Brightline: Revolutionizing American Rail or Capitalist Pipe Dream?
By Dheer Sanghi from Northwestern University (Kellogg Branch)
US Rail and Introducing Brightline:
It’s common knowledge that when compared to its European and Asian peers, America’s rail system holds up poorly. Once the country with the most miles of rail in the world, the advent of the automobile, poor urban planning, and a shocking lack of funding has all but insured American car dependency for both intercity and interstate transportation. Passenger travel on trains in the US dropped from 98% to 4% from 1916 to 1956, showing this change in attitude towards rail (Vox). In fact, the US Department of Transportation allocates more money to federal highways every year than it has to AMTRAK since its inception in 1971 leading to the current bleak landscape of US Rail with only one form of high speed rail (avg. speed above 125mph), The Acela across the Northeast corridor (Vox). This results in many problems – apart from it being environmentally hazardous, a lack of rail significantly reduces the mobility of those that don’t have, or can’t afford a car (Akhtar). To learn more about the benefits of accessible public transportation, read ‘The Impact of Pedestrian-Friendly Urban Planning on Communities’ by Sarah Gama on the GRC Insights page.
Enter Brightline, a private company looking to fill this clear gap. Owned by Fortress Investment Group, Brightline became the first private intercity passenger service in the United States in over a century, clearly a monumental achievement (Brightline). Starting with trains between West Palm Beach and Miami, then expanding to include Orlando, and now looking at Tampa, as well as other projects such as Los Angeles to Las Vegas, Seattle to Vancouver, and St. Louis to Chicago, Brightline views themselves as trailblazers. While this seems great, Brightline has garnered harsh criticism. Many don’t think it can be feasible or effective — and they may be right.
Critique 1: Deaths
Let’s start with Brightline’s first controversy, its death toll. The trains have resulted in nearly two hundred casualties since inception in 2017. In 2022, it killed more people per mile in the U.S. than any other railroad company (Leake). This has understandably garnered a lot of negative publicity for the company, and many only know of its services through hearing about the deaths associated with Brightline. Nevertheless, these deaths haven’t made investors bearish about brightline. While all the deaths and injuries that have occurred are tragic, they occur due to suicides and tresspassing, and Brightline cannot do much more to prevent these deaths without shutting services. After all, the MTA in New York, CTA in Chicago, AMTRAK, and every other rail organization in the nation and the world have to deal with the same problems. Additionally, these deaths highlight an important point about how rail is treated in the media. Nobody calls for highways to be canceled due to avoidable car accidents. Advocates for rail point out that these double standards go further than deaths: rail projects such as California’s proposed High Speed Rail are always criticized for not being able to make back what it costs through fares, however people don’t expect roads to recoup their costs through tolls. There is an understanding that roads are not an investment but a necessity, and rail supporters feel the same should apply to rail.
Critique 2: Virgin lawsuit and questionable economics
Recently, Brightline lost a lawsuit filed against them by the Virgin Group, forcing them to pay $115 million in damages. A US Judge found that Brightline illegally backed out of a deal by claiming that Virgin didn’t hold up their investment, and became a company of ill-repute after the deal was negotiated and signed. Brightline was meant to go public through an IPO under the name Virgin Trains USA, with an SEC filing indicating plans to price shares at around $18 (AP News). Underwriters of this IPO included Barclays, J.P. Morgan, and Morgan Stanley. After reneging on the IPO, and the outcome of this lawsuit, some people’s faith in Brightline leadership has been shaken. After all, Brightline lost over $200M last year and has not turned a profit yet, so hits like this may further harm the company’s capabilities and credibility. On the other hand, some remain bullish. Fortress Investment Group has deep pockets, with billions of dollars ready to spend on Brightline. Additionally, Brightline claimed to have reached operational profitability in March of 2023, with 170,000 riders (Brightline). This is great news as it reinforces that Brightline has a working model that has enough demand to be sustainable.
Critique 3: Private companies should not be in public transport
This criticism is by far the most common, and the strongest. Many argue that rail should be an inherently public service, with governments working to create affordable rail. Once again, rail should be viewed like roads, where turning a profit and the bottom line isn’t a consideration, and helping citizens is. As much as Brightline markets their social benefits, as a private company they realistically care about their stakeholders and solvency more. In essence, due to the high barriers of entry in the rail industry — from leasing land, to laying tracks, to buying trains and hiring drivers — having a profit motive either ensures expensive ticket prices or an unsustainable business model. As seen above, Brightline has proven to be somewhat sustainable already, so the economics suggest that ticket prices must be quite high. Reality reflects this. The Orlando to Miami line is over $100 per ticket, more than it would cost in gas to reach (Wixon). Critics assert that Brightline is built for the rich, who don’t want the hassle of driving, rather than the poor, who cannot afford cars (Robinson). Hence while being more sustainable, it doesn’t actually help the social and economic mobility of the communities that need it most. This is made worse by the fact that Brightline receives millions of dollars in government subsidies, such as a $25 million grant from the Miami government. Many question how taking money from the average American to support a company that caters to wealthier Americans is conscionable.
Clearly, current subsidies aren’t enough to support cheaper ticket prices. Perhaps the answer is more subsidies, but Brightline could just use those to expand services rather than reduce prices. Interestingly however, Brightline is looking to make other parts of their business more profitable to reduce the need for high ticket prices. Its sister company, owned by Fortress Investment Group as well, makes money by selling the real estate bought by Fortress next to stations. This has proved popular as companies realize the value of setting up shop next to stations with high foot traffic. In fact, the fastest growing housing real estate in South Florida is actually next to Brightline stations according to some estimates, which is a great sign as the sister company’s ventures can hopefully subsidize Brightline tickets (Acosta).
Critics also contend that Brightline being a private company simply makes some of its aspirations unfeasible. Getting the paperwork, permits, and licenses within Florida was hard enough, imagine having to work with multiple states and Congress, which oversees interstate travel, through projects such as connecting LA with Vegas. Furthermore, one potential Brightline project is Seattle to Vancouver which would require working with the US Federal government, Canadian federal government, Washington state government, the government of British Columbia, and the cities of Seattle and Vancouver. This logistical nightmare is made worse by the fact that Brightline is a private company which some suggest does not have the political strength or determination to deal with so many institutions.
However, this is not the whole picture. There are benefits to Brightline being a private company. Most costs associated with Brightline have been incurred by Fortress Investment Group, with much less coming from subsidies. No rail, public or private has sought to connect Tampa, Orlando, and Miami, or LA to Vegas, or Seattle to Vancouver. If these are truly unfeasible, impossible projects, it would be better for a private company to foot most of the bill, compared to taxpayers. The upside to Brightline succeeding is seeing metropolitan areas connected by high-speed rail, resulting in mutual economic growth, jobs, and a better consumer experience for travelers. It could also cause other companies, or even the government, to enter this market, bringing down costs through competition. If Brightline fails, the consequences are that the transportation status quo remains, and Fortress Investment Group faces losses, rather than everyday citizens.
Conclusion:
Deciding right now whether Brightline has a sustainable business model that can affordably serve citizens is almost impossible. Brightline executives themselves do not know what the future holds. However, it is safe to say that there is a gap in the market that Brightline is attempting to fill, making it a very lucrative investment if Brightline succeeds. Reasonable obstacles stand in their way: bureaucracy, opposition due to noise and deaths, and high costs, but they have forged ahead, spending $12B and supporting 10,000 temporary union jobs during construction for Brightling West, their Los Angeles to Vegas project. The future looks promising, and I would be cautiously optimistic about more grandiose plans.
Works Cited:
Bibliography
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