Ex-Delta CEO Bashes Domestic Airlines, Embraces Subsidies

Last year we learned that Delta’s former CEO, Richard Anderson, would step down as of May 2016. Then in June of this year it was announced that he would become the President & CEO of Amtrak. He left a great legacy at the airline, and I certainly have a lot of respect for the guy.

At the same time, there’s great irony to me in the CEO of Delta, which fought so hard against subsidies of all kinds, to turn around and become the CEO of Amtrak, which relies on subsidies to operate. I guess that only speaks to the degree to which he’ll go to fight for what’s in the best interest of the companies he works for.

I haven’t heard much about Anderson lately, though the StarTribune has a story quoting Anderson that can’t help but make me laugh.

This week Amtrak launched a new ad campaign highlighting how taking Amtrak is better than flying, and it’s actually a really solid ad campaign. You can check out the ad campaign’s dedicated website at breakthetravelquo.com. For example, here are a few of the ads:

While the ads themselves are well done, my favorite part of all this is what Richard Anderson said about the campaign, drawing a comparison between airlines and Amtrak:

“The coach on Amtrak is better than the first-class product on any domestic airplane,” Anderson said Thursday in an interview. The new campaign, though it predated his arrival, is “spot-on in terms of the contrast” with U.S. carriers, he said.

Of course in his new role, Anderson is a huge fan of subsidies, especially for something as “essential” as trains. He also thinks that it’s much more complicated to run a rail company than to run an airline:

During his nine years at Delta, he became famous for the ferocity with which he battled subsidies he believed competitors enjoyed, from sources including the Export-Import Bank and a trio of Middle Eastern governments that U.S. airlines accuse of giving unfair aid to their carriers. Under Anderson, Delta led an effort to cut off federal support for the Ex-Im Bank, which was a key element in many sales of Boeing jets abroad.

Amtrak, meanwhile, provides an “essential service” for many Americans, Anderson said, and enjoys broad congressional support. Earlier this month, the House rejected a proposal by Rep. Mo Brooks, an Alabama Republican, to eliminate federal funding for Amtrak; a Senate committee has also set aside a budget request by the Trump administration to eliminate money for Amtrak’s long-distance routes.

Running a passenger rail company “is a lot more complicated than an airline,” Anderson said, because the railroad also owns its “air traffic control” system in the form of tracks, switches, and other equipment.

(Tip of the hat to @spn1971)

Comments

  1. Amtrak doesn’t really own much of the tracks in the NE Corridor as it’s owned by CSX. This is why the freight trains get priority over Amtrak in this region. Not sure if this is the same in other parts of the US but I’m guessing it is. So, RA is wrong about owning the tracks, switches, etc.

  2. Amtrak is better than flying?

    Maybe Acela, but in the rest of the country it’s a shithole on wheels.

    Once I was on a train leaving Chicago and I went in the dining car (sit-down restaurant) with my laptop to get some work done. Bitchy server comes up to me and says “put your laptop away young man this is the dining car.”

    I don’t know what the fuck she was on about. And no I wasn’t playing a video out loud or anything, just working on homework (I was a college student at the time).

  3. @ Jason

    Quite right. Didn’t your mother teach you any manners?!

    Very cheeky how these ads use the same classical music (The Flower Duet by Delibes) that BA has been using for more than twenty years as its advertising. Must be deliberate.

  4. …Except Amtrack’s subsidies are to keep a failed business model alive so rail doesn’t disappear entirely. Not as a blunt force weapon intended to flood markets with oversupply to drive foreign, capital constrained competitors out of business as part of a master plan to take over the global market. Calling him a hypocrite for embracing life sustaining subsidies in a market with no willing competition is like calling a shipwrecked vegetarian a hypocrite for eating a fish he caught after not eating for a month.

  5. @ Jason and J – Amtrak is the highest priority on the class 1 freight road I work for. Quite literally everything gets out of the way for Amtrak and our highest priority trains follow behind Amtrak on it’s highball route. With regards to the dining car, the full service car is for dining, they have a lounge car for busting out a laptop. Part of the Amtrak experience in the dining car is eating with others and getting to talk to them, that’s the first class service customers use. Look at the prices for flights to some of the cities Amtrak serves out west and compare that to an Amtrak ticket. They do serve a valuable service to many in rural America.

  6. @J — You’re absolutely right. In the rest of the US, we see that other freight companies like BNSF, UP, CN, CP, KSC, and NS own most of the trackage that Amtrak uses, especially on West Coast routes, where the long journey and priority given to freight trains obliterates on-time performance. Where you’re wrong, however, is in your reference to the Northeast Corridor. Amtrak actually owns a majority of the Corridor’s trackage, with some bits operated either by Metro-North or CSX.

    In addition, your statement about freight trains’ priority is generally incorrect on the East Coast. CSX has both special prefixes to denote passenger trains and extra sidings to ensure that freight trains stop for AMTK, which generally operates at higher speeds than freight in the Northeast. While some exceptions do exist and this is not true for the entirety of the US (the West Coast is a prime example of not following this idea), it is true at least where I live.

  7. Lucky aren’t you going to write a post about Icelandair’s new service to DFW?. Curious to see your perspective. You wrote about WOW so I assumed you would about FI as well.

  8. Have you ever even ridden the Acela Express? It’s definitely preferable to flying and it’s commands a premium price because of it.

    Amtrak is forced to keep unprofitable long-haul lines running due to our lovely congress. If they could just keep the successful regional services (Acela Express, NE Regional, Cascades, Capitols, Pacific Surfliner, etc) and axe the rest of it, the service might actually get heaps better and more cost-efficient.

    Airlines are subsidized in heaps of direct and indirect ways, so I don’t think it’s entirely fair to talk about anyone “running in the black” until all of that’s accounted for.

  9. That’s an absurd comparison. There’s an enormous difference between subsidising a rail network and subsidising international air carriers.

    While I can’t speak for the US, I know in Europe the vast majority of the population would be very pro-subsidy for trains and very anti-subsidy for airlines.

  10. 1. You can’t call someone on a plane because it might mess with the systems.
    2. You can’t bring more than 4 bags because there is not enough space.
    3. We can’t take the train everywhere.

  11. Lucky, you should review one of Amtrak’s sleeper services. It’s probably a comparable product to most airline’s business class seats, and there’s a door (like, one built into the floor-to-ceiling wall) and a shower. No free booze though 🙁

  12. My problem with Amtrak is that there are several large metro areas without train service, yet those of us in those cities continue to pay for this subsidy. Nashville, Las Vegas, Louisville, and Columbus OH are all metro areas with over 1 million in population that are not served. And there are many more major cities not served. There are entire states not served by Amtrak. Airline subsidies at least provide subsidized air service to smaller markets in many states. A large part of the country basically pays for convenient travel options for those living in the Northeast Corridor.

  13. Mark F., most of the Northeastern states (NY/NJ/MA/DE) are net contributors to the federal budget – they’re already subsidizing federal aid to a bunch of other states. The Northeast Corridor in addition is 100% profitable and does not need to rely on subsidies. It’s here again that the Northeast Corridor is keeping the rest of Amtrak afloat. Feel free to fact-check any of these assertions on Google.

  14. We can all be cynical. Like bloggers pushing credit card sign-ups to earn personal revenue. Everyone pushes what is in their own best interest. At least we benefit from the card sign-up bonuses, cant say the same for over priced and slow Amtrak trains except for D.C. To NYC route.

  15. I think us humans tend to do whatever we perceive as being in our best interest at that particular time. Then, we find a way to rationalize it later. This does not always hold, but experience has taught me it’s a reliable predictor of human behavior.

  16. Lucky, your shtick on ME3 airline subsidies is getting old. You’re literally comparing trains and airplanes here. I guess your next target will be farming subsidies and how the federal, state and local governments are hypocritical for providing them.

  17. @propaganda: I think its just Acela that is profitable and any other route in the NEC that is losing money is just lumped in together. Also, be very cautious of what you mean by ‘making a profit’. I believe, in this case, it means your revenue was more than your operating costs. I don’t think that would also include the huge capital equipment investments that go along with that service (of which many states don’t enjoy). That doesn’t seem to be included in ‘operating costs’ when determining whether NEC trains in general make a profit.
    I also didn’t think being a net contributor to the national budget meant you got more services than other states. I didn’t think that was the intent of the federal system.

  18. @propoganda Finally, I don’t think I meant to say the NEC shouldn’t get subsidies. I meant to imply: “OMG can we get some of that train service too? Our freeways are clogged and it would be really nice to be able to take a train to Atlanta or Chicago!”

  19. Mark F – This attitude perfectly sums up why I despise the American “psyche” so much (despite loving both the country and the culture).

    “Why should my money benefit someone else?” – The answer is because you live in a civilised society, and that’s what civilised societies do – help each other. Should all the states that contribute more money than they get back all secede and form their own union?

  20. My problem with Amtrak is that there are several large metro areas without train service, yet those of us in those cities continue to pay for this subsidy. Nashville, Las Vegas, Louisville, and Columbus OH are all metro areas with over 1 million in population that are not served.
    —————————————————————————————————————————————

    That’s because local politicians in almost all those states are hostile to passenger rail. OH had a high-speed rail system proposed and the current governor cut it. The governors of those other states are hostile to passenger rail.

  21. Rainstorm17 is correct. Federal level republicans passed laws that meant the federal government could no longer subsidize trains under 750 miles, only state could. State level republicans then cut the budget to fund those trains.

    “Nashville, Las Vegas, Louisville, and Columbus OH ”

    Hm, which party generally controls the purse strings in those states?

  22. Well, it’s also refreshing to see Anderson admit that flying for the 85% of passengers who sit in coach/economy sucks — and that the ridiculous and obnoxious nuisance fees (that Anderson, btw, had a heavy hand in implementing while he was CEO at Delta) are, in fact, ridiculous, obnoxious and totally unwarranted — except, of course, to fund the obscenely generous salaries and bonuses he and other senior executives pocketed, and to pay for the ridiculous and obscenely large stock buybacks that shareholders demanded once the airlines killed off competitors and became oligopolies.

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