Management in Action Amtrak Is on the Wrong Side of the Tracks The National Railroad Passenger Corporation. better known as Amtrak. began operations in 19?]. The railroad has more than 20,000 employees and serves more than 500 destinations in the United States and Canada on more than 21.400 miles oftrack. Amtrak customers took 32.5 million trips in 2019, setting a record yearoveryear increase of 800,000 passengers.\"- Congress created Amtrak because private railroads were failing. By the 1940s, rail travel became less popular as Americans chose buses. planes, and cars to get around the country. Eventually. the US. government consolidated the majority of passenger rail service under Amtrak's umbrella. The federal government is Amtrak's majority stockholder and guarantees its nancial support, but the company is operated as a forprot organization rather than a government entity. Though it was created to save an unprotable railroad system. Amtrak itself has never earned a prot since its inception. For example. the company lost $194 million and $1?0 million in 2017 and 2018, respectively. Americans continue to choose other modes of transportation over Amtrak, and government subsidies are all that stand between the railroad and bankruptcy.T3 Let's take a closer 1ook at what's going on at America's only highspeed rail provider. A LOSING MODEL One ofAmtrak's biggest problems is its price. For example, a four-hour Amtrak train from New York City to Boston is more expensive than hopping on a one-hour ight. Amtrak charges these high fares on popular Northeastern routes because its other routes across the country are either unprotable or operating at a loss.71 According to Virginia Mar-emu; ridership may be able to grow ifAmtrak's prices were reduced.\" Amtrak's other challenge is Americais sheer size. It is the fourth largest country in the world with 3.8 million square miles of land. Compare this with Japan's rail service, which has to cover an area smaller than the state of California. All ofthis rail needs maintenance and repair, which Amtrak can't afford. For example, simply bringing the rail tracks in the 453mile Northeast Corridor to a state of good repair will cost $42 billion.T6 To make matters worse, Amtrak's rails aren't the only asset in dire need of xing. [ts passenger cars have expected lifespans of \"3 205 25 years. yet the average car in its eet is well over 30 years old. And Amtrak's biggest investor. the federal government, which has spent more than S IOO billion in taxpayer funds to keep the rail service operating. doesn't have the appetite to make largescale investments in the railroad.\" LEADERSHIP HAS A NEW PLAN Amtrak hired Richard Anderson as CEO in 2017 to chart a new strategy for the company. Anderson. formerly Delta Airlines' CEO, is changing the railroads route system and the services it provides in the hopes of leading it to protability for the rst time in its 50year history. The rst part ofAnderson's plan includes breaking up longdistance train routes and substituting bus service. For example, he wants to change the Chicago to Los Angeles route and replace 500 miles ofthe trip with bus service. Anderson believes these types of routes don't meet the needs oftoday's commuters. "If we're going to deal with congestion, growing populations and the carbon footprint of automobiles. Amtrak is the best answer for intercity transportation in a 200 to EGO-mile market." he sayst Reducing the number of unprotable routes won't only help the carrier's bottom line. it will also reduce the costs associated with maintaining large swaths of railroad tracks. The second part ofAnderson's plan includes a reduction in some ofthe company's services. For example. Amtrak has decided to scrap its traditional dining car service. The reservationbased dining cars, staples ofthe U.S. railroad system, had shiny silverware and white linens. Fresh food. which could rival highend restaurants. was provided by onboard kitchens. Now. Amtrak provides prepackaged meals and no longer has \"white glove" service in most of its dining cars. The company estimates that this change will save around $2 million a year and attract a younger generation of new riders who are on the run. on their phones, and not looking to sit at a fancy. communal table. The change "is part of an evolution.\" says Peter Wilander, Amtrak's customer service chief.T9 DERAILED PLANS? Amtrak's strategic plan is showing some early success. The company posted a $29.8 million loss in 2019, its best operating performance ever. And the company believes 2020 will be even better. "Our expectation is that in 2020, we will actually make money, we will have positive earnings for the first time in the company's history," says Amtrak Board Chairman Anthony Coscia.I However, critics believe Anderson's pursuit of profitability has caused Amtrak's service to suffer. Jim Mathews, president and chief executive of the Rail Passengers Association, says train riders are lamenting the end of the dining car. "It is not just the food, it is the experience," he tells The Washington Post. Skeptical lawmakers, responsible for subsidizing the company, echo Mathews' concerns. "This is shortsighted and foolish," says Tennessee Congressman Steve Cohen. Representative Cohen feels Anderson is doing to rail service what he did to air service. Amtrak's decision is "like Delta Air Lines taking away amenities to passengers on their airplanes and making air traffic more like traveling on a bus," he says. $2 Lawmakers, many from less populated states, have also taken aim at Anderson's plans to cut long-haul routes, which include stops in states like Kansas and New Mexico. "The idea that Amtrak would think about replacing passenger service with bus service for 400 miles and believe that we would still have a long-distance passenger train service is something I can't get over," said Kansas Senator Jerry Moran. Moran's criticism doesn't just put Amtrak's congressional budget allocation in jeopardy. The government also has broad discretion to direct the railroad to take or not take certain actions. In this case, the Senate ordered Amtrak to run its Southwest long- haul route as originally planned, shattering Anderson's strategy. Other lawmakers think the company's entire model should be re-evaluated. Oregon Congressman Peter DeFazio believes Anderson's profit-focused philosophy is inappropriate for a government-owned company like Amtrak. "I think part of the problem we're dealing with is the original mandate from Congress, which said that [Amtrak] is supposed to be run as a for-profit corporation," says DeFazio.4 Anderson's plans seem to be stalling as the company is on the verge of profitability. FOR DISCLISSIONChapter 5 Discussion 3 3 Review the following articles, read the "management in action" case included at the end of the chapter, and post your answers for the Problem-Solving Perspective case questions within this discussion. Your post should be at least 200 words and directly address the question or questions with sufficient detail. Details should include examples and reasons. Please comment on at least two other students' posts. Your post should include specific commentary and be at least 25 words each. In addition to posting your comments to this discussion board, you must also submit your post to the Chapter Discussion check assignment. Amtrak's Grand Plan for Profitability Inside Amtrak's Dying Long-Distance Trains | WSJ Why Amtrak Is So Expensive