Friday, November 14, 2008

Transport: Amtrak after Kummant

TORONTO, ONTARIO - Today, the resignation of Amtrak President and Chief Executive Officer Alex Kummant was announced--except that a prominent and respected source says that a "resignation" isn't exactly what happened. Especially unclear is whether the exit of Kummant, for whatever reason, provides any indication about the future of Amtrak, the only intercity rail passenger company in the United States.

Kummant had served as Amtrak President for about two years following the very political firing of widely-respected predecessor David Gunn in 2005. Gunn, who had earned wide acclaim for his previous work improving transit systems in New York and Toronto amongst other places, had been hired in 2002 to improve the operating efficiency of the railroad and generally improve Amtrak's standing with Congress and the Bush administration. While Gunn made significant progress in his goals, focusing on running a passenger railroad while ending an express business that interfered with passenger operations and angered host freight railroads, working on putting the equipment in a "state of good repair" and stabilizing the overall financial status of the railroad, he rapidly found himself at odds with an Amtrak board filled with George W. Bush administration appointees that wanted Amtrak to operate without a subsidy. In contrast, in a famous 2003 presentation about the "Six Myths of Amtrak," Gunn expressed his belief that Amtrak could never be profitable, that no other rail passenger system in the world was profitable, and that no transportation system in the world exists without significant subsidies of some kind. During Senate testimony, he challenged Amtrak opponent John McCain to let commuter airlines in the state of Arizona try to operate without subsidies to outlying areas. Eventually, the Amtrak board had enough of Gunn's perspective and he was fired in late 2005.

When Alex Kummant was hired to be Amtrak president in the summer of 2006 after David Hughes had served as placeholder, it wasn't clear how he would approach the job. While Kummant had served in several vice-presidential positions at freight railroad and Amtrak host Union Pacific, he had since moved on to construction and mining equipment. He would still dealing with the same Amtrak board, but in a significant change, he would no longer be dealing with a Republican Congress intent on "reform" (read privatization of Amtrak). The Democrats moved into control of both houses of Congress within months of the start of Kummant's tenure, meaning that Amtrak's subsidy was much more secure. While President Bush threatened to veto Amtrak funding, in the end the subsidy would be included in some other bill that Bush did not dare veto and the railroad could at least live on.

The board still wanted to "reform" Amtrak, however. A ban on new routes, imposed during Gunn's tenure in exchange for a government loan that kept Amtrak running during a funding crisis, remained in effect. The board wanted to avoid subsidizing "cruise" passengers, so for a time the number of sleeping cars had to be reduced on some long-distance trains even if they were available and could have been sold out. Money spent on "amenities" had to be reduced, resulting in the implementation of a less-than-popular "Diner Lite" service on many long-distance trains in which much less actual cooking was done on-board the trains and millions of dollars were spent re-configuring dining cars for the new-style service. In an attempt to save money through making operations more uniform, standardized consists were introduced on the Northeast Corridor, instead of changing train length based on demand, and through coaches and a sleeper between Boston and Chicago were eliminated to avoid switching a train at Albany, New York.

Furthermore, even improvements that were attempted under Kummant just didn't seem to be implemented very well. The re-launch of the premium service on the long-distance train on the west coast, the Coast Starlight, was supposed to occur in June 2008, but many of the promised amenities simply weren't there when I rode the train on 21-June. Yet, they did materialize by the time I rode the train again on 25-October. A general feeling of lack of discipline seemed to permeate the entire railroad--a feeling that seemingly has been almost-continuously increasing since it took over passenger service in the United States in 1971.

Yet, despite the moves that were unpopular with rail advocates, it was clear that Kummant was at least trying to run a passenger railroad within the restrictions that he was given. Under Kummant, the reliability of the Acela trainsets in the Northeast Corridor increased considerably. State-supported corridor services, where states were willing to step up with increasing funding, increased in frequency, including in California, Illinois, and Washington. Service initiatives like the "re-launch" of the Coast Starlight have proceeded, even if their implementation has been somewhat lackluster. Most significantly, obviously driven by increased gas and airline prices, ridership has been rising. 28.7 million passengers rode Amtrak in the fiscal year ending on 31-October-2008, more than a 12% increase from the previous year--and increases were seen all over the system, not just in expanding corridors.

So why did Kummant resign? Railway Age has reported that Amtrak spokesperson Clifford Black stated "differences in strategies, direction, and management philosophy" with the board were behind the resignation. Respected long-time transportation reporter Don Phillips, now of Trains magazine, has reported that Kummant has been feuding with Chairman of the Board Donna McLean over debt restructuring. Phillips characterized the dispute as an "arcane budget matter," but it was apparently enough that "Kummant agreed to walk away and not bring the clash before Congress in exchange for being allowed to characterize the departure as a resignation, not a firing."

In time, the exact nature of the dispute will likely come out, but it seems hard to believe that an "arcane budget matter" would be worth bringing to the attention of Congress or resigning over unless it made a real difference to the future of the railroad. While Kummant himself has been accused of being a Bush administration tool, Donna McLean is definitely a Bush follower. After serving various transportation roles in the Reagan and both Bush administrations, McLean was nominated to a five-year term on the Amtrak board in 2006. While her nominating statement was far from inflammatory, her history implies that she would be in favor of the radical reform agenda espoused by Republicans. It seems entirely plausible that Kummant--like Gunn before him, fundamentally coming from the perspective of trying to operate a railroad--may have thought that the "debt restructuring" pushed by McLean and the board would in some way hinder either the operation or future expansion of Amtrak.

More interestingly, regardless of the viewpoint of the McLean, the makeup of the Amtrak board is likely to change radically in the coming months. A nominally seven-person board, it presently has only five members: McLean, Hunter Biden, Thomas Carper, Nancy Naples, and Mary Peters. McLean, Peters, and Naples are relatively-recent Republican appointees who will remain on the board for some years, while Biden (the vice-president-elect's son) and Carper are Democrats. Besides the two presently-open seats, the board will be expanding by two additional members in April under legislation signed by President Bush last month, so there are effectively four openings. By May, the Amtrak board may have a Democratic majority.

Furthermore, vice-president-elect Joseph Biden is well-known for riding Amtrak regularly between Wilmington, Delaware and Washington, D.C., and has long been a rail transportation advocate. With his influence in the White House, his son on the Amtrak Board, and a Democrat-controlled Congress, it seems likely that Amtrak will not be struggling for its very existence for at least the next two years.

The big question is not whether Amtrak will survive in its present form, but whether it will be able to turn around its deteriorating operations, equipment and on-board attitude and actually become a real and attractive alternative in the US transportation system outside of a few limited corridors. Alex Kummant's successor may not have to worry about his company's existence, but he or she will still have a very hard job to do.

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