Amtrak announced on Tuesday evening that the company will cut up to 20% of positions in the next fiscal year. The railroad also said that it needs a $1.5 billion bailout, after receiving $1 billion from Congress in April. Even for a company that is struggling to turn a profit after forty years in operation, the outlook isn’t good.
‘It is clear we have no choice but to reduce our overhead structure to better align our costs with our revenues,” CEO Bill Flynn announced to employees in a memo. ‘This reduction is necessary to ensure we have a sustainable Amtrak that can continue to make critical investments in our core and long-term growth strategies, while also keeping safety as our top priority.’
Ridership is down 95% since the coronavirus pandemic began, according to Amtrak. The company expects revenue to fall by $1.6 billion this year, and for demand to be cut in half. Without additional funding, Amtrak anticipates having to reduce service and suspend some routes. The railroad cut $215 million in capital expenditures so far this year, and is targeting another $600 million, which will require many projects to be put on hold. Amtrak forecasts finishing 2020 with a $1.4 billion deficit after coming close to breaking even last year.
‘[T]he climb back will be hard,’ Mr. Flynn continued in the employee memo. ‘To return to even half of the railroad’s past ridership will require “substantial growth over the next 16 months, and it will have to be achieved against a backdrop of stunning unemployment, socio-economic dislocation and a potential recession.’
He isn’t kidding. Although Amtrak will resume its high speed Acela service on June 1st, it’s safe to say that the company does not see things turning around immediately. On top of record unemployment and falling GDP, stay at home orders are only beginning to lift, and some businesses are reconsidering whether to return to traditional offices at all. It certainly isn’t a conducive time for travel.