SirNitram wrote:MKSheppard wrote:Indeed. It's just Shep is obsessed with the idea that railroads must be profitable.. And has yet to answer why. The highway system certainly isn't profitable!
Because you know, virtually all US railroads, other than government run mass transit semi-public corporations are private companies and own their own non-public rights of way (aka railroad tracks); so they have to show a profit to the boss or their stockholders.
And even when it's a semi-public corporation like Amtrak or state government owned like MARC, there has to be a close enough return on the budget to make the legislators who approve the yearly subsidies/budget for them that they are getting their money's worth, and not pouring money down a hole.
It can only be pouring money down a hole if
you expect it to be profitable. Why should the subsidied corporations have that expectation? Why the fuck can't you simply address this fundamental thing which I've been asking, again and again? It was always about Amtrak, since you started your diatribes whining about how unprofitable the Cardinal was.
A subsidised corporation should expect that AFTER the subsidy it should still make a net profit across all operation modes.
For rail freight is the obvious money-maker (and thus would determine the value of investing in more track, better signalling, etc). What motive does a corporation have to run passenger traffic over the same rails if it is a net money loser? We can expect many things from corporations but ultimately they are etablished to operate profitably.
If the government requires that they operate passenger service over a given line segment then the corporation will. In turn if the losses from passenger service outweigh the income from freight service the corporation will lose money and eventually go bankrupt. This means the government needs to either not mandate the passenger traffic OR it needs to subsidize the traffic. If the subsidy still means the rail line AS A WHOLE is unprofitable the rail line will STILL go bankrupt which will result in losing the freight and passenger service.
You ask why should a subsidized corporation expect to make a profit? They shouldn't on passenger service alone BUT unless they ahve to have it none of them will willignly add a money losing venture. I doubt I could get you to invest in a new idea I have if I can garuntee you that I will lose money every single year and you will have to keep shelling extra money out.
So here are the scenarios for any given rail line:
1) Frieght isn't profitable AND passenger traffic isn't profitable
- Without government subsidy the liune is going to go bankrupt period, no service will be avilable no matter if the governmnt requires service to be continued.
- With government subsidy if it matches the operating losses then the coproation will continue to stay alive and operate services.
2) Freight is profitable BUT passenger traffic isn't
- Without government subsidy threescenarios:
A) Passenger traffic isn't mandated and the coporation will cut service to make money
B) Passenger service is mandated and the operating losses are less than the freight profits. The corporation will oeprate since it is still making money and doesn't have to get into fights with the government
C) Passenger service is mandated and operating losses exceed freight profits. The corporation will either go bankrupt (ending service) or will find some way to cut passenger losses
-With government subsidy, its unlikely there will not be a requirement to maintain service so really only B and C from above apply only you would have to say passenger losses after the subsidy then proceed with the previous scenarios.
3) Freight and Passenger traffic is profitable
-Everything is hunky dory and we get all the rail we want.
Now the most common situation is the second where freight is profitable but passenger traffic is a net loser. It would be crazy to actually ask people to intentionally lose money therefore the combination of freight profits and the subsidy MUST exceed the losses from passenger operation or else the corporation will slowly go bankrupt and then there will be no service.
Lets take an example I can speak to very easily: MARC. Its a commuter rail service operated in Maryland by the Maryland Transit Adminitration. Within that scope they contract out to both CSX and Amtrak to operate the actual trains (as they own the rails on which MARC runs). In the cae of CSX their balance sheet shows that the cost of operating the service over their lines exceeds the amount received in the contract from the State of Maryland. The only reason the contract has not been terminated is that CSX doesn't want the hassle of dealing with the State after stopping service. In turn if the line they use (the Capitol and Metropolitan Subdivisions) were not profitable for freight traffic then they would just shut the whole lines down rather than risk bankrupting the corporation. Again its simple logic that you cannot expect a corporation to bankrupt itself and if the subsidy/contract for passenger service doesn't cover losses then they need to make money on the line somehow or it will just be simpler for them to try and shut the line down than risk losing the whole business.
All this comes back to the point I was makign earlier. You can't expect a company to oeprate its whole business at a loss AFTER you account for government subsidy because that way lies bankruptcy and the loss of service anyway.
