In response to continually growing losses and a widening gap between operating deficits and federal operating subsidies, Amtrak developed its Strategic Business Plan. This plan (which has been revised several times) was designed to increase revenues and control cost growth and, at the same time, eliminate Amtrak’s need for federal operating subsidies by 2002. However, the relative gap between total revenues and expenses has not significantly closed, and passenger revenues (adjusted for inflation)—which Amtrak has been relying on to help close the gap—have generally declined over the past several years (see apps. At the end of fiscal year 1994, the gap between Amtrak’s operating deficit and federal operating subsidies was $75 million. It is important to note that Amtrak’s increased debt levels could limit the use of federal operating support to cover future operating deficits. For example, many of the productivity improvements (such as reducing the size of train crews) that Amtrak had planned in fiscal year 1996 were not achieved. We reported in June 1996 that Amtrak will need billions of dollars to address its capital needs, such as bringing the Northeast Corridor up to a state of good repair. A significant capital investment will also be required for other projects as well. For example, additional capital assistance will be required to introduce high-speed rail service between New York and Boston. It is likely that as Amtrak assumes increased debt (including capital lease obligations) to acquire equipment and as the number of cars in Amtrak’s fleet that exceed their useful life increases, even less of Amtrak’s future capital grants will be available to meet capital investment needs. Achieving Operating Self-Sufficiency by 2002 Will Be Difficult

Amtrak’s ability to reach operating self-sufficiency by 2002 will be difficult given the environment within which it operates. Amtrak is relying heavily on capital investment to support its goal of eliminating federal operating subsidies. In addition, providing funds from a dedicated source—such as the federal Highway Trust Fund—may not give Amtrak as much money as it expects. Amtrak is also subject to the competitive and economic environment within which it operates. Such trade-offs in the future could limit further increases in Amtrak’s yield and ultimately revenue growth. Finally, Amtrak will continue to find it difficult to take those actions necessary to further reduce costs. During fiscal year 1995, Amtrak was successful in reducing and eliminating some routes and services. Although the business plans have helped reduce net losses, Amtrak continues to face significant challenges in accomplishing this goal, and it is likely Amtrak will continue to require federal financial support—both operating and capital—well into the future.
Why GAO Did This Study

GAO discussed preliminary information from its ongoing work looking at Amtrak's progress in achieving operating self sufficiency, focusing on: (1) Amtrak's financial condition and progress toward self-sufficiency; (2) Amtrak's need for, and use of, capital funds; and (3) some of the factors that will play a role in Amtrak's future viability.

What GAO Found

GAO noted that: (1) Amtrak's financial condition is still very precarious and heavily dependent on federal operating and capital funds; (2) in response to its deteriorating financial condition, in 1995 and 1996 Amtrak developed strategic business plans designed to increase revenues and reduce cost growth; (3) however, GAO has found that, in the past 2 years, passenger revenues, adjusted for inflation, have generally declined, and in fiscal year (FY) 1996, the gap between operating deficits and federal operating subsidies began to grow again to levels exceeding that of FY 1994, when the continuation of Amtrak's nationwide passenger rail service was severely threatened; (4) at the end of FY 1996, the gap between the operating deficit and federal operating subsidies was $82 million; (5) capital investment continues to play a critical role in supporting Amtrak's business plans and ultimately in maintaining Amtrak's viability; (6) such investment will not only help Amtrak retain revenues by improving the quality of its service but will be important in facilitating the revenue growth predicted in the business plans; (7) in 1995 and 1996, GAO reported that Amtrak faced significant capital investment needs to, among other things, bring its equipment and facilities systemwide and its tracks in the Northeast Corridor into a state of good repair and to introduce high-speed rail service between Washington and Boston; (8) Amtrak will need billions of dollars in capital investment for these and other projects; (9) it will be difficult for Amtrak to achieve operating self-sufficiency by 2002 given the environment within which it operates; (10) Amtrak is relying heavily on capital investment to support its business plans, which envision a significant increase in capital funding support--possibly from a dedicated funding source, such as the Highway Trust Fund; (11) while such a source may offer the potential for steady, reliable funding, the current budget environment may limit the amount of funds actually made available to Amtrak; (12) Amtrak is also relying greatly on revenue growth and cost containment to achieve its goal of eliminating federal operating support; and (13) the economic and competitive environment within which Amtrak operates may limit revenue growth, and Amtrak will continue to find it difficult to take those actions necessary, such as route and service adjustments, to reduce costs.