AMTRAK - REVENUE PROJECTIONS AND AIR FARE SENSITIVITY

This article examines Amtrak's recent revenue results and highlights t he passenger revenue problems of its Intercity Rail Service (IRS), sho wing that recent forecasts considerably exceeded actual results. Amtra k's two other Strategic Business Units-Northeast Corridor (NEC) and Am trak West (AW)-have better financial prospects. These two units are le ss vulnerable to shortfalls in passenger revenues than is the IRS. How ever, the success of the IRS is crucial for the continuation of the po litical consensus in Congress to maintain federal support for Amtrak. IRS fares (and perhaps those of NEC and AW) were increased excessively . Amtrak should reinstitute the use of more sophisticated modeling in its passenger revenue forecasts. Amtrak does not adequately consider t he demand elasticity effects of rail and air fares-revenues (and rider ship) can fall with higher rail and lower air fares. This article also demonstrates how higher federal airline fees (and fares) can substant ially increase Amtrak's passenger revenues, providing an example of ho w federal policy in one transportation mode can affect that of another .