that there’s a short-term view — the challenges we have today, the level of ridership that exists — and the immediate- to long-term view. We need to balance both views, and that is a discussion we’re having with all of Amtrak’s stakeholders.
How has the COVID-19 pandemic changed Amtrak’s long-term goals?
Our long-term view for the company remains the same. Intercity passenger-rail transportation is an integral element of our company’s long-term strategies. The growth that we’ve had leading up to the pandemic underscore the value of services that we provide. And because of that, we’ve had broad-based support for Amtrak and for Amtrak’s growth.
There are quite a number of major metropolitan areas and regions where, over the past 40 years, there’s been substantial internal migration and population growth and there’s limited intercity service [to those areas]. We view that as a key market for us.
Increasingly, as people think about the environmental impact of the individual choices that we make, older passengers like me and potential [younger] customers clearly understand the environmental impact of taking a train between two cities is a better choice than driving your car or getting on a plane.
So, it remains our strategy that we can double ridership on Amtrak over the next 20 years. There are key corridors that exist — many of which exist on long distance routes — that aren’t served today that would absolutely benefit from, and rightly demand, high-quality passenger-rail service.
That remains our goal and that’s the way our strategies are directed.