November 15, 2005
From the desk of Jane Galt:A monopoly not even a monopolist could love
Daniel Gross notes:
You would think it would be pretty difficult to lose money selling cans of Coke, frozen sandwiches, and bags of chips to train passengers. After all, you've got a captive audience, since passengers don't hop off at stations to buy snacks. You've got a monopoly, since outside vendors don't troll the aisles. You buy standardized, non-spoiling packaged goods in bulk, so you should be able to keep costs down.And yet somehow Amtrak managed to lose a trainload of cash on its food--excuse me, dining--service
Let me suggest a possible explanation: Amtrak's food is terrible. I mean, worse than airplane food. And not that microwaved dog-food enchilada with the rubber cheese that they used to serve you in the good old days when airlines took an interest in keeping their passangers alive and in possession of all their limbs as they shuttled them from Point A to Point B. I mean worse than the repulsive bag of "southwestern-flavour" pretzels that I was served on a recent flight to Colorado (I believe that anyone who had tried to serve such an item in the Southwest would have been--rightfully--gunned down by the liberty-loving citizens of the region). Worse than the cardboard-and-rubber concoction misleadingly labeled as a "ham and cheese sandwich" I was given during my return flight from London. Worse, even, than the port-wine flavoured processed cheese substance that formed the main content of the "snack" that American Airlines sold me for $3.50 on my last trip to Mexico. Amtrak food can only be adequately compared to the execrable fare that used to await unwary travellers at the highway service stations of my youth.
Given that the average journey on Amtrak is, like, four hours, you have to be pretty desperate to ever buy a sandwich off them. And if you want to buy anything else, you have to wait on a line that is sort of a Platonic ideal of all lines, stretching from the slow-witted bureaucrat behind the cash register off into infinity through some sort of special space-time vortex located around the gent's lavatory. One miserable Christmas, when I was having an asthma attack on the train to Syracuse, I nearly blacked out three times before reaching the head of the line. In the true Christmas spirit, the staff and fellow passengers acted as if I wasn't there.
When you see service this incompetent, you know the government has to be behind it somewhere. Only in a government agency could such practices continue without fear of competition or bankruptcy.
Posted by Jane Galt at November 15, 2005 7:36 AM | TrackBack | Technorati inbound linksBack in the 1970's Amtrak's long haul trains, e.g., New York-Chicago or Chicago-LA, had excellent dining service featuring glassware, china, "real" silverware, a passable kitchen and fairly good food. It's been long slide over the intervening decades ostensibly to "save" money and cut costs.
I suspect most of the money is being lost in the dining car service (with tables and waiters). Also since this is mostly used by first class passengers and is included in the first class ticket price the computation of profitability is going to be a bit arbitrary.
Also, they're not really monopolizing food. People who are going to take a longish journey may just take a couple of snacks with them - bought at half the price and of reliable quality.
I'm riding Amtrak this weekend, from NYC to NC. I actually don't mind their food selection, which is better than when I started traveling on the train 10 years ago. I usually brought my own snacks, but I'd buy juice from them, and maybe a hotdog or a danish.
This time, though, I'm bringing my own meal food and bottled water. I'm not in the mood to brave that line. It can stretch across the cafe car and into the next passenger car, many times.
I just took an (otherwise pleasant) long haul ride from NYC to north carolina on Amtrak. Making the mistake of relying on the dining car for my food, I purchased a totally rancid chicken sandwich, heated in the microwave until the bottom bun was soaking in the orange grease -- I had to pay $5.50 for the pleasure of eating this monstrosity. However, the "Vermonter" train that services New England-NY offers lovely sandwich boxes for a reasonable price.
I am confused by your blaming the gubmint for the fact that amtrak serves terrible food. After all, you compared it all through out your post to air plane food and rest stop food -- not offered by goverment-owned entities. I suspect the reason for the terrible food is simply monopoly (whether private or public) compounded by the fact that relative to a train ride or airplane flight, the quality of the meal you have on it does not weigh heavily in your decision making process. It would not take many extra dollars for airlines serve edible food, but as long as consumers do not make decisions to fly with them based on the food, those meagre extra dollars would be wasted from the perspective of the airline anyhow.
Maybe this is just a west coast thing but out here I've always found AmTrak food to be pretty good, if not downright tatsy. I remember taking a train ride from Washington to Montana and having an excellent barbeque spare rids (of all things) that was one of the best I'd ever had in my life.
Wait a minute, Megan — the food's universally known to be awful and the lines are interminable? You have to wait ages in a queue to get your completely worthless sludge of a meal because so many other people are eager for the same thing? Something's wrong in there.
The sodas are no worse than soda elsewhere; hence hte lines. But there's little margin on canned soda.
About 45 or 50 years ago, I took a train trip with my uncle on the Pennsylvania Line. I still remember the steak I ate in the dinning car. It was wonderful. I thought I was in the big time. Of course, that was before the service economy.
The sodas are no worse than soda elsewhere; hence hte lines. But there's little margin on canned soda.
Nonsense. There's as much margin as you want there to be. (I went to a baseball game a couple of months back, for the first time in ages, and was amused to see how the vendors worked it: food was only moderately overpriced, but anything liquid was marked up ridiculously. That would explain the absence of water fountains round and in the ballpark . . .)
If you're gonna be de facto taxed for your soda, who wouldn't prefer to pay the tax in a surcharge rather than in queue time? Sounds like a case for vending machines to me. Maybe they can buy them up cheap from all the CA schools getting rid of them on the grounds that they make kids fat.
The dining room food we had on the Empire Builder last winter was okay; chain-restaurant (e.g., Perkins, Village Inn) in quality. But boy, was it expensive. The snack bar food, in contrast, was both expensive and horrible.
Most people not eating in the dining car (which seemed to be mainly patronized by the first-class passengers) brought bags full of their own food.
Amtrak may manage to lose money on its train-wide monopoly of food service -- but the New York City government pulls an even neater trick by losing money on its city-wide monopoly on gambling, via Off-Track Betting, year in and year out. Every year it's bailed out by taxpayers.
To lose money on a gambling monopoly -- it takes a government.
Out here in California, it's actually pretty decent (although the different routes do have different standards.) Micro Brew beer, pretty good frozen burritos and snacks in the cafe car; hot resturant-style food and decent varietal wines in the dining cars.
I still think that the concessions ought to be bid on (frequently).
"Amtrak's food operations had a loss of $83.8 million in fiscal 2004, which ended Sept. 30 of that year, on revenue of $80.4 million...."
It doesn't specify how they arrived at $83.8 million in expenses. I would say that labour was a very large share. Maybe they are charging the dining facilities & snack bar rent...
It's not difficult for them to use a bit of creative accounting when calculating expenses.
Our Canadian Gun Registry is now up to $2 billion dollars (and counting), which is still a lot of your US dollars. They expensed _everything_ in that fiasco.
Aw, come on, Jane. Anyone STUPID enough to buy Amtrak food deserves to be poisoned. Are Americans of today so lazy and thoughtless that they cannot reason ahead and make a sandwich, a salad, or some fruit and a bagel? I mean, anyone can throw together a Limburger/anchovy/kimchi/horseradish sandwich, after all. [This has the added benefit of ensuring plenty of room to stretch out, as fellow passengers exit the scene].
Little margin on canned soda? The stuff can be had at Costco at somewhere under 25c a can, and people will pay upwards of a dollar in the right circumstances.
It's bad, but I'll still miss it when it's gone. And it's looking more and more like pretty soon it will be.
Wait a minute, Megan — the food's universally known to be awful and the lines are interminable? You have to wait ages in a queue to get your completely worthless sludge of a meal because so many other people are eager for the same thing? Something's wrong in there.
What's wrong is that even with such an obvious indicator of demand, Amtrack is unable to provide better service or make a profit while doing so.
But there's little margin on canned soda.
Not at all true -- there is a HUGE margin on canned soda. You would probably never buy from a vending machine again if you knew what the cans of soda cost the operator! (I'm not telling you, either, else the Pepsi police would be knocking on my door in the middle of the night!) :-)
I hear that on trains in Central Asia peasants set up charcoal braziers in the aisle and butcher and cook the goats and chickens they bring with them. One of them tried that on an airplane once ...
Little margin on canned soda? The stuff can be had at Costco at somewhere under 25c a can, and people will pay upwards of a dollar in the right circumstances.
The per-can cost doesn't include refrigeration, which any form of vended soda normally includes (directly or using ice), as well as the labor costs of delivering it (either via a vending clerk or a machine stocking/maintenance crew). This cuts back on the margins a bit.
Nonetheless, unless you are allowing your eight-year-old to include soda pop sales at a nickel lemonade stand, it is really hard to lose money on a soda sale.
It sounds like the way to lose money on soda sales is to:
1) Have people (union employees, too!) selling the soda instead of a vending machine, and
2) Run the sales counter so slowly that you get long lines of customers waiting.
I'm guessing that union work rules are behind both of these issues.
And yet Monopolists are still buying the Reading Railroad...
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