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ment. Auto-Train is also to reimburse the operators for specified indirect and direct costs incurred by them under the agreement and pay them a further amount equal to 20 percent of such direct costs.3 Applicant anticipates gross operating revenue during the first year of operation of $8,376,070 based on operating at 80 percent of capacity. A single auto-train, with a capacity of 120 autos a trip will make one trip daily. A total of 35,040 automobiles transported is projected for the initial year. Applicant proposes to charge $198 for an auto and two passengers and $25 for each additional passenger. A variety of sleeping accomodations will be available at rates ranging from $45 for two persons to $85 for five persons. General estimates of the revenues and costs for the first year of operation are set forth in appendix C. Based on these estimates, the projected net profit from operations is, for the first year, $632,215, and this figure is computed as follows:

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SCL, a common carrier by railroad, was incorporated in Virginia in 1944 as Seaboard Airline Railway Company. The name was changed in 1945 to Seaboard Airline Railroad Company. In 1967, upon merger with the Atlantic Coast Line Railroad Company, its name was changed to its current one. SCL controls many smaller lines, and it is controlled by Seaboard Coast Line Industries. SCL's line runs mainly along the eastern seaboard from Richmond, Va., to the State of Florida. L&N, also a common carrier by railroad, was incorporated in Kentucky in 1850. All of its outstanding capital stock is owned by SCL. Its lines run generally between the cities of

3A more detailed summary of the operating costs to be paid by applicant may be found in appendix B.

Chicago, Ill., and Cincinnati, Ohio, in the North, to the States of Louisiana and Florida in the South. There is no financial control or management relationship between Auto-Train and these carriers.

FINANCING

In order to finance its proposed expenditure of $1,100,000 for refurbishing equipment for the Louisville-Sanford service, AutoTrain will draw against an existing $4,100,000 line of credit agreement with the United States Trust Company of New York. Interest on the money borrowed is payable at 2 percent per annum over the lender's prime interest rate.

The three locomotives to be acquired will be purchased by the Continental Illinois Bank and Trust Company of Chicago and leased to Auto-Train under a 12-year lease, with annual lease payments of $115,000. Auto-Train anticipates no additional borrowing in connection with the construction of the Louisville terminal, but plans to use working capital on hand to defray the estimated $1,250,000 in costs.

As mentioned above, Auto-Train revenues for the fiscal year ending April 30, 1973, were $13,976,335, with net earnings of $804,872, and for the quarter ending July 31, 1973, revenues were $4,433,259, with net earnings of $406,663. Auto-Train's balance sheet as of April 30, 1973, showed total assets of $12,616,090, consisting of current assets of $2,294,610, including $1,105,677 cash; property and equipment less depreciation and amortization, $10,127,536; and other assets of $193,944. Liabilities consisted of current liabilities $5,792,381; long-term debt $2,003,010; capital stock $200,389; additional paid-in capital $6,215,301; and accumulated deficit $1,674,991.

Auto-Train is authorized by its articles of incorporation to issue 5 million shares of common stock and as of December 18, 1973, 1,442,113 shares were outstanding. Fifty thousand authorized but unissued shares of common stock have been reserved for the conversion of 50,000 warrants to the underwriters of Auto-Train's public sale of stock in July 1971. One hundred thousand shares have been reserved for issuance under an employees' stock purchase plan and options to purchase 91,000 shares of common stock have been granted to officers of Auto-Train. On November 20, 1973, AutoTrain declared a 5 percent stock dividend on its common stock which will require the issuance of a maximum of 82,256 shares. Auto-Train has filed an application under section 20a of the act, in

Finance Docket No. 27549, seeking authorization to issue 170,256 shares of common stock in connection with the stock dividend and the stock option plan.

DISCUSSION AND CONCLUSIONS

The proposal to provide auto-train service between Louisville and Sanford is, with respect to the legal considerations involved, much like the earlier proposal for Alexandria-Sanford service considered and approved by us in 1971. There has been, however, one important intervening change in the legal framework which will be considered at the outset. The change arises from the passage of the Amtrak Improvement Act of 1973 (Public Law 93-146) (1973 Act) which amended section 305(b) (45 U.S.C. 545(b)) of the Rail Service Passenger Service Act of 1970 (1970 Act) as follows:

In order to increase revenues and to better accomplish the purposes of this act, the Corporation (Amtrak) is authorized to modify its services to provide auto-ferry service as a part of the basic passenger services authorized by this Act, except that nothing contained in this Act shall prevent any other person, other than a railroad (except that for purposes of this section a person primarily engaged in auto-ferry service shall not be deemed to be a railroad), from providing such auto-ferry service over any route in accordance with a certificate issued by the (Interstate Commerce) Commission if

(1) the Commission finds that such auto-ferry service

(A) will not impair the ability of the Corporation to reduce its losses or to increase its revenues, and

(B) is required to meet the demands of the public, or

(2) such auto-ferry service is being performed by such person on the date of enactment of this paragraph under contracts entered into before October 30, 1970.

Since Auto-Train is "primarily engaged in auto-ferry service," it is not prevented by the 1973 Act from providing such services. Furthermore, its present operations from Alexandria to Sanford, which were approved by this Commission, appear to be sanctioned by subparagraph (2) of the quoted amendment. However, in order to approve the instant application, the 1973 Act clearly requires this Commission to find that: (1) the proposed Louisville-Sanford service will not impair the ability of Amtrak to reduce its losses or to increase its revenues, and (2) the proposed service is required to meet the demands of the public.

In addressing ourselves to the finding concerning the anticipated effect on Amtrak, we should consider any available evidence of the

intent of Congress before interpreting this novel requirement. The limited legislative history of the amended section 305(b) yields two indications of congressional judgment on the standards we should apply in carrying out our duty under this section, both of which appear in the Conference Report on the 1973 Act (House of Representative Report No. 93-587, October 12, 1973). On page 14 of the Conference Report, it is stated that this Commission is to issue the required certificate if a proposed auto-ferry service "will not unduly impair the ability of Amtrak to reduce its losses or increase its revenues." [Emphasis supplied.] The word "unduly" does not appear in the statute. However, we believe the use of this term in the report accompanying the final draft of the bill is an indication that Congress did not intend us to deny a certificate to a proposed auto-ferry service on the grounds of any trivial or transitory potential damage to Amtrak.

The second indication of congressional intention with respect to our findings under section 305(b) is the sentence which directly follows the quotation in the preceding paragraph; "The burden of proving that such impairment would not occur would not be on the applicant for the certificate." It is clear from this sentence that we would be ignoring the congressional intention as expressed in the Conference Report if we placed a burden on Auto-Train of proving that Amtrak's financial condition would not be impaired by the proposed Louisville-Sanford route. If a "burden of proof" exists, it may be said to lie on Amtrak, or perhaps the Commission. However, we need not decide this question here. Amtrak has declined to present any evidence of impairment and has, in fact, withdrawn its protest after "having weighed all the relevant legal and factual issues" and obtained Auto-Train's agreement to waive any contractual rights it may have to object to Amtrak's proposed autoferry service.

While the withdrawal of its protest may not, ipso facto, settle the issue of impairment, Amtrak's action is certainly highly persuasive that such impairment is not anticipated by those in the best position to evaluate the economic consequences of the proposed Auto-Train service, i.e., Amtrak's management. It may be assumed, at a minimum, that the management of Amtrak does not believe the Auto-Train service will "unduly impair the ability of Amtrak to reduce its losses or increase its revenues," as stated in the Conference Report on the 1973 Act. In fact, it is quite apparent that Amtrak obtained a quid pro quo in the Auto-Train waiver of contractual rights which might otherwise have encumbered

Amtrak's proposed initiation of auto-ferry service between Indianapolis and Poinciana. Accordingly, a denial of the subject applications on the grounds that the Auto-Train service will impair Amtrak's financial capabilities would achieve the awkward result of the Commission insisting on injury and the supposedly injured party claiming none.

It is not necessary, however, to rely solely on the failure of Amtrak to object to the applications since other factors exist which indicate that the probable absence of impairment to Amtrak's ability to increase its revenues and reduce its losses. Certain of these factors relate to Amtrak's passenger service and others to Amtrak's proposed auto-ferry service.

With respect to rail passenger service, Amtrak's train, the "Floridian," runs daily between Chicago, Ill., and either St. Petersburg or Miami in Florida. This train stops at both Louisville, Ky., and Sanford, Fla., the termini of the proposed Auto-Train service. In evaluating the effect of the Auto-Train service on the Floridian, we believe that the results of a survey conducted by AutoTrain of its passengers on its Alexandria-Sanford route are relevant. By way of extrapolation, these figures can give some guide or comparison as to the extent of a competitive market between Amtrak and Auto-Train. In response to the survey, 67 percent of the passengers said that, had Auto-Train's service been available, they would have driven; 20 percent would have gone by air, and 12 percent would not have made the trip. Less than 1 percent indicated they would have otherwise used an intercity passenger train. While the foregoing indicates there may be a negligible loss of traffic to the Floridian, there is evidence which suggests that the Auto-Train service may actually benefit Amtrak by arousing consumer interest in rail passenger traffic generally. Following the inauguration of the present Auto-Train Alexandria-Sanford service in December 1971, Amtrack has experienced large gains in traffic aboard its regular passenger trains. For the period from May to December 1972, Amtrak ridership on its Florida trains increased by 11 percent over May to December 1971. (Amtrak commenced service on May 1, 1971.) In 1973, Amtrak's ridership on its Florida trains rose 29 percent over 1972.

Turning to the question whether the applicant's projected service will damage the prospects of Amtrak's proposed IndianapolisFlorida auto-ferry service, it would be mere speculation on our part to conclude that such damage would occur. From the limited

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