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Amtrak Unveils 'Market-Driven' Route Strategy

[From an Amtrak press release] . . .

Washington, February 28, 2000 - Amtrak today announced plans to expand passenger rail service in 21 states and strengthen its competitive edge in the mail and express business, steps that will generate $65-million in improvements to its bottom line beginning in 2003. These actions, the first phase of Amtrak's network growth strategy, are based on findings of its first comprehensive economic analysis of the national rail system that is designed to preserve and expand the existing rail network.

Amtrak made the announcement following a meeting between President Clinton and members of the Amtrak board of directors at the White House. The President commended Amtrak for the strategy and its recent business turnaround, and reiterated his strong support for operational funding and the development of high speed rail corridors.

"The network growth strategy builds on Amtrak's financial success over the last two years, but it is grounded in the understanding that we can never grow complacent," said Governor Tommy Thompson, Amtrak's chairman of the board. "Amtrak must constantly search for new market opportunities and keep on growing - just like any other business. And like other businesses, we are using state-of-the-art commercial tools and analysis to increase our market share and improve efficiency."

Amtrak's network growth strategy is built on a network of feeder routes that, much like the airlines, are connected at major hubs, such as Chicago and Dallas/Fort Worth. This network will offer passengers not only more attractive travel options, but also will provide Amtrak's mail and express customers twice as many shipping lanes than currently exist today in partnership with the freight railroads. Finally, the interconnected network also allows for more efficient use of the railroad's fleet, enabling Amtrak to improve the financial performance of routes and expand service at the same time.

"The network growth strategy will result in a larger, better connected system of trains that provides greater choices for travelers and shippers of time-sensitive express," said George Warrington, Amtrak's president and chief executive officer. "As a result, Amtrak will be more competitive on both the passenger side and in the mail and express market."

Pending agreements with the freight railroads, commuter authorities and other partners, ridership on the routes covered in the phase one analysis will increase by seven percent; 11 routes will be expanded to serve additional markets; and, the number of trains operating weekly will be increased on three routes. Amtrak will activate 50 passenger cars and 45 locomotives, as well as 4,000 mail and express cars as part of the initial phase.

These phase one changes will be implemented using Amtrak's existing capital resources. Over the next several months, Amtrak will work with states across the country on phase two of the analysis, identifying additional capital requirements for future high-speed rail corridors. Like other modes of transportation, Amtrak will continue to need a reliable source of capital funding in the future.

"Amtrak's new approach recognizes that a national passenger railroad system is a valuable asset in and of itself," said Mayor John Robert Smith, Amtrak board member. "We cannot become a stronger part of our country's infrastructure by cutting routes one-by-one. On the contrary, we can only improve our bottom line by aggressively identifying new market opportunities and acting boldly to increase our market share."

During its extensive analysis, Amtrak considered hundreds of route scenarios, including the elimination of select underperforming routes. However, the analysis revealed that the loss of revenue from a single poor performing route combined with the loss of connecting revenue, derived from both passengers and mail and express, exceeded the marginal cost savings. The financial strength of the railroad is its interconnected system that serves as a strong base to build revenue.

With the announcement of the Network Growth Strategy, Amtrak is fulfilling another critical component of its business plan initiatives. Other elements underway include the development of one of the travel industry's first service guarantee programs, the expansion of the mail and express business and the development of commercial partnership opportunities with industry leaders. Taken together these initiatives will enable Amtrak to become operationally self-sufficient by 2003, as mandated by Congress. For the past two fiscal years and through the first quarter of this fiscal year, Amtrak has surpassed its business plan targets, and is on course to achieve that goal.

Planned service expansions include the following...