Meeting Details:
Next meeting: Oct 26th: 8pm Central
Question of the Week:
Could high speed rail make the airlines more profitable?
Agenda:
Faster Headlines
Infrastructure Package Update
Airlines and High Speed Rail
Brightline and the Bucks
Faster Headlines
Wheels on Steel:
ARS Technica
Fox5 Las Vegas
CBS 11 DFW
Yahoo!life
Up in the Air:
N Business
In the Tube:
The Next Web
Infrastructure Update:
For the latest on the infrastructure, check out a dedicated webpage:
From the Captain:
Why High Speed Rail would be profitable for the airlines
Why do the airlines fly 50 seat aircraft? These airplanes cost more to operate, use up critical gate space at the hubs, and with pilots in a short supply... they are getting harder and harder to find staff to fly them.
Well, they do because of network feed
The reason for an airline hub and spoke system is to collect all the passengers from one region who want to go to a specific city. For example, there are 50 passengers who want to go from Chicago to Boston. There are also 5 passengers in Milwaukee who want to go to Boston,10 passengers in Minneapolis, 2 passengers in Des Moines, 5 passengers from St. Louis, 1 passenger from Wichita, and so on.
What the major airlines do is use the small jets to fly out to these smaller cities and collect everyone. Then in the Chicago everyone gets sorted, and those how want to go to Boston go to gate B53. So instead of trying to have 12-20 very small airplanes flying from these small cities to Boston, the airlines only needs to collect everyone and operate a 150 seat airplane from Chicago to Boston.
However, the problem is these small aircraft use a lot of employees and resources at Chicago O’Hare. They also use up gate, taxiway, and most importantly runway space. Then of course, they also use fuel, create CO2 gases....and most importantly lose your luggage (remember these small planes don't allow wheelies in the cabin)
Air and Rail:
That is the beauty of airlines and high speed rail working together. A train from Minneapolis to Chicago could not only collect everyone from Minneapolis, but also all of the cities within 50 miles of the line. The high speed train then brings everyone to Chicago O’Hare and transfers them to those flights on bigger aircraft. Since seat miles costs tend to be lower on the big aircraft flying longer routes, the airlines become more profitable while at the same time dramatically freeing up gates, personnel, and reducing those long delays waiting for takeoff.
Analysis: Flights Out of O'Hare
According the Bureau of Transportation Statistics, in 2019 there were 437,477 flights that landed and took off at Chicago O’Hare. That includes everything from the major US carriers, to all international carriers, to private aircraft. United is the predominant carrier, as they operated 89,958 flights or 20% of all flights. American was the second largest carrier with 68,278 flights or 16% of total flights. Together these two airlines represent 36% of all flight operations at O’Hare.
However, when you look at regional carriers that franchise with United and American the immensity of the regional market comes into focus. These franchise airlines use aircraft that fly 75 seats or less, and include such airlines as Skywest (66,512 flights in 2019), Envoy (67,180 flights), and Air Wisconsin (36,767 flights). In fact, when you add up these carriers plus Republic, Endeavor, and Goject…197,467, or 45% of all flights at O'Hare are operated by these small regional airplanes!
O’Hare is literally flooded with regional jets!
Now Reimagine O'Hare
With high speed rail, over half the flights would be eliminated!
The major airlines would still have the passenger feed to their larger aircraft, but no longer would they be hiring the extra personnel and there would no longer be 20 regional jets waiting in line for takeoff. Better yet, flights would be on time and less lost luggage. Or maybe no longer the need for Terminal 2. Perhaps even, the $8 billion O’Hare Modernization plan would never have been needed?
O’Hare could potentially become of the most efficient, uncongested, and most profitable airports in the nation for the airlines! There would still be flights all over the world, but you could also catch easy connections to Kenosha, Springfield (IL), or Champaign/Urbana.
It really is a win-win scenario…if the high speed rail train was to be built.
Rail Icon: Central Japan Railways
One of seven high speed rail lines in Japan
Privatized in 1987
Operates Tokyo to Osaka (Takaido Shinkansen)
60% of Japan’s Population lies along route
64% of the GDP of the country
Carries more passengers than United, Delta, American or Southwest Airlines (2019)
466,000 passengers a day
United Airlines only carries 433,000
Amtrak only carries 87,000
Trains operate at 305 mph
Local conventional lines up to 110 mph
Taikado Shinkansen up to 186 mph
Building the 305 mph SC maglev Tokyo-Nagoya (2028)
In 2019
Revenues of 16.9 Billion USD
Operating Income of $6.4 billion
$745 million Real Estate Division
United States Projects:
Texas Central Railways (American owned company)
Northeast Maglev (American owned company)
Internship program – UW, Vanderbilt, Texas A&M, Maryland (but only UW-Madison in 2021)
UW-Madison & JR Central have a 20+ year relationshipons
Feature: Brightline and the Milwaukee Bucks:
What does Milwaukee’s World Champion Basketball team and a railroad have to do with each other? No, its not a specially painted train (or plane), like the airlines did with sports teams in the 90s.
It's more about the money and ownership.
About Brightline:
Brightline describes itself as the first (of hopefully many) private passenger rail operator in the United States.
Originally it started out as Florida East Coast Railways back to 1881, but the combination of transportation and real estate turned the company into one of the oldest and largest real estate companies in Florida. Then in 2006, the company was renamed Florida East Coast Industries, and Florida East Coast Railways was sold off in 2017 to Grupo Mexico.
However, 2012 came All Aboard Florida which was to be a 125 mph passenger rail from Miami to Ft. Lauderdale, West Palm Beach, then up to Orlando and Tampa. All Aboard Florida was later named Brightline, then Virgin Rail USA, and then back to Brightline. However, that is another story...
To find out the relationship with the Milwaukee Bucks we must go back to who owns which company. Starting with Brightline…. Brightline is owned by East Coast Industries. East Coast Industries is owned by Fortress Investments. Fortress Investments was owned by Wes Edens until it was bought by Softbank. Yea, I know its confusing, so check out the graphic below...
Wes Edens purchased the Milwaukee Bucks in 2014 from Senator Herb Kohl (for who the Kohl Center is named). So in a way the Brightline and the Milwaukee Bucks are 3rd cousins.
However, the Bucks are a good story, but its not the main story. That story is how Brightline is really is a real estate company, rather than a railroad.
So what Brightline and Wes Edens and Fortress did; was back in 2012 applied for a loan from the Railroad Rehabilitation & Improvement Financing from the Federal Railway Administration. This funding was actually a result of the American Recovery and Reinvestment Act of 2009 in response to the Great Recession. Florida East Coast Industries then received a loan for $1.6 billion to build what would become Brightline. However, this is where it gets fun.
With financing now secured to build Brighline (and the Milwaukee Bucks purchased), this meant that all of the real estate around the stations could be leased or sold at much, much highly rates than before. This meant that Florida East Coast Industries was now a gold mine.
This is when Softbank stepped in and bought Fortress Investments for $3.3 billion, leaving Wes to spend a lot of time at Fiserv Forum. Wes Edens remains Chairmen of Fortress Investments today, and led the acquisition of XpressWest, which is now known as Brightline West....and he also very happy about the 2021 Buck's season.
Brightline and the Last Train to Paradise
It is rumored that Wes Edens & Fortress Investment was inspired by the book: Last Train to Paradise: Henry Flagler and the Spectacular Rise and Fall of the Railroad that Crossed an Ocean (2003). This book is the story of how Henry Flagler partnered with John D Rockefeller to create a railroad over the ocean through the Florida Keys to Key West. The railroad stood for 22 years, until it was destroyed in a storm in 1935. The Overseas Highway, that goes through the Florida Keys to Key West; was built on the former right of way of Henry Flagler’s Overseas Railway.
Of course, in addition to Wes Edens, the book also was the inspiration for the song “The Last Train to Paradise"`which then went on to become a 2013 Minecraft Animation Youtube hit:
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