NB: This may not be a word-for-word transcript.
American Passenger Railways: Back on Track
Brightline is behind the first new privately-funded line for a century
Railways played an integral role in the development of modern America. The first coast-to-coast line, finished in 1869, allowed the West to be settled. But after the second world war people abandoned trains for cars. After several rail lines went bust, in 1971, Congress nationalised the remnants as Amtrak to stop passenger services from ending completely. But Amtrak has not revived rail’s fortunes.
Brightline, a startup from Florida, thinks it can. Instead of being greeted by grey concrete and the whiff of urine, as at many Amtrak stations, Brightline’s Miami terminus looks like the lobby of a posh hotel. Early this year, it opened its debut line, costing $3bn, between Miami and West Palm Beach in Florida, America’s first new privately-funded passenger line for over a century. On September 18th, it announced plans to expand, starting with a new line between Los Angeles and Las Vegas.
Wes Edens of Fortress, a private-equity firm, is the founder of Brightline. He thinks that the industry is ripe for a rebound. In 2007, he purchased the land (and some tracks) that Brightline now uses, thinking mainly of their value for moving freight. He then saw the potential of starting passenger services on them, too. Some 6m people live near Brightline’s tracks in Florida, taking 365m trips a year between Miami, Fort Lauderdale (a stop on the line) and West Palm Beach, nearly all by car. Analysts at Fitch, a credit-ratings agency, reckon that Brightline needs to take 0.4% of that traffic to break even. It is also developing tower blocks with offices for rent and sale around and on top of its main stations, taking advantage of land values that have been boosted by its rail services.
Mr. Edens hopes to tap more lucrative routes. Brightline plans to focus on those between big cities 「too far to drive, too short to fly」, such as between Atlanta and Charlotte, Houston and Dallas, and Chicago and St Louis. Several trends may help fill the trains. The number of youngsters who drive is falling: only 69% of 19-year-old Americans have licences, compared with 87% in 1983. Wi-Fi means that business people can work on trains.
Amtrak has not managed to capitalise on these trends. It still runs the same sort of long-distance routes as in the early 1970s, using tired equipment, and has lost money every year it has existed. That is not all its fault, says Ray Chambers of the Association of Independent Passenger Rail Operators, a trade group. Congress has underfunded it and limits its ability to raise private money for new projects.
Matt Coogan, an American rail expert, warns that Brightline could struggle to get space for its trains on future projects where it needs to use existing lines. Other track owners want to give their own freight trains priority and balk at investing the money needed to run passenger trains at faster speeds. Brightline could build new tracks, as it plans to between LA and Las Vegas. But this is likely to cost billions of dollars for each of the 10-15 lines it wants to build. Some analysts say it would need to issue more equity, perhaps in an IPO.
Another threat is competition from publicly-funded high-speed rail projects. But there is opposition to their cost ($77bn and rising for LA to San Francisco, a section of which is already under construction); Brightline thinks it can build new lines more cheaply and quickly than any public initiative. Nonetheless, to get his sums to add up, Mr. Edens admits that public perceptions of train travel as drab will need to change. They already have in Europe, he notes. On a recent visit to St Pancras in London, an insalubrious area before redevelopment a decade ago, he saw a couple getting married at the station. 「There’s no reason,」 he says, 「why we can’t get there, too.」