Transit trouble – in many modes

Operational woes at Amtrak coincide with harsh business climate for US airline, rail, and bus companies.

A well-known name in transportation saw its operating profits drop by 95 percent from a year ago. It faces competition from deep discounters who offer fares so low it's impossible to meet them. And, as competitors declare bankruptcy, the value of its assets has been steadily declining.

No, it's not another airline. This time it's Greyhound Lines, the nation's largest bus company.

In fact, whether it is planes, trains, or buses, many of the nation's long-haul transportation providers are either operating in the red or just barely making money. A good portion of the cause is the soft economy. Some of the red ink is still related to Sept. 11: schools canceling trips, conventions being scaled down.

But transportation is also an industry with high fixed costs. There are flight crews to pay regardless of how many passengers are on an airplane. Amtrak has at least one run from Los Angeles to New Orleans where it loses $300 per passenger. Other costs are soaring: Insurers have raised premiums because they can't count on investments in the stock market to supplement their income.

Competition, in the meantime, remains cutthroat. Over the past year, airfares are down 5.5 percent. New bus lines, often using smaller vehicles, are siphoning customers from lines such as Greyhound with tickets costing 60 percent less. Good for the consumer, bad for the business.

"I think these are the worst times in my memory," says Damian Kulash, president of the ENO Transportation Foundation in Washington.

Recent troubles in this vital sector include:

• United Airlines, facing a huge debt repayment, says it may go bust within 30 days if it does not get employee concessions. US Airways is already in bankruptcy.

• American Airlines plans to lay off 7,000 workers, ground jets, and change how it connects passengers. Chairman Don Carty calls it "the worst financial crisis in the history of the industry."

• Most Acelas, Amtrak's fastest and newest trains, have been yanked off the tracks for safety reasons. On Friday, the troubled rail system found problems with other trains and reduced Northeast-corridor service by 25 percent.

Transportation experts believe the future will be one of consolidation, shrinkage, and, perhaps, higher prices for consumers. "It's unrealistic to expect any industry to offer services at a price where they can't stay in business," says Dick Barsness, a management expert at Lehigh University in Bethlehem, Pa.

Big change from 2001

This is far cry from 14 months ago, when the main transport worry was congestion. Airports were adding new runways. Rail freight lines were busier than a Lionel set at Christmas. And bus companies were snapping up new motor coaches with luxury seats and DVD systems. Over the past year, the focus changed to security. Congress passed an aviation act dealing with such issues as airport screeners and cockpit security. Bus security is pending.

If United files for bankruptcy, the focus may change once more. Congress would look closely at the industry's health. "We would want to know how the other carriers could absorb the passenger load," says Steve Hansen, a spokesman for the House Transportation Committee.

Bankruptcies in transportation are not new. Pan Am, Eastern, Braniff, and Penn Central (rail) have all folded. Sometimes the struggling company, with its costs lowered by bankruptcy, cuts prices further. "In the 1890s after a huge wave of railroad bankruptcies, one of the survivors said the worst fear he had was to compete against a bankrupt carrier," says Mr. Barsness.

Next year, Congress is also likely to look much closer at Amtrak, says Mr. Hansen. The railroad is asking Washington for $1.2 billion for the fiscal year that starts in October. It lost more than $1 billion last year. And now it is short on cars. That's because 100 cars, including those involved in two derailments this summer, await repair.

As Congress focuses on transportation issues, some bus operators hope it will approve federal loan guarantees to the small-bus industry. Massachusetts Sen. John Kerry (D) sponsored such a bill this year, but it was blocked "until the President could come up with his own small-business plan," says Norm Littler of the United Motor Coach Association. "We really are desperate."

The industry, which was in a downturn even before Sept. 11, was badly hurt after the terror attacks. Schools canceled trips, conventions shrunk and travelers tended to stay home after every new security warning. "This is the worst I've seen business in twenty-five years," Mr. Little says.

Even some large bus lines have been hurt. Coach USA, owned by Britain's Stagecoach Group, is reducing tour and charter service. Greyhound, with 18,000 daily departures, turned a profit of just $810,000 on $250 million in sales last quarter. Although its parent company, Laidlaw, is in bankruptcy, Greyhound says it has been able to round up financing. "Business is down but it's trending better," says spokesman Lynn Brown.

Upstart bus lines

But Greyhound faces low-cost rivals. One example is Fung Wah bus line, which runs mini-coaches from New York's Chinatown to Boston and Washington. Prices are $15 to $25, versus as much as $42 on Greyhound.

Bo Hurd, a Harvard University student just back from Africa, was on a recent Fung Wah bus with 17 other young people and immigrants. He says the drivers can be little more aggressive than he likes, and he once got delayed when the bus broke down. But "I'd never consider taking Greyhounds – they take longer and are more expensive."

• Staff writer Seth Stern contributed to this report.

You've read  of  free articles. Subscribe to continue.
QR Code to Transit trouble – in many modes
Read this article in
QR Code to Subscription page
Start your subscription today