Amtrak Loses Money on Food

http://www.futureofcapitalism.com/2012/08/amtrak-loses-money-on-food

A lot of businesses operate with low margins in some areas but higher ones in others. Movie theaters, for example, make a lot of money selling high-priced popcorn and soda. And airlines seem to have cut base ticket prices low, but are now charging money for food and in some cases in-flight wireless Internet service or movies. Leave it to our government-owned passenger railroad, Amtrak, to figure out a way to lose money while selling food to a captive audience. USA Today reports:

Amtrak loses millions on its food and beverage service, and a congressional committee wants to know why.

The company's food and beverage cars have lost $833.8 million over the last decade, including $84.5 million in 2011, according to testimony at a congressional hearing Thursday.

The reason: the difference between Amtrak's costs and what it charges passengers. For example, taking overhead into account, each cheeseburger costs Amtrak $16.15 and each can of soda costs $3.40. But Amtrak charges passengers only $9.50 and $2 for those items.

Republican Rep. John Mica, chairman of the House Transportation and Infrastructure Committee, called the losses "outrageous."

It does seem pretty outrageous. On the other hand, the whole railroad, with the possible exception of a few busy routes, runs at a loss. So selling something for less than it costs is Amtrak's business. If taxpayers, including those who work in competing transportation businesses like airlines, buses, or cars, subsidize Amtrak's losses on trains, why is it any more outrageous for Amtrak customers who don't buy food on the train, and for taxpayers who don't ride Amtrak at all, to subsidize Amtrak's losses serving cheeseburgers and soda to some passengers? Is there a difference here that I'm missing, or are they both outrageous?

by Editor  |  Aug 3, 2012 at 10:13 am Related Topics:  Government ownership, Government Spending receive the latest by email: subscribe to the free futureofcapitalism.com mailing list