It is recognized that production of finalized plans for regional general consolidation would require several years of intensive effort. This fact merely emphasizes the necessity of getting started now. In summary, the consolidation agency would 1. Be responsible for reflecting the public interest in consolidation. 2. Make pilot studies to demonstrate advantages in economy and service performance. 3. Study and determine standards for abandonment of railroad mileage. 4. Work with State agencies in a study of railroad taxation policies. 5. Study and recommend coordination of reorganization and consolidation. 6. Serve as medium for arbitration of terms in connection with financial negotiations incident to consolidation. 7. In the event of failure of railroad industry to do so in time specified, to prepare plans for general consolidation. 8. Approve or administer loan programs for approved regional consolidation. (3) The legislative program.-The legislative program necessary to give some assurance of rapid progress in the direction of general consolidation would include the following provisions: (a) The establishment of an agency to have full jurisdiction over the policy respecting the consolidation of railroads. (b) The criteria set forth to govern the program of consolidation for which this agency would be responsible would include (i) Conformance to an established plan would be required for approval of a consolidation of railroads in any major region of the United States. (ii) The plan approved would provide for a minimum number of systems which could provide comprehensive competition within each region. (iii) Adequacy and efficiency of service would be considered in the approval of any program of consolidation. (iv) Displaced labor incident to consolidation would receive the compensatory protection for a period of 4 years from date. consolidation goes into effect as presently provided in the act of 1940. (c) Provisions of aid in the financing of a regional program of consolidation which would be administered by the special agency set up to carry out the policy of consolidation. (d) Provision for deduction of payments for displaced labor from Federal taxes paid by carriers. (e) Require the railroad industry to set up a special task force, adequately staffed, to prepare plans for the general consolidation of the railroads in the various regions of the country. These plans would conform to the principles which the consolidation act would set forth as desirable. CHAPTER 5. THE FUTURE OF INTERCITY RAILROAD PASSENGER SERVICE A. INTRODUCTION Item 5 of Senate Resolution 244 requests examination of the "policy considerations for the kind and amount of railroad passenger service necessary to serve the public and provide for the national defense." In order to ascertain an "amount" of service, the "need" must be first established. In the United States today we have a large and diversified group of intercity passenger vehicles, public and private, producing more than twice the amount of capacity actually used. Therefore, it is important not to confuse "need" with "desire." This confusion is already causing unnecessary public and private investment in passenger and freight capacity, discussed in "Part II: Transportation Trends," chapters 4-7. We think it is particularly important that public funds be spent for adding to, or preserving capacity only in situations of clear-cut and urgent justification. We think the following criteria measure the existence of need for a particular segment of passenger transport: (1) Where the total capacity required for a particular movement of people would be clearly inadequate without the segment under consideration; (2) where certain important geographic locations could not be served by other modes of transport, or where a certain class of the population could not be so served; (3) where the carrier possesses service characteristics so unique that they merit preservation for noneconomic reasons; and (4) where rising or stable public demand is in itself an indication of the public necessity of the service. The only railroad service meeting the capacity test is commutation. This is such an important public need that it is separately discussed in part VII, chapter 7, "Urban Transportation." Railroad intercity passenger-miles in 1959 amounted to only 3 percent of the estimated national total of all public and private carriers. The present load factors of bus and air carriers along with estimates for private vehicles show there is very adequate highway and air capacity for moving this traffic. Rail service probably produced about 10 percent of the total capacity moving in intercity service since it operated at the lowest of all load factors. However, except for emergencies, this amount is not great enough to establish a need. The responsible Federal agencies have not, at this time, established such a national emergency need. There are no geographic locations nor segments of the population that cannot be reasonably served by highway and air. The railroads have only one service characteristic that appears to be unique and that is a high degree of reliability in adverse weather. This now attracts passengers only as a standby service. Unless special fares were charged recognizing the cost of providing such a service it could not be supplied by private enterprise. Such fares would doubtless reduce the demand as it would be cheaper to take a hotel room for a day or two. The railroads provide relatively safe transportation, but the class I motorbus carriers have had a better statistical safety record in 5 out of the last 10 years. While the railroads produce a seat-mile of travel for a very low cost, almost as low as buses, the cost of a passenger-mile actually sold is one of the highest. This is caused by an apparent overproduction of seat-miles in relation to demand, or passenger-miles. Public demand, expressed through buying tickets on railroads, is rapidly declining except in urban areas and in longer coach trips in the West. Due to the great capacity in other modes of travel the coach demand is not significant unless it produces a self-sufficient service. The United States is simply not dependent on rail passenger service today. There is what may be termed a "residual" desire for the service, but it is declining. The present service-price package offered by the railroads to the public is not attracting traffic, and its selling price is far below the cost of production. This chapter will present evidence that the present price-service combination could be improved very markedly. However, this improvement cannot be made by minor changes in details nor alone by changing circumstances external to the railroad industry. The fundamental changes must be in operation and management of the railroad service. Rationalization of Federal, State, and local policies can help but will not be a final determinant. The present program of service discontinuance is a step in the right direction. It is clear that far too many thin traffic rail routes have been operated far too long and at great cost to the total transport economy. The railroads are efficient carriers only at high volumes, and this is true in the passenger business as well as freight. A viable and self-sufficient rail service will be restricted to serving the more important intercity routes. Chapter 5, part V, "The Provision of Public Carrier Service in Rural Areas," points out that there are modes less expensive and more adequate than railroads for serving such areas. In examining the rail passenger service problem we have had the benefit of many reports and recommendations made during the past 3 years. This is a rather well discussed subject. Therefore, we have focused the major part of our analysis on some of the less widely understood, but perhaps more important, aspects of the problem. We desired to make this report brief but were confronted with major shortcomings in the earlier reports. The most important of these lacks are adequate comparison of unit expenses and revenues of competing public and private carriers together with the evident market preferences of the public, and analysis of the cost and production control problems of the railroads. Those interested in further background in the subject may consult the existing literature.63 63 (a) Interstate Commerce Commission: Report of Howard Hosmer, examiner, "Railroad Passenger Train Deficit," docket 31954. Report of the Commission, "Railroad Passenger Train Deficit," docket 31954, May 18, 1959. Report and order recommended by Commissioner Charles A. Webb and Examiner Richard S. Ries, "Passenger Fares, the New York, New Haven & Hartford Railroad Co.," docket 33332, served Nov. 21, 1960. (b) Department of Commerce: "Federal Transportation Policy and Program," March 1960. "The Federal Interest in Railroad Passenger Service," a report for the Secretary of Commerce by W. B. Saunders & Co. (c) Other: "Passengers and Profits," an economic study of the earnings potential of railroad passenger services, prepared by Transportation Facts, Inc., for Railway Progress Institute, Chicago, Ill., March 1959. "Railroad Transportation and Public Policy," Dr. James C. Nelson, Brookings Institution, Washington, D.C., April 1959. "Who Shot the Passenger Train ?" Trains, the magazine of railroading, April 1959. "Wanted-A Crash Program To Save the Passenger Business," Modern Railroads, March 1958. There is little mention of nonpassenger, or head-end, traffic in this chapter. This is property traffic which, although it possesses a high value and important time priorities-mail and express, can be moved on other services. To the extent the revenues of this traffic produce reasonable net earnings it supports the passenger service and should remain in the vehicles. To the extent this test is not met, this property traffic should be moved to less expensive vehicles. We see no reason why regulators should not assure that this high-class traffic pays full costs plus a reasonable net return. It should be emphasized that the scope of this chapter is limited to major traffic flows between cities. Passenger service within metropolitan areas is fully treated in part VII, chapter 7, and service in rural areas in part V, chapter 7. B. TRAFFIC AND SERVICE TRENDS OF INTERCITY TRAVEL To properly understand the trends of intercity travel, we should have facts that would relate travel volume to cities and would in addition show the origin and destination of the important passenger flows. Such data would give us a clear picture of the relative importance of regions and cities, the important city pairs in numbers of passengers exchanged, and an accurate picture of the geographic flow of traffic in varying seasons and such characteristics as average length of trip and vehicle used. Unfortunately, such information is not available for any mode of passenger transportation except the regulated air carriers. There are random survey materials on highway passengers, principally by private auto, in Bureau of Public Roads surveys but these are the responsibility of the States and are not carried out systematically nor repeated from time to time. There is no geographic passenger data for rail and bus since 1940 except for what may be implied from the operations of individual companies reporting to the ICC. Thus we are unable to make a comprehensive geographic or traffic flow analysis of intercity passenger movement in order to identify the most important flows and the means by which the passengers move in these flows. The Government is indeed remiss for not having taken the necessary steps to secure adequate passenger movement surveys on a continuing basis through the years. In the absence of market oriented travel data we must use total reported passenger miles by the various carrier groups to review the present trends. While rail and bus data are available for geographic regions, the boundaries differ for each mode making the data incomparable.64 Exhibit I, reveals that total passenger miles by public and private vehicles in the United States have had a very great growth in the 20-year period 1940 to 1959. Total intercity passenger miles have increased over 212 times and the average annual travel of each man, woman, and child in the United States has doubled. In 1940 the passenger-miles per capita were 2,081 and in 1959 4,166. Exhibit I also shows that the largest portion of this growth has been in private vehicles, primarily the automobile. In 1940 public carriers represented just over 10 percent of total travel and in 1959 they held the same proportion. The effect of World War II, temporarily changing 4 See ICC regional maps, pt. V, ch. 7, of this report. this relationship, is clear from exhibit I and from the chart, part II, chapter 4, showing trends from 1946 to 1959. Passenger travel by public carrier declined in volume until the Korean war when it stabilized and there has been a very gradual increase since 1953. The significant reasons for the great increase in intercity travel are: (a) The substantial increase in average personal income since 1940 has provided the "wherewithal" for personal travel, and the high level of business activity has provided increased business travel. (b) There have been outstanding improvements in facilities and equipment in all forms of transport except rail in the post1946 era. The most important has undoubtedly been the improvement in highways and in the comfort and cruising ability of pri vate autos. (c) Trends toward decentralization of industrial production, nationwide product distribution, and the high volume of private building and public works construction have produced an increased volume of business travel. (d) The migration of population in the United States-it is reputed that 1 out of 5 families moves every year-has increased travel in itself and opens the way to more travel to visit friends and relatives. (e) The "taste for travel" is increasing due to the exposure of many individuals during the wars and in business travel, due to higher levels of education, and due to energetic promotion by the various segments of the travel industry. The latter hope to make travel an important outlet for the consumer's discretionary spending. 1. Common carriers-Traffic trends Using the exhibits which support exhibit I, we shall quickly review the trends in each of the important modes of intercity travel. (a) Railroads.-The most significant aspect of rail travel, of course, is the very substantial decline in its use during recent years, exhibit II. From 1949 to 1959 the total declined by 41 percent. However, within this total the decline was much greater in first class travel, 63 percent, than in coach travel, 30 percent. The 1959 total of 17.5 billion passenger-miles is the lowest since 1935, a depression year. Through 1959 the rate of decline for each 2-year period is accelerating. However, we note that in the most recent calendar year report,65 the western district 66 obtained a slight increase from 1958 to 1959 in rail coach passenger miles. This is the first year-to-year increase in any reporting district since 1955, a boom year for all carriers. We also note that for the 7 months ended July 30, 1960, both coach and first-class rail traffic showed slight increases over the prior period for the first time since the Korean war. The increases were in the South and West but it is too early to discern their importance. (b) Airlines.-Uniquely among the public carriers, all reported segments of air transport are growing at a rapid pace and have enjoyed a strong upward trend over a 10-year period, exhibit III. 65 ICC, "Statement M-250 Year Ending December 1959." 66 See map of "ICC Railroad Reporting Districts," pt. V, ch. 7. |