Privatization Issues

Bankruptcy for Amtrak?

The 24,500-mile Amtrak rail system is nearing bankruptcy, which might actually pave the way for improvement in the nation's rail passenger service. The main problems for the system are pork barrel politics and labor union featherbedding, which have never been successfully addressed in the 25 years since it was established in 1970. Among the problems facing the system:

  • The Washington to Boston corridor is the only Amtrak route which even approaches the breakeven point financially.

  • Amtrak cannot drop all other money-losing routes because Congress won't let it.

  • 21,300 employees, belonging to 13 different unions, are entitled by law to six years' severance pay if they are laid off because of discontinuation of their route - as much as $5 billion.

  • In 1983, Amtrak carried 19 million passengers with 18,500 employees; 10 years later it carried 22 million riders using 24,000 workers.

Bankruptcy could be a way out for Amtrak, provided Congress repeals the six-year severance payout. Assets could be leased or sold to private freight or passenger service companies.

Hearings on Amtrak's liquidation are planned before the House Transportation Committee during the second week of September.

Source: James R. Norman, "The Featherbed Express," Forbes, August 28, 1995.

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