Amtrak - Business in United States of America

Identification: Quasi-public corporation created by the federal government to operate passenger train service in the United States
Date: Began operations on May 1, 1971
Significance: The federal government’s creation of Amtrak allowed private railroad companies to abandon their passenger services, which had become highly unprofitable. Amtrak and the sizable federal subsidies supporting it make it possible to maintain a national rail passenger service that would otherwise be financially unsustainable.
After World War II ended in 1945, the automobile and airline industries began to make major inroads into the customer base of commercial passenger trains, threatening the major U.S. railroad companies. By the late 1960’s, passenger rail service faced a serious crisis. Many railroads wanted to end passenger service, but government regulations made it difficult to suspend unprofitable trains. In 1970, Congress passed the Rail Passenger Service Act, which President Richard Nixon signed into law on October 30 of that year. The law created Amtrak (National Railroad Passenger Corporation) to maintain railroad passenger service while allowing the private railroads to stop carrying passengers.
Advocates of the Amtrak system believed that with improvements in service and the rationalization of routes, passenger trains could operate profitably, so the legislation creating Amtrak mandated that it should make a profit. Amtrak was free from Interstate Commerce Commission regulations that had often kept the private railroads from cutting money-losing trains. However, Amtrak did not prove to be free from the political pressures that might be brought to keep operating underutilized lines.
Relatively modest federal subsidies in Amtrak’s early years proved to be wholly inadequate. For several years, annual subsidies of more than $1 billion were required. Later, deficits were decreased, and subsidies were cut to between $600 million and $700 million per year. Significant gains in performance were achieved by the mid-1980’s, and by the 1990’s, Amtrak had largely replaced the outdated equipment it inherited from the private railroads. The system remained unable to realize a profit, however.
The Northeast Corridor, from Washington, D.C., to Boston, Massachusetts, is the most heavily used part of the system. Amtrak owns the track in the Northeast Corridor. In other parts of the country, Amtrak pays fees to use the tracks owned by the freight railroads. In the Northeast Corridor, many trains operate on frequent service schedules. In the rest of the country, long-distance trains operate much less frequently (often one train runs per day in each direction). In parts of the Midwest and along the West Coast, there are regional corridors that provide more frequent service.