Update: see corrected Shinkansen staffing numbers below

The last few decades have seen the growth of airlines and bus operators that reduce operating costs using a variety of lean-production ideas, chiefly using the equipment for more hours per day to earn more revenue with the same fixed costs. This hasn’t generally happened for rail, even in the presence of competition between operators. There is one low-cost option, on the TGV network, which like Ryanair and easyJey cuts costs not only by leaner production but also by reducing passenger comfort and convenience. I contend that an intermediate solution should be investigated: lean like Southwest and JetBlue, but without the extra fees, which are lower on those two airlines than on legacy US airlines.

First, the preexisting fares. In Japan, JR Central charges an average of $0.228 per passenger-km on the Shinkansen, JR East charges $0.245, JR West charges $0.208. In Japan nearly all intercity service is Shinkansen; averaging all JR East rail other than Tokyo-area commuter rail, even commuter rail around Sendai and Niigata, drops the average marginally, to $0.217. European intercity rail fares per passenger-km are lower: €0.104 on RENFE (PDF-p. 27), €0.108 on DB, and €0.112 on SNCF. All of those companies are profitable and do not receive subsidies for intercity rail, with the exception of RENFE, which loses small amounts of money (-0.8% profit margin). This is far lower than Northeast Corridor fare, which, as of the most recent monthly report, averages $0.534 per passenger-km on the Acela and $0.292 on the Regional.

Now, we can try penciling what operating costs should be. The most marginal costs, which grow linearly with the addition of new service, look a lot like those of low-cost private bus operators: crew, cleaners, energy, rolling stock acquisition, rolling stock maintenance. I am specifically handwaving the peak factor – frequency is assumed to be constant, to establish the operating cost of the base rather than that of the peak. I am going to assume 1,120 seats per train, all coach, about the same as a 16-car Shinkansen with 2+2 standard-class seating, or 70 per car. First class should be thought of as an equivalent of buying extra seats – fares should scale with the amount of space per passenger, and at any rate most cars are coach. Occupancy rate will be taken to be 57%, for a round 40 passengers per car; this is well within the range of HSR occupancy.

The cost turns out to be quite low – this is similar to the analysis in Reason & Rail from 2 years ago, except for now I’m leaving out infrastructure costs, which in that analysis are the dominant term, and so excluding them leads to very low costs. It is about three cents per passenger-km in operating and maintenance costs. This is of course not what HSR currently costs, but should be thought of as a lower limit or as the marginal cost of increasing base service.

A crew on a high-speed train is a train driver and a conductor. A 16-car Shinkansen train appears to have one conductor judging by the single conductor’s compartment has three conductors (see Andrew in Ezo’s comment below); the TGV has much more staffing, with the low-cost TGV having four. US salaries are high because the railroads have good unions: according to the Manhattan Institute’s applet for public employees’ salaries, on the LIRR, the average train driver makes $103,000 a year (search for “engineer”) and on Metro-North $115,000 (search for “locomotive engineer”). This is higher than on the Shinkansen. A conductor makes $98,000 on the LIRR and $105,000 on Metro-North. Figure $240,000 per year for a two-person crew $440,000 per year for a four-person crew.

We need to convert this to operating hours. On the LIRR and Metro-North, there are about 4,500 revenue car-hours per driver-year, which translates to about 600 revenue train-hours. At an average speed of 200 km/h, HSR would cost $2 $3.67 per train-km, or $0.003125 $0.0057 per passenger-km. But Metro-North and the LIRR are inefficient due to a prominent peak making smooth scheduling difficult; HSR can schedule a simple shift with a roundtrip of about 6-7 hours plus rest time, and if each employee does this 5 days a week minus holidays this is 1,200 revenue hours. This halves the cost. Conversely, going to 4 conductors, with a five-person crew paid a total of $540,000 per year, raises the cost to $0.007 per passenger-km, still low.

Electricity consumption can be calculated from first principles based on acceleration characteristics, or based on real-life HSR consumption levels. For the latter, a UIC paper claims 73 Wh/passenger-km on PDF-p. 17; this appears to be based on an assumption (see PDF-p. 33) of 70% occupancy but a train that is smaller (397 seats for 8 cars) and heavier (425 t vs. 365 t for an 8-car Shinkansen). Correcting for these gives 54 Wh/p-km. When I try to derive this from first principles assuming Northeast Corridor characteristics but with substantial segments upgraded to 360 km/h, I get about 50 Wh/p-km; this doesn’t include losses between catenary and wheel or regenerative braking, which mostly cancel each other out with losses being a little bigger. Rounding up to 56 Wh/p-km and using a transportation-sector electricity cost of $0.125 per kWh, we get $0.007 in electricity cost per passenger-km.

Cleaning should be done as fast as possible, with large crews working to turn trains around in the minimum amount of time based on safety margins and schedule recovery. JR East cleans Shinkansen trains in 12 minutes of Tokyo turnaround time minus 5 minutes for letting passengers disembark; the team size is 1 cleaner per standard-class car and 2-3 per green car, for a total of 22. This does not mean we can pencil in just 7 minutes of cleaning, since this doesn’t take into account the cleaning crew’s time waiting for a train to arrive, or downtime in case trains don’t arrive exactly one turnaround time apart. For a 4 tph operation, 15 minutes are fine, but for a 6 tph one, 10 may not be enough, requiring going up to 20. This is once per train run, so once per 720 km. With a team size of 24, that’s 24 person-hours per 720 train-km, or 32 in the 6 tph version.

Again using Manhattan Institute data, cleaners make $50,000 a year; it’s possible wages will have to go up to attract people who can consistently clean a car on the tight schedules posited, but there’s no base of comparison of companies having both Japanese standards for scheduling and American union scales. Say $30 per hour on the job (including downtime and waiting for a train, but not scheduled breaks). In the 6 tph version, this costs $0.002 per passenger-km.

RENFE’s above-linked executive summary includes a breakdown of employees by category (regular, support, and managerial) and gender on PDF-p. 46, whence we can obtain that for each operations employee there are 0.2 managers and 0.07 support employees. For capital projects, the California HSR estimates add 20% for overhead, management, and design, not including contingency, and the Penn Design estimate adds 18% (PDF-p. 247). This should be taken as the marginal cost of extra managers to oversee extra employees hired to provide additional service. In total, this is roughly $0.019 per passenger-km assuming higher crew staffing, and $0.013 $0.0175 assuming lower staffing.

Rolling stock is more expensive, and should spend as much time earning revenue as feasible based on established maintenance protocols. A large share of the operating costs of high-speed rail comes from the rolling stock: 20% on Madrid-Barcelona according to a RENFE presentation to California HSR whose official source is now a dead link, and, from eyeballing, perhaps 25% according to PDF-p. 8 of a UIC presentation about track access charges. The low-cost TGV doubles train utilization to about a million kilometers a year. This should be routine on Northeast Corridor operations: two round-trips per train, about 14-15 hours per day including turnaround time, 1 million train-km a year. Procurement of new N700s costs about $3 million per car, and Japanese depreciation schedules are over 20 years. Other trains capable of more than 250 km/h cost $4 million per car in China; with mid-life refurbishment of non-trivial cost, they can last up to 40. With 4% interest cost, depreciation and interest are about $280,000 per car-year either way, and if a car travels a million km with 40 people on average, that’s another $0.007 per passenger-km, a substantial sum so far.

Rolling stock maintenance is also relatively expensive. California HSR’s 2012 business plan has a list of costs around the world on PDF-p. 136. JR Central’s rolling stock maintenance is $7.20 per trainset-mile, which with our assumptions translates to $0.007 per passenger-km. European rolling stock maintenance costs are $4.16 per trainset-mile, which appears to be for an 8-car train, so scaling up by a factor of two gives $0.008 per passenger-km. Note that the maintenance of the rolling stock costs as much as the depreciation and interest on its acquisition.

In reality, maintenance depends on both time and distance, so increasing rolling stock utilization leads to lower costs per train-km. Since with those assumptions, the rolling stock costs about as much as the actual operations, this is a major cost cutter, though not a game changer given other costs. Note that the RENFE presentation slide also includes a large array of fixed costs and infrastructure (maintenance, which is very cheap at about $100,000 per route-km per year, and depreciation and interest on construction, which aren’t so cheap) as well as managerial overheads, hence the 20%; the UIC presentation includes some overheads as well. However, those fixed costs are more affordable if they’re spread across more service. A line built to have a 6 tph capacity has the same infrastructure cost at any frequency up to 6 tph.

So far, adding up all the operating and rolling stock costs totals to about $0.03 $0.033 per passenger-km. This means $11 $12 direct operating costs between New York and Washington or New York and Boston. It’s also a quarter what the Europeans charge for HSR tickets, and an eighth of what the Japanese charge. Despite this, the California HSR numbers are similar, so this analysis passes a sanity check. Again referring to the business plan’s PDF-p. 136, the table claims operating costs per trainset-mile that, after scaling from 8- to 16-car trains, are $0.04 per passenger-km. They exclude rolling stock acquisition, but include maintenance; but the assumptions in the Operations and Maintenance Peer Review are worse than in this post, with worse train utilization (turnaround times are assumed to be 40 minutes on PDF-p. 21) and more staff on board each train (an engineer, a conductor, an assistant conductor, a ticket collector, and a special services employee per 8-car unit, for a total of ten employees for 16 cars).

Still, I have no expectation that anyone can charge $11 $12 profitably for HSR service between New York and Washington. However, I strongly believe costs could be brought substantially below current rates. I believe the reason SNCF has only begun to do that and other operators not at all comes from two places.

First, infrastructure charges, a third of the cost of both the TGV and the Madrid-Barcelona AVE, are not just about paying off infrastructure costs (both Spain and France are low-construction cost countries for HSR). They transfer profits from the HSR operator to the monopoly infrastructure owner: track access charges were specifically increased in France ahead of the opening of the European rail market to competition, ensuring HSR surplus would go to state-owned infrastructure owner RFF rather than to foreign companies or the customers.

And second, unlike in the US, in Europe low-cost airlines are associated with terrible service: low seat pitch, hidden fees, rigid policies toward carry-on baggage, rigid policies toward missed flights, worse customer satisfaction, secondary airports located far from the cities they purportedly serve. The US has some of this in Spirit Airlines and Allegiant Airways, but it also has Southwest, JetBlue, and Virgin Atlantic, which have high customer satisfaction, flexible tickets, secondary airports located close to city centers (such as Dallas Love Field), and seat pitch equal to or better than that of the legacy airlines, which have degraded service. Europeans hate low-cost flying; Americans hate flying. The result is that Ryanair tars any attempt to lower costs in Europe by associating lean production and high equipment utilization with no-frills third-class service. This might make managers more wary of adopting some of the more positive aspects of low-cost carriers. Japan has no major low-cost carriers, so although it does not have the stigma, it doesn’t have the domestic experience, either.

I do not believe it’s possible for a train to charge $11 $12 one-way between New York and Washington and stay in business. There needs to be some profit margin, plus paying back infrastructure construction costs. However, I do believe it’s possible to charge closer to that than to present European HSR fares for the same distance (about $45), let alone present Amtrak fares. California HSR is actually pointing the way, but has such high construction costs that paying off even part of construction represents a major rise in ticket fares. The Northeast can and should do better.