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Year after year, Amtrak executives plead for more money to maintain current service levels and invest in new equipment. And year after year, Congress kicks them to the curb. But a perfect storm is brewing, and Amtrak may finally get its wish. High gasoline prices, concerns over tailpipe emissions, struggling air carriers, and a new president who is less beholden to lobbyists all add up to likely major changes for Amtrak in 2009 and beyond. Even Michigan's congressional representatives -- all of whom have historically shielded Detroit from any unfavorable legislation -- are starting to lose their nerve to fight, recently relenting on higher gas mileage standards. And that's not great news for automakers such as Ford (F) and GM (GM) . For that matter, Washington's knee-jerk hatred of Amtrak has shielded major air carriers such as Delta (DAL) and American (AMR) from serious competition. It's common knowledge that Amtrak makes plenty of money in the Northeast Corridor and loses money everywhere else. Sure, this region has very favorable demographics, but if Amtrak has the funds to invest in other paired city routes and can fill up its trains more effectively, then the whole system can make money. Before you scoff, note that France's state-owned SNCF has turned a profit for each of the last 10 years. So here's Amtrak's recipe for success: Identify highly-trafficked city pairs. If the route is less than 200 miles, price it at $99. If it's 200-300 miles, price it $129. Charge $159 for any trip that is 300-450 miles. Go hard after the airlines that are suffering from high fuel prices. Just last week, air carriers tacked on new $20 fuel surcharges. "If (oil) really does shoot up to $130, $140, $150 [a barrel] , there's really no way that airlines can raise prices high enough to cover that cost, because consumers are going to push back more quickly than they are right now," Rick Seaney, CEO of airline ticket research site FareCompare.com, told Reuters. Air carriers have already begun to shrink their domestic capacity, in some cases as much as 10%. To really win the fight against the airlines, Amtrak will need to make every one of these inter-city trips faster. High-speed train service is no longer a novelty in the rest of the world -- it shouldn't be here, either. If you can get from downtown Atlanta to downtown Charlotte in two hours (instead of the current four), why would you even think about flying? I still smile at memories of rides on France's Tres Gran Vitesse (TGV) or Japan's Shinkansen bullet trains. The idea of a high-speed rail network is gathering steam, if you'll pardon the expression. Texas planned to develop a high-speed rail network 15 years ago, but the plan was quashed by the lobbying efforts of Southwest Airlines (LUV) . Hearings are under way again to develop a "Trans-Texas Corridor," although hurdles could still arise. A similar effort in California is under review. As an added kicker, Amtrak should offer a truly first-class experience at twice the above-noted price points. For that price, you'd get a great meal, complimentary booze, a flat-panel TV on the seat backs and maybe even full showering facilities. Heck, throw in a piano player named Sam. I'm told that train travel was once glamorous; as someone who hates to fly, I'm all for a little land-based glamour in my life.
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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.
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