Categories
Amtrak Finance High-Speed Rail

Getting the Price Right: How Much Should High-Speed Fares Cost?

» Amtrak charges too much for its existing services, and future operators should attempt to lower prices to maximize ridership.

Begin a discussion about the potential success of high-speed rail in the United States and people look at what they know, quickly proclaiming that it will not work. They argue that Amtrak already offers something like fast service on the Northeast Corridor in the form of the Acela, but tickets are too expensive, especially when compared to competing air and bus lines. Few Americans will choose to ride an expensive train when they can get into their cars for far less money.

These criticisms are accurate: Acela service is significantly more expensive than equivalent air routes, though it should be noted that slow-speed Northeast Regional trains are cheaper. Amtrak still carries more people between New York and Washington than the airlines, but that demonstrates some of the inherent benefits of train travel: it gets riders directly from center city to center city and it allows passengers to work on board. Indeed, there are plenty of reasons to think that high-speed trains will mostly replace air travel in their respective corridors. But the high costs of riding Amtrak have not diminished the market shares of bus service and automobile use even in the Northeast, and they collectively transport more people than rail or air. If future American high-speed rail is to succeed — in other words, if the U.S. is to become a train-riding country — operators must offer low prices to compete effectively with buses and automobiles.

As the charts below show, comparing Amtrak’s train fares to those of high-speed rail systems in operation today demonstrates that the American example comes in opposition to experience abroad, where travel on high-speed trains is typically more economical than competing offers from airlines on equivalent routes (see data table at the end of this piece). The affordable nature of travel by train in most developed European and Asian countries means that on corridors where high-speed rail is present, air travel is often reduced to connecting flights. More relevant to this article, rail there has a far greater market share than buses and often even than private automobiles.

But Amtrak’s problems are not due to the fact that it is particularly inefficient in the Northeast. The fares it demands per hour of travel are roughly on par with those charged by foreign rail operators. The American rail system’s problem, rather, is that its trains are too slow in general, increasing labor, maintenance, and operations costs. If U.S. rail services are to be successful in attracting customers at reasonable prices, in other words, one way to do so would be to offer services at higher speeds.

The California High-Speed Rail Authority, which is planning the nation’s most ambitious new rail project, has considered the effect of pricing on ridership. It predicts strikingly varying ridership outcomes depending on the cost of its future services; in 2030, with the full system operating, the agency estimates 93.1 million yearly trips if fares are set at 50% of air travel levels and 74 million if fares are set at 77% of air travel levels. Though final fares have not yet been established, one thing is for certain: California will not copy Amtrak and charge customers exorbitant rates to ride the train.

Peer experience on specific high-speed routes demonstrates just how expensive Amtrak’s Acela trains are. Acela rides cost more than $0.35 a kilometer, compared to $0.20 for Milan-Bologna trains in Italy or $0.08 for Paris-Lyon trains in France. The chart below illustrates that comparison; it also shows differences between “regular” prices offered on foreign trains and reduced prices that are easily available for any rider booking early. In terms of cost per distance, only Germany’s ICE comes close — and that’s only for regular-priced tickets. Note that none of the systems mentioned here — including Amtrak’s services in the Northeast — are subsidized in their operations.

Cost per Distance on World High-Speed Rail Systems

The comparison with foreign railways is even more stark when evaluating how much riders pay for average speed on the routes I have compared here. Whereas Acela costs more than a dollar per average km/h, Korea’s KTX between Seoul and Daejeon costs less than $0.10 per km/h. Amtrak’s Northeast Regional service, at a bit less than $0.50 per km/h, seems far more cost effective in this comparison — that’s because Regional trains travel almost as fast as does Acela but cost less than half as much to ride.

Cost per Speed on World High-Speed Rail Systems

When it comes to cost per hour of travel, however, Amtrak looks a bit better, charging customers about $45 per hour, versus $55 for trains in Japan and $50 for routes in Italy. Regional trains are even cheaper, coming in at less than $20 an hour, making them the cheapest of all routes evaluated in this comparison.

Cost per Time on World High-Speed Rail Systems

One of Amtrak’s problems in the Northeast Corridor, then, is the fact that its trains run so slowly, increasing power consumption, labor costs, and fleet maintenance. But these expenditures are more directly related to travel time than to distance or speed, so if trains were to cover more distance in less time, the organization could theoretically lower fares.

These issues are compounded by the relatively low capacity of the system’s existing trains — Northest Regional trains offer 5-9 passenger cars and Acela trainsets all have 5 seating cars. In 2007 and 2008, Amtrak was frequently selling out trains, and with no room to expand, the organization had an incentive to increase prices, especially since commuters on the Northeast Corridor subsidize rides on other parts of the system. Amtrak’s Acela trains have a capacity of 303 riders. Two French TGV Duplex trains coupled together can carry 1,024 passengers. The ability to move more people in one trainset allows for operational efficiencies — and, as a result, cheaper tickets for those who make it onto the train.

If American high-speed services offered similar prices for time traveled as Amtrak does today — at $45 per hour of running time for standard fares and $15 at reduced prices — on faster trains, U.S. commuters would switch to rail in droves. The San Francisco-Los Angeles route being planned by the State of California, with a travel time of 2h40, would cost $40 for reduced-price tickets and $120 for standard fares; those costs seem perfectly acceptable for just about everyone. A renewed Northeast Corridor, offering travel between New York and Washington in 1h40 (at an average of 220 km/h), would cost $25 for customers buying reduced-price fares. People currently driving their own cars or riding buses between the cities would take a second look at those prices.

There are significant advantages to lowering ticket prices to the lowest level possible while keeping operational finances in the black. California predicts a higher revenue stream for its rail system if it charges customers fares that are at 77% of airline levels: $4.3 billion annually versus $3.6 billion with tickets at 50%, even though the latter would attract 25% more riders. But opening services to a greater percentage of the population has a number of benefits beyond those affecting the bottom line, and American policy should be to encourage low-cost rail travel. It reduces carbon emissions as people choose to drive fewer cars. It encourages the sense that trains are an engine for universal mobility, rather than a limousine on tracks for the rich. It will, most importantly, smash the conception that Americans won’t take advantage of rail services, and encourage the creation of a train-riding society.

To make high-speed rail popular, American high-speed rail operators must do as much as possible to lower ticket prices. Amtrak’s existing fare structure is unacceptable.

——-

Comparing Pricing on World High-Speed Systems
Corridor Length (km)
 Travel Time (h)
 Rail Price (US$) Air Price (US$)
New York-Washington Amtrak Acela 362 2.93 133 73
New York-Washington Amtrak Regional 362 3.33 49 73
Tokyo-Osaka Nozomi 553 2.65 141 246
Milan-Bologna TAV 215 1.08 53 325*
Koln-Frankfurt ICE 177 1.17 42 151
Bruxelles-Liège IC 100 0.92 20 n/a
Paris-London Eurostar 492 2.25 63 116
Madrid-Barcelona AVE 621 2.63 74 165
Paris-Bruxelles Thalys 314 1.37 36 213*
Taipei-Zuoying THSR 336 1.60 38 n/a
Seoul-Daejeon KTX 160 0.83 16 n/a
Paris-Lyon TGV 396 2.15 32 411
Beijing-Tianjin CRH 120 0.50 8 205*

* Not a direct flight.

Data: from evaluating train and air tickets running one way on Monday, October 12th, 2009, at around 13h00. Only direct trains were considered and I have noted here the fastest trains offering the lowest prices for each of the corridors. Note that Japan’s rail services are particularly expensive because the Nozomi trains described here are the fastest in the system’s fleet; Hikari and Kodama trains are almost as quick and less expensive.

31 replies on “Getting the Price Right: How Much Should High-Speed Fares Cost?”

I havent done the sums but you may want to look at costs outside the system, ie: price per population of cities along the way, maybe throw in median incomes or some other index?
Its not usually done but I cant see why not, you dont really pay to travel 30km, you pay to get to the city with more shops, or more beaches in it.

Sorry but in in particular the first figure is misleading! Let us just compare ICE and TGV.

In Germany, you can get the reduced price (25 or 50 % lower) everytime, also if you by your ticket 5 min before your train departs. You just need a “BahnCard” (about 4 Mio. Germans have one), which allows that rebate.

In France you get reduced prices usually only if you book a longer time in advance and if you accept some restrictions (e.g. not rebookable).

Therefore, most of the travellers in Germany experience the lower price an this more often than TGV-travellers!

In addition, Cologne-Frankfurt is the most expensive OD in Germany and not representative for the whole ICE system.

The Bahn card is a must have for any German who will be riding the rails on any thing approaching a once a month frequency. They give as stated 25% or 50% off most fares for the up front card cost. It moves money around, but with any use it really shines as a product to reduce the cost of travel. I still miss mine every time I go to visit where they really nail the visitors for a hefty train fare on the ICE trains.

But just like Acela vs regional or even commuter trains, ICE are by far the most expensive trains in Germany.

Two friends from Long Island just opted for air over rail for a weekend trip to DC because the air fare from JFK was just $40 more than rail.

All over Manhattan you can now find low-cost buses to DC, Boston, Albany and many other destinations that should be attractive for rail travel.

A good point about capacity. If Amtrak can only handle 5 – 8 cars on a train, it is leaving people in the station. In the Pennsylvania and New Haven Railroad era, it was common for trains on the Northeast Corridor to run 16 cars or longer.

In reference to ticket prices —
The point of this post was not to compare European or Asian fare policies, but rather to show just how expensive Amtrak’s Northeast Corridor services are. You’re right that I didn’t mention Germany’s BahnCard — but it should also be noted that France and Italy have similar frequent voyager cards that give discounts just like the BahnCard does (among others).

This proves my case even more dramatically, as the lower-than-Amtrak prices quoted above for travel in Europe and Asia — prices anybody can get, even without a discount card — are higher than what many customers pay in those countries. Meanwhile, Amtrak has no such frequent traveler fare reduction program for normal Adults (it provides some discounts to seniors, children, and AAA members), and it rarely provides the option of buying reduced price tickets, even ahead of time.

In response to Philipp, I picked Koln-Frankfurt because it is Germany’s only 300 km/h line comparable to the other routes noted above (with the exception of the slow Amtrak routes). DB has clearly made a decision to charge more for faster service.

I agree. Fares need to be cheaper.
I was wanting to take Amtrak before but it was so expensive, I just couldn’t justifty it.

I think it’s rather silly to try to compete with air AND auto on cost. Each mode offers its own advantages. You’ll never compete with cars on cost when 4 people can travel in a car for the same cost as one. And you need to add end-point transfers to the rail cost. One huge advantage NE Corridor trains have had over flying is the time and cost of getting to-and-from the airport at each end, whether it’s cabs, parking, etc.

Ticket prices are a very limited way of comparing advantages. A more comprehensive take would be helpful.

How does Amtrak’s profit margin in the NE Corridor compare to other rail systems? Are the prices somewhat higher due to the need to subsidize routes elsewhere?

Also, I believe Acela trains are running full (or were at least before the recession), so one could say that the price is set appropriately for the system capacity.

The article suggests that driving is cheaper than taking Acela, but does not give any evidence for this. If we assume that the driving distance is the same as the railroad distance (it’s probably more), then driving costs about 225 miles x $.55 per mile = $123.75. 55 cents per mile is, of course, IRS’s 2009 standard mileage deductible rate, which is considered to be an average of the total cost of operating a vehicle. AAA has a similar comparable figure.

So indeed, driving is cheaper on average, although I suspect that if one figures in the above-average insurance and repair costs of metropolitan areas, Acela is very cost competitive. It is also cheaper to fly than to drive. The reason most people still stick to driving is inertia, fixed costs (they already own or lease a car), and last-leg destination convenience. Even a slight change in underlying factors, whether the return of $4 gas or improved local transit in metropolitan areas can tip the scale towards a huge increase in demand for train service, even at current prices.

Boris –
The problem, as you alluded to, is the fact that most people don’t think about total costs when they drive their cars — they think about gas, and gas alone. In a 26 mpg car (about the U.S. fleet average fuel economy), you need 8.7 gallons to get between the cities. Even at $4/gallon gas, that’s only about $35 to make the trip. Compare that number to the $133 Acela cost or even $49 Regional cost, and you have a pretty good explanation for why people still drive (especially when there is more than one person in the vehicle). Even worse for trains, if you drive at the right times, you save very little time by taking the train when you count getting to and from the train station.

In other words, the problem here is one of both perception and service. People need to understand that they’re paying more than just the gas when they drive their cars. But American train services need to be faster as well to provide a suitable incentive for people to switch away from driving (or taking the bus). Note that I suggest near the end of the article that Amtrak’s existing prices — $49-133 for the New York-DC trip — would be acceptable, but only if the travel time on the train is made much quicker.

I’ve taken Amtrak before, through some very scenic parts of the country. It’s a very relaxing and enjoyable trip. I don’t take it more often primarily due to the cost. I really do hope HSR can keep its costs down for riders, as there will be threshold when people will be weighing cost vs time vs convenience vs quality of service.

I can see HSR becoming like the Whole Foods of intercity transit. People would like to pay for this premier service when they can, when they can’t, they will opt for the Target of intercity transit, the bus.

The Acela is a business class-only service. You should compare it to the cost of a green car ticket on the Shinkansen, not to the cost of a regular ticket.

Also, Nozomi doesn’t cost much more than the slower services on the Tokaido Shinkansen. Riding Hikari from Tokyo to Osaka costs ¥13,750, compared with ¥14,050 on Nozomi. I think Kodama costs the same as Hikari, but at any rate it takes 4 hours, which makes it slower than the NY-DC Acela.

High-speed rail is more expensive than buses everywhere. The reason low-cost buses are more successful in the Northeastern US than in Korea and Japan is that the trains are slower, reducing their time advantage. I’m sure that if the NEC can do NY-DC and NY-Boston in 1:40 each, it will be able to fill multiple long trains at higher-than-Regional fares.

Regarding comment #6 – that Amtrak has significant marketshare — Amtrak has a tiny amount of the travel market share when compared to the complete market. Amtrak has around half (or more) of the air-rail market. But buses and cars carry far more travel than air+rail combined.

As an example, there are over 60 roundtrip bus departures between Philadelphia and New York each day (or about 3,600 seats per direction per day). That capacity is the equivalent of 12 Acela roundtrips per day just for the Philly to New York market. The bus costs about $11 and takes about two hours. The train costs over $100 and takes about 1:15. Thus, you would pay about $90 to save 45 minutes.

Of course, many of these buses are leaving from curbside locations, not stations, but you can see how the price comparison might indicate a problem.

And then there is auto travel…

Nice charts and enjoyable discourse. However, conspicuous by its absence are charts showing relative Farebox Operating Ratios (FOR) between different rail operations, comparable fuel (carbon) taxes between travel markets, rail capacity utilization, relative automobile ownership saturation and relative price of parking spaces. Of these functions several are co-dependent and determinant of others especially regarding the relationship between fuel taxes and rail funding.

High fuel taxes provide both a useful financing tool for railroads and bends the relative operating cost functions in favor of rail. That equation drives up capacity utilization in the European and Asian rail markets. People still own cars and drive them but operating them is much more expensive than in the US so rail is relatively more attractive.

Until the US bites into the fuel tax apple rail operations cannot be sufficiently funded and will not be all that attractive economically to the mass market in the US that already owns cars and fuels them at the lowest prices in the world outside of the oil pumps with flags we call the OPEC countries.

The Acela is a business class-only service. You should compare it to the cost of a green car ticket on the Shinkansen, not to the cost of a regular ticket.

An ordinary shinkansen car compares to a “business” class Acela car in terms of seats and amenities, plus there are First class cars on Acela trains that offer amenities even above shinkansen Green cars. I think Yonah’s comparison is apt.

Also, Nozomi doesn’t cost much more than the slower services on the Tokaido Shinkansen. Riding Hikari from Tokyo to Osaka costs ¥13,750, compared with ¥14,050 on Nozomi. I think Kodama costs the same as Hikari, but at any rate it takes 4 hours, which makes it slower than the NY-DC Acela.

A Kodama, Hikari, or Nozomi ordinary unreserved seat ticket from Tokyo to Osaka is 13,240 yen during nonpeak periods. For reserved seats, the Kodama and Hikari are 13,550 yen and the Nozomi 13,850 yen. Add another 200 yen to each during holiday peak periods. So you’re looking at a total price difference between the cheapest and most expensive train of 810 yen, or about US$8.75. Not a huge difference, but the graph appears to accurately reflect that difference.

Not long after a small civil war had left the government of the Ivory Coast (or Cote I’voire, they prefer) completely broke and unable to meet payroll, I traveled from the Ghana border to the airport at Abidjan.

In that short distance we were stopped by their Border Patrol and Immigration, Customs, Army, various police of city, province, and national forces, and did I say, the Army? We were stopped 19 times by these uniformed officers collecting their own tolls. Well, at least they were friendly, generally quite amused to see a white man digging into his pocket to pay the fare.

I was reminded of that experience driving round-trip to D.C. Leaving the city is free, that is, the bridge and tunnel tolls are one way, but $10 of so on return. Then the New Jersey Turnpike feeds into the Delaware Turnpike which gives way to the Maryland Turnpike.

I don’t recall how much was the total of tolls, NYC-DC but I’m amazed that folks posting here could forget to mention them!

Regarding the comments about total cost of car vs cost of the trip I have serious issue with saying you need to include the insurance as part of the trip costs. This is completely false.

You are paying that insurance just to have the car registered. Whether you use it for a particular trip or not. To say you must include it in the cost of a trip is just more shady accounting to tilt statistics in your chosen favor, in this case that cars are more expensive and closer in expense to the train ticket. The ALL BUSINESS CLASS train ticket at that.

Look. I’m a HUGE fan of the trains in this country and I have taken Acela. But I will drive this route almost every time and if I can’t drive it or don’t want to, I will look to the bus which runs very often between NYC and DC at $20 one way.

I have two people to account for in my fiancee and my self and the costs of a train that still requires multiple transfers to get on is not worth the time, effort, and expense.

NOW. You want to change this and throw on a gas tax of $5 per gallon, I’m all for it. We’ve had cheap gas for too long in this country and it is just another factor on why I’m looking to get out for a while.

As for the tolls between NYC and DC, you can get around many of them if it was really important to you. Its fairly easy.

So keep the push on for more and cheaper trains, but please don’t use numbers that really have no reason to be included to make your argument look better.

Woody,

It’s doubly ironic that there are tolls all around, but within New York City itself- that great chokepoint where cars don’t really belong- you can get around for free. Even though in theory the city has a monopoly on connections between Long Island/southern Connecticut and the mainland, it gets nothing out of it. Even those taking the tolled bridges pay only for the bridges themselves (and the MTA); they pay nothing for the roads they drive on in the city. It’s the residents (the majority of whom don’t own cars) that get stuck with the bill, the pollution, etc.

Boris — How sad but true. I’m one of the majority of households in the city who do not own a car, and rent one when I have a carful of passengers for some excursion.

I strongly supported Bloomberg’s plan for congestion pricing and the later plan to toll the free East River bridges to subsidize the subway and bus system.

But we have a Fifth Column of car-crazed politicians, mostly in Brooklyn and Queens but some even in Uptown Manhattan, who stab us transit riders in the back every time we try to make cars pay their fair share.

Woody – don’t forget the biggest fifth column of all, Mike Bloomberg. Bloomberg cut transit funding as mayor, especially transit funding that doesn’t involve his pet project, the 7 extension. He also did nothing to promote bridge tolls when it was proposed by someone other than himself.

The thing is, Amtrak already fills the trains it has at the prices it charges!

Make it possible to put in more trains, and the prices will drop. Currently the NEC is at capacity in the morning peak, and some of the long-distance lines are over capacity due to freight and commuter interference (build Englewood Flyover now….)

Sadly missing in the article and discussion is the question of who pays for building these systems (highways, airports, rail) vs. who benefits by using them.

Acela was paid for by billions of dollars from taxpayers. Riding it is too expensive for the vast majority of those taxpayers, therefore those who paid for it do not benefit from it (even indirectly, as it doesn’t have enough capacity to diminish congestion on the more egalitarian-priced highways). The same cannot be said about the air or highway system. Fare pricing for Acela based on supply and demand ignores this basic unfairness – the fact that Acela is only “business class” and first class is a giant slap in the face to American taxpayers. Limousines on rails, indeed – and limos paid for by people who couldn’t even afford a bicycle.

This discussion should be about more than just what to price fares in order for the system to attract the most riders; it should be about what to price fares after considering that taxpayers _already_ paid for these trains and are paying for them in operating subsidies also.

Another way to think about it is this: taxes pay for roads, but not the cars on the road, or their fuel; therefore rich people drive nicer cars, but the roads can be used by anyone with a functioning car (or a bus). On rails, everything is paid for by taxes – the rails, the cars, the crew, and the farebox recovers a certain portion of the operating costs. Premium pricing on rail should reflect only the level of luxury in the car you’re riding in, not the mere fact that you’re using the rails at all, since all taxpayers should have the same right to use the rails as the roads, as we have paid for them both.

Resnyc —
One quibble. It’s not correct to say that “On rails, everything is paid for by taxes – the rails, the cars, the crew” except on the NEC. All the trains outside the NEC run on freight lines that do pay heavy property taxes on their land and roadbeds — and pass some of those taxes on to Amtrak in the usage fees. So in fact, Amtrak indirectly pays local property taxes, unlike airports and highways.

But I share your concern that the excitement of HSSR could lead some to back projects that end up serving only the fast-moving elite. We should not forget Amtrak’s current customers, however un-elite they may be.

Just eyeballing some trains south of D.C., it looked to me like black folks are a MUCH larger share of Amtrak’s riders than of any airlines. Obese folks too can fit into Amtrak seats while airline seats are embarrassing or downright painful for them. Retirees simply enjoying the journey and in no hurry. Young people seeing the Continental scale of the USA on an Amtrak-backpack-crash pad tour. (Crash pad. Do I date myself? Rough translation: Sleep on a friend’s couch.)

Today ordinary people fill Amtrak’s slow and crummy trains for their own reasons. They shouldn’t be priced out and pushed aside — “Make way!” — to prove once again the verity that “The poor must go slower so the rich may go faster”.

I went on Amtrack from Richmond to Washingtion DC in 2007 and it costed $68 dollars to ride it for one regular seat. I checked last week and the fair to ride it would be $67 which means at the very least Amtrack prices don’t go as sky high as the airlines who are now raising fairs and also started to charge big amounts for suit cases. When I rode Amtrack the group of people on it were middle class.

Amtrack could get more money on eatch train by adding two to three more rail cars to it.

Right on with this article. I visit the northeast occasionally, and I’ve never ridden Acela because of the $100+ fare. The regular Amtrak is also too expensive. That’s why people ride the discount buses. It’s not because they want to be on a bus. Cut the train fares in half and the trains will be jam-packed and they’ll be adding more runs. People will pay a little more to ride a train, but not a lot more.

When I visited Germany in 1998, it charged a flat per-kilometer rate for all trains, and a percent surcharge for faster trains. The basic rate is the S-bahn (stops everywhere) and Stadt-Express (skips most rural stops); these are like regular Amtrak and have no surcharge. The InterCity trains (in the 125 mph range) have a small surcharge, maybe 5%. The InterCity Express trains (in the 250 mph range) have a larger surcharge. There is also a separate surcharge for very short trips (metropolitan). So you can choose between speed vs price.

Where does it say how much it actually cost to run the trains, they (the train companies) have to actually make money or we just waste our money away into oblivion. if it is cheaper and easier to fly or drive somewhere instead of riding a train, they will do so. If the trains can’t sustain their business on their own, they should either change or fail. I want to know how much the operating cost in relation to the fares.

@Rayvok- In European countries train costs are subsidised by governments as they recognise the benefits a regular train service brings to the regions and cities. Road building is not covered by direct road pricing but rather than by taxation money redistributed so why not rail services?

Mike is actually right. Pushing up train volume directly depends on the intent of European Governments in cutting the fare costs. Its insane to charge more than treble the bus fare and then report dropped volumes. It just does not make any business sense at all.

Leave a Reply