No doubt you have read recent magazine and newspaper reports on countrywide railroad losses from passenger service.
A great deal of this loss is due to the operation of trains that are really not needed, if the amount of public patronage is any criterion. In other words, the development of railroad passenger services which are popular is burdened and handicapped by losses from passenger services which the public does not use. The losses are a burden on freight service, too, and shippers are be coming restive.
This general subject now becomes specific to the residents of San Diego served by our subsidiary, the San Diego and Arizona Eastern Railway Company.
The operation of passenger service over this line has resulted in heavy losses over the years. They are now so burdensome that they can no longer be absorbed, and we are now asking for public authority to discontinue passenger service over the line.
Based on present patronage the operation of the passenger trains Nos. 362 and 363 between San Diego and El Centro (and Calexico) is resulting in an out-of-pocket loss of approximately $300,000 per year. This does not consider any return on the heavy investment, or taxes.
Here are the estimated figures:
Out-of-pocket costs of operation..............................$450,000
Total revenue from passengers, mail and express........ 150,000
Out-of-Pocket Loss.................................................$300,000
Let's review our efforts in connection with this line.
For many years before the line was built, Southern Pacific did a great deal of promotion for San Diego, to attract tourists and settlers. Building of the line was long considered but was delayed because of the rugged terrain and tremendous construction difficulties. Finally, after 12 years of construction, the line was completed and opened to traffic December 1, 1919. The A.B. and J. D. Spreckels interests and Southern Pacific each had half ownership. In 1933 Southern Pacific acquired full ownership.
The line was opened with high hopes and Southern Pacific naturally made every effort to develop traffic in the hopes of profit. Through cars to the East were operated out of San Diego, as they are today. The service was well advertised and promoted as was San Diego itself as a California tourist attraction and Southern Pacific's efforts have been helpful in the development and growth that has taken place in San Diego. But the service was never very successful and by 1940 the passenger revenues had dwindled to almost nothing. During the World War II years the revenues increased considerably due to defense traffic, but after the war ended revenues again declined to the results quoted above. Tremendously increased operating costs have also been a factor.
San Diego is well served by Santa Fe over their high speed line from San Diego to Los Angeles, connecting with trains of various railroads to the East. San Diego's active community organizations have been aggressive in promoting air service to and from San Diego, and now there are six flights daily in and out of San Diego to and from the East. There are six bus schedules a day in and out of San Diego serving the same territory as the SD&AE, providing much faster service than we can provide because of the heavy grades and curvature of the railroad line.
Since the end of World War II we have tried a number of experiments with different types of chair car, tourist car and standard sleeper service from San Diego to Chicago, Memphis and New Orleans destinations, hoping to develop business, but without any success.
In the face of the other transportation services we have reviewed above, and considering all efforts to develop business, we see no recourse but to abandon the service. We do it with a great deal of regret. We have spent a great deal of money and a great deal of energy trying to make a go of it.
There have been suggestions that we might solve our difficulties by providing a streamlined train to the East. Considering present costs of passenger train equipment (our new streamlined Sunset Limited to go in service this summer cost $15,000,000 or almost as much as it cost to build the SD&AE in the first place), considering the narrow margin between out-of-pocket costs of operation and the revenues from our most popular streamliners on our main routes, and considering the potential traffic out of San Diego in view of the competition we face and which I have reviewed, our judgment is that our losses would only be increased. Our experience has been that streamlined trains are not the only answer to passenger service success. There must be a large and concentrated traffic potential as well. So you now have the reasons for our proposed action. I have tried to give them to you frankly and honestly.
We will, of course, continue our Southern Pacific freight and passenger traffic forces at San Diego and our Southern Pacific Ticket Office. The bulk of the San Diego passenger travel enjoyed by Southern Pacific moves via Santa Fe to Los Angeles (and thence on our principal trains to the East and other destinations). This for the reason that many business men, department store buyers, vacationists, etc., prefer to go via Los Angeles, joining friends or associates who are making trips at the same time. This routing is competitive to the San Diego and Arizona Eastern service, but it is the popular one and in ticketing this business we proceed as if the Santa Fe line between Los Angeles and San Diego were our own railroad and service the business as if it were entirely over our own lines. our sales and service forces will continue to work aggressively to develop business for our lines both to and from San Diego.
And we will continue to aid in publicizing San Diego in an effort to develop travel to the San Diego area via our lines and the connecting Santa Fe service. We are an important force in developing traffic from the East to California and we want San Diego to benefit.
We will continue to maintain the San Diego and Arizona Eastern Railway as an efficient freight carrier for San Diego's businesses, industries and government installations. In an emergency the railroad will be there for operation of passenger trains the government wishes us to haul.
We have tried to be a good citizen in San Diego, we have had very friendly relationships with the San Diego community leaders, and we expect that those relationships will continue on the same friendly basis. Because of my own former residence in San Diego and my acquaintanceship which has been maintained by visits since I was stationed there, our decision was particularly difficult for me. However, I am confident that San Diego people will understand our situation and the reasons for our action.
A. T. Mercier, President.
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