After America spread west in the mid to late 1800s to the 1920s, nearly all long distance travel in the United States was done by rail. By 1929, there were nearly 65,000 railroad passenger cars in operation on over 250,000 miles of track. At this time, all passenger service was on private railroads.
As the popularity of the automobile increased through the 1930s and 1940s, passenger service diminished dramatically. With the construction of the National Highway System, service continued to fall as passengers more frequently traveled by car, bus, or airplane, all of which were heavily subsidized by the United States government leading to lower travel fairs.
The railroads realized that they could not compete with the automobile for cheap, convenient, and easy travel, so they went with luxury. In the 1930s, huge streamliners gained the public’s attention and admiration as the Pioneer Zephyr and Flying Yankee travelled the rails. Even with these amazing locomotives and continued improvement in passenger comfort, rail traffic continued to decline.
The rail industry saw a huge increase in passenger traffic during World War II. Due to troop movements and restrictions on automobile fuel, passenger service soared sixfold during the War. With all this new traffic, the railroads were able to upgrade their overworked and neglected fleets with fast and luxurious streamliners including the Super Chief and California Zephyr.
This resurgence was short-lived however. By 1946, there were 45% fewer passenger trains than in 1929. As passenger service declined, so did the profits. Nearly all passenger trains were operating on a loss, and by the mid 1950s, railroads claimed aggregate annual losses of more than $700 million on passenger service. At this time, the only thing keeping many of these passenger trains economically viable was the US Mail contract. This lasted until 1966, when the US Postal Service switched to trucks and airplanes. This proved to be the death bell of private passenger service in the United States.
Many railroads were requesting to terminate passenger service in the late 1960s. This was followed by several huge bankruptcies. The Pullman Company became insolvent in 1969, and the Penn Central followed in 1970.
In 1970, Congress passed the Rail Passenger Service Act. In this bill, the National Association of Railroad Passengers sought government funding to assure the continuation of passenger trains. This led to the formation of the National Railroad Passenger Corporation (NRPC), a hybrid public-private entity that would receive taxpayer funding and assume the operation of intercity passenger service. NRPC was originally known as Railpax, but shortly before starting operations, the name was changed to Amtrak.
According to the Rail Passenger Service Act, there were several key provisions that led to Amtrak taking on nearly all passenger service in the United States.
- Any railroad operating intercity passenger service could contract with the NRPC, thereby joining the national system.
- Participating railroads bought into the NRPC using a formula based on their recent intercity passenger losses. The purchase price could be satisfied either with cash or rolling stock.
- Any participating railroad was freed of the obligation to operate intercity passenger service after May 1, 1971, except for those services chosen by the Department of Transportation as part of a basic system of service and paid for by NRPC using federal funds.
- Railroads that chose not to join the NRPC system were required to continue operating their existing passenger service until 1975 and thenceforth had to pursue the customary ICC approval process for any discontinuance or alteration to the service.
Of the 26 railroads still offering intercity passenger service in 1970, only six declined to join Amtrak.