Minimise investment to maximise profits, which you take, whilst running the minimum service required to avoid contract penalties or publicity so adverse you lose your contract.
Then threaten to go bust and get bailed out by the government when the infrastructure starts to break a few years later.
> The passenger train operating company had failed to inform Railtrack and the signaller that the automatic warning system (AWS), which warns drivers of adverse signals, had been turned off in the cab of the HST.
But Ladbroke Grove was Railtrack's fault entirely (within the first few years of its creation). Meanwhile it's been 20 years since National Rail was created, when do we get to blame current governments and National Rail for bad infrastructure?
Not disagreeing, but words are important here to get at precisely what happened.
> Railtrack made a lot of money
"Made" implies creation, growth, increase.
This is the opposite of what happened.
The money wasn't made. It was /extracted/. They /extracted/ a lot of money.
Railtrack doesn't have that money. Their succeeding entity doesn't have that money. The government doesn't have that money. The taxpayer doesn't have that money. None of that money was invested such that any of these entities might benefit from it in any way. It was removed from the system into private wallets.
The private owners plundered and fled, and the remaining skeleton was socialised again so it might regrow a bit of flesh from public taxes for the next extraction cycle.
What about losses from federally funded corporations like USPS and Amtrak that are bailed out every year? Amtrak loses over $1 billion/yr and they are still "nationalized." USPS loses multi billions per year.
USPS costs billions, public services don't need to be profitable they just need to be paid for. Taxpayers pay for it with their taxes.
When we sell our public investments for a quick buck we complain when the real cost of the service gets priced in. The trouble is, we pay the same taxes still, they just no longer go to the service we privatised, so we feel it in the pocketbook individually.
Presumably those taxes are going elsewhere now, but I was very happy with them going to core public services.
The USPS is "loosing" money because it was told to prefund it's Healthcare having to set aside $100 billion in 10 years (unlike any other company) . Moreover, it's much more a service than a business, e.g. it can not really set its own prices.
I don't get it. The USPS has lost billions due to government policies and can't enforce prices due to government policies. They are forced to deliver to unprofitable routes and have prices set to inflation due to government policies. Private delivery services like Amazon and Fedex are generally profitable and don't have these issues. Why is a government alternative better?
> They are forced to deliver to unprofitable routes and have prices set to inflation due to government policies. Private delivery services like Amazon and Fedex are generally profitable and don't have these issues.
I, for one, think it's a good thing that people are entitled to their mail regardless of the profitability of their mail route. That's the point of a public service.
A cynic would say Congress's actions, loading the USPS with costs while denying it control over prices, is so that people ask "Why is a government alternative better?"
Is it your opinion that some people simply shouldn’t get their mail, or that people who live in rural areas should pay exponentially more to get their mail delivered? Why is either of those things desirable?
USPS is not a business, and it’s a fundamental mistake to pretend it is, solely for the sake of slandering it.
None of the competitors offer a similar service to USPS.
Among other core competencies, USPS has nationwide daily coverage of the entire United States and centuries(?) of experience interoperating the the respective mail services of every country in the world and then some.
None of the competitors are allowed to offer a similar service to USPS.
That said, the service provided by the USPS nowadays is primarily delivery of paper waste into a receptacle I am obligated to empty because very occasionally they also use the same box for packages.
Welcome to the world of privatising public services. This has been a scheme of free market politicians for years; call public services too expensive, strip them of funding and hamper them in other ways, then call out how they are not delivering on their promise. Then sell the off at bargain prices, often with additional government guarantees on revenue. After privatisation services don't improve and cost never go down, but somehow the public is better off?
We need to rearrange our brains. USPS provides a valuable service to the country. It does not need to make a profit. It should be evaluated based on the value it generates for the people. Why does something like the mail system get treated differently than something like road development, which is not expected to bring in any revenue at all let along a profit?
Amtrak is the least subsidies mode of Transportation. It has to compete with road transport and the subsidies given to highways, roads and parking is orders of magnitude larger then what Amtrak gets.
I think you may have conditioned by HN to assume that any comment is a refutation. I brought it up because it’s an additional piece of the explanation for why amtrack can’t support itself on ticket prices alone.
Mostly because it’s the single biggest thing that keeps me from using Amtrak. The last few trips I’ve taken, we ended up sitting waiting on freight trains for many many hours.
Each big city we came to we had to stop and wait without having any idea how long it would take for “freight traffic to clear”.
I love train travel, and I’m not price sensitive at all, but the delays were completely absurd.
I expect the maximum profit sweet spot actually includes a small amount of penalties. If you don't get any penalties at all, you are probably leaving money on the table re service cuts.
By running your lines on a shoestring budget, how else would you? The contacts have a fixed life time, keep your expenditures low and you can extract the highest profits. Long-term maintenance in particular suffers after privatization, because why would you, that doesn't align with your goals. And the risk is nill, because the government needs to provide the services so if things go awry you have little too worry about. They will have to bail the line out. Just find a way to move money from the entity to shareholders while you can and you're good, they are not clawing that back.
Offering shitty, expensive service. It's not like customers can use a competing rail line, so every dollar you invest in customer service is a dollar out of your pocket.
My experience of American railways as a tourist is having to show my passport to book a ticket from Davis to Sacramento (I assume I also did that on other trips like to SFO but don't remember), and it being expensive.
My experience in the UK and Germany is show up, pay, go, and it being cheaper.
US consumer rail way is a quasi public corporation (Amtrak) that has lost money for decades and is still funded to the tune of over $1 billion per year. You are confusing that with private US rails.
US private rails own the railways and, while in theory they are required to give way to passenger rail, are so long and take so much time to cross that in practice passenger rail is forced to adhere to the time-schedule of private rail.
This is arguably illegal and only exists because the govt refuses to enforce the obvious interpretation of the agreement.
Meanwhile, the US DOT has historically always taken the approach of "the solution is more highways. What's the problem?", losing far more than $1B/year.
There are 3 million rail cars moved per day that haven't produced apocalyptic skies and chemical rain. You misrepresent the overall safety of private rail lines.
We're talking about passenger rail here, not cargo. Amtrak has a legally mandated monopoly, so you can only compete with them by building your own rails or using a different travel mode (e.g., bus or air).
If you find their service to be good and cheap, I can only assume you've never ridden a train in Europe.
By stripping and selling off as many assets as you can and borrowing as much as possible leveraged on the income from future fares. There is no incentive to spend this on long term investment or contingency planning. The railways are an essential service so the government will always have to step in when the private company reaches breaking point, so no money is saved by the state in the end. It’s just disguised debt with terrible interest rates.
Amtrak, a public rail company gets over a $1 billion in public funding. Private rail lines do not. Amtrak has operated at a loss for decades unlike private rails.
You are comparing completely different services, though, right? Private freight lines versus passenger? Amtrak runs on lines owned by the freight companies. I've been on an Amtrak train that had to sit on a siding while a freight train passed. The passenger service has to have a published, predictable schedule. The freight moves when it is needed and breaks the Amtrak schedule, leaving a crap passenger service.
I think the extent to which freight shoves aside passengers varies from region to region. My worst experience was going to West Virginia from DC. I find the Vermonter keeps its schedule pretty well.
A "loss" here is just a politicized framing of the fact that government pays Amtrak to do something of use to society.
You might as well say that the US military makes a $1 trillion loss per year. No, they supply something which is required by the govt and which has a cost.
1.) Force other competitors to go belly-up or buy them to create a Monopoy or if the authorities don‘t let you do that, try to end up in a duopoly situation where you and your competitor come to some silent agreement to not overly compete.
2.)
Raise the regulatory bar to prevent startups from entering your field.
Milk whatever half dead infrastructure you have and people depend on.
Oh and raise prices every odd year while still not investing in the rotten infrastructure.
Somehow investors need to see growth and dividend payments.
Due to 1.) there is no competitor left that could offer a better service. People cannot simply switch.
Die to 2.) you are not in danger of ever having to face situation 1.) again.
Job of the government is to not let 1. and 2. happen.
Cutting corners and costs e.g. shutting ticket offices, doing just enough to barely offer the service. It's not like your passengers have any sensible alternative. If that doesn't do it then you can also load the company up with debt and pay yourself a nice dividend until rates rise.
> load the company up with debt and pay yourself a nice dividend
I am new to this. Doesn't a dividend come from profits? What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?
> What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?
If you’re a water company, after government bailed out the banks, chances were good you’re not going bust. What are they going to do? Let the entire population of London die of dehydration?
And since a lot of investors in large utility companies are international, should the government somehow not make them whole (or worse, just expropriate), there would typically be repercussions - with international arbitration courts adjudicating reparation with processes that are typically stacked in favour of businesses.
And they should thus pay the extra cost for that privilege.
30 years ago Terry Wogan was using his radio 2 breakfast show telling the 40-60 demographic how to send emails and watch his webcam. That demographic are now 70-90. I do sympathise for independent 95 year olds who can't use a ticket machine. I'd rather we spent the money in a far better way -- increasing services for example.
I dont think this is true, but suppose it was - so what? If I am travelling eith my daughter I often need advice from the ticket office folks. It does not matyer how they aquire it.
Additionally, often the ticket office gives better rates -
It could possibly be achieved here if our prices weren't so arcane and difficult to understand. There's tickets you can't get from the machines etc. There was a photo yesterday of a queue of 10 odd people waiting next to 4 idle ticket machines. It's solvable but nobody seems interested in actually doing it, presumably because it costs money to fix. International Airlines I assume gained some competitive edge by that move, there is no competition in a lot of our privatized industries so no real incentive to do anything but the bare minimum.
You asked how profits are extracted, and I answered your question. Now you're bringing up monopoly vs free market, which has nothing to do with the question.
The award of the contract to run that particular collection of routes is ostensibly free-market. Once it's awarded, they hold a monopoly for the duration of the contract though.
Actually, the very widely replicated experience of most challenger utilities is that the entrenched utility will stop you, sometimes in collusion with the government or municipalities. Try getting permits to dig up the road to put your competing pipes alongside the current monopolists.
In Britain, British Telecom spent around 20 years making it impossible for other players to supply an internet service to consumers. They used various anti-competitive practices and had very good capture of the largely toothless regulator OfCom. This is all documented.
By making sure there’s no water fountains on the train platforms, yet plenty of kiosks and vending machines that sell water.
I was just at EWR last night waiting for an arrival and there was an old man looking for water. He asks an employee where to find some and she looks at him like he has two heads.
“You have to buy some. Or you can drink out of the faucet in the restroom”
Can you imagine that? Telling an old man at 1am he has to drink out of a bathroom fixture to quench his thirst.
In my mind, I was hoping he was flying to a more civilized country. Because that’s the system we’ve built for ourselves. In a better present, the man would have access to a drink for free. But because a profit needs to be made, the entire airport is organized around little nickel and dime scams.
This is the way the world works now and anyone who disputes the justification of it just gets neatly added to the pile of "complaints" burned by elites for warmth.
By competing to make the best rolling stock, online booking systems, catering, cleaning services, etc. These contracts should be put out to tender and should the promised level of service not be delivered then contracts should be lost and/penalties applied where necessary.
Most important is that the target service coverage, quality, etc should be decided by government (who should be seeking to please voters), not corporations who are seeking to please shareholders.
Sell off assets, get subsidies, understaff, rundown and don’t maintain equipment. Provide a shit service. When bankruptcy comes up you’ll be bailed out.
Rail lines have inherent competition in form of trucks and boats (for transport of goods) and cars, busses and planes (for transport of people) and rail is often outcompeted by these as they don’t require large station in expensive real estate.
So the example of rail doesn’t really apply to this branch of the discussion.
However, once you’ve bought a house, it is very difficult to to but in new pipes from a different water works.
So how do you extract profits then?