RAILROAD FARES

Do the Passengers Pay Their Way?

TO most U.S. railroads the passenger business is a money-losing headache. To the passengers, most railroaders are mossback operators who neglect service while engaging in a never-ending round of raising fares, chopping schedules and eliminating branch lines. Last week another big fare boost loomed for the embattled passengers. The Pennsylvania and the New York Central, which together move 27% of all U.S. passengers, are trying to get the rest of the nation's passenger lines to join them in asking for a first-class-fare hike of 33 1/3% to 50%. To many experts it looked as if the Pennsylvania and Central were deliberately trying to price themselves out of the first-class market and drive first-class passengers to the coaches or to competing airlines.

The Pennsylvania vigorously denied the charge, but last week, amidst the swelling uproar, the Interstate Commerce Commission announced a full-scale investigation of the whole passenger problem. Save for the World War II years, the railroads say that they have been losing money steadily on passengers during the past quarter century. By official ICC computation the passenger loss for Class I railroads (those grossing more than $3,000,000 annually) reached a staggering $642 million in 1952, rose to $705 million in 1953, dropped slightly to $670 million in 1954 and $636 million in 1955. The ICC arrived at these figures by means of a 42-year-old formula that arbitrarily assigns to passenger travel a fixed proportion of the total costs of running the railroad.

Even ICC members and railroaders agree that both formula and figures are far out of line. Fortnight ago Northwestern University's Transportation Professor Stanley Berge published a study that flatly calls the passenger loss "a phantom deficit." According to Berge, the deficit "for the most part consists of costs which could not be avoided" even if the rails carried no passengers at all. The rails' $153,000-a-mile capital investments in bridges, yards, rails, for example, is needed for the freight traffic that accounts for 87% of the roads' revenue. Eliminating passenger traffic would therefore cut fixed costs by very little, but would cut out a margin of pure profit.

As a more realistic formula for measuring passenger-traffic profit and loss, Berge suggests using actual out-of-pocket costs, i.e., subtracting from total passenger revenues only those costs directly connected with maintaining passenger traffic. On this basis the ICC's $4.8 billion passenger deficit between 1947 and 1954 would turn into a $486 million profit. Taking the most recent years, during which passenger revenues dropped, Berge found only a $1,000,000 loss in 1953 v. a $705 million ICC deficit, a $38 million loss in 1954 v. a claimed $670 million deficit.

But while passenger deficits may have been wildly exaggerated, there is no doubt that the rails have been hard hit by autos and buses for short haul passengers, by airlines for the long haul. Between 1947 and 1955 railroads lost 32% of their passenger mileage, while the scheduled airlines gained 217%. In freight hauling, the rails' proportion of the total fell from 61% in 1937 to 49% in 1954.

The rails have tried economizing. Between 1949 and 1954 they slashed passenger-train runs from 15,000 to 12,000 daily and cut the road mileage over which they run passenger trains by 20%. They have also been fighting back with family plans, excursion fares and a whopping $750 million for new passenger equipment.

Not all the new ideas have worked. Some roads report the family plans have simply added to deficits. But some innovations have caught on; e.g., Western Pacific reports that its Vistadome cars are filled to capacity, with waiting lists for space. In many cases, however, unnecessary, profit-draining restrictions such as union featherbedding make it impossible to cash in on technical improvements. One big trouble is with the railroads themselves. Says Jervis Langdon Jr., chairman of the Association of Southeastern Railroads: "We've just sat back on our duffs and let the problem creep up on us."

To solve the problem, Professor Berge suggests that the roads replace long, slow-moving, infrequent trains with shorter, faster, low-fare, self-propelled cars, concentrate them on intermediate-distance runs that cannot be served properly either by auto or airline. As an example, he cites a Baltimore & Ohio three-car, self-propelled train which sped from Washington to Chicago over the 1955 Memorial Day weekend faster than its crack Capitol Limited, at less than half the regular fare, yet yielded a 60% profit over operating coists. But most of all, the railroads need to get down to the facts of the rail-passenger problem, rather than continue to talk of mythical deficits so staggering that they paralyze initiative.

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