Thursday, April 25, 2013

The Gospel According to Saint Donald

The Don Phillips column appearing in June TRAINS is indeed provocative. In the column, Mr. Phillips contends that Amtrak's allocation of fixed costs are allocated so that the Corridor, and in particular the Acela, are shown to be profitable and the Long Distance trains are hopeless losers. Mr. Phillips contends that if the fixed costs were properly allocated, as well as some costs being capitalized that should be expensed, the Corridor and Acela would be "The Biggest Loser" and the LD's would still lose, but the losses would be "tolerable".

The problem I have is that the column quotes Mr. Andrew Selden, at attorney from Minneapolis, but unsaid is that he has done work for NARP - and to me NARP is more concerned about the preservation, and for that matter expansion, of the LD System.

While of course the allocation of fixed costs/expenses in any industry with a high percentage of such as a railroad, can be the "Pandora's Box" ("figures don't lie but liars figure"), the column loses much credibility with the direct quotations from someone long affiliated with NARP. I have no answers for this issue; the Monthly Performance Reports that show the Corridor as profitable are of course unaudited. The outside auditors (Ernst & Young for the moment) are largely concerned with the presentation of the Consolidated Financial Statements, and as such the capitalization of costs that should be expensed is of their concern, how the fixed costs are allocated over the trains is of considerably less.

June TRAINS is presently being circulated; also of interest is an article on Iowa Pacific passenger operations.