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Commuter rail operator still struggles with losses

Timothy Tai for The Boston Globe

Passengers leaving the platform mix with those boarding the Keolis-run MBTA commuter train to Framingham at South Station on Friday.

By Nicole Dungca Globe Staff 

In the French press, the group that runs the Massachusetts Bay Transportation Authority’s commuter rail has been called a “nightmare” and a “quagmire” for its parent company in Paris.

And here in Massachusetts, the reviews for Keolis Commuter Services aren’t much better, with a slew of complaints from its riders.

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“It’s way more crowded, and it’s way more delayed,” said Nader Gamini, as he stood in the aisle on the Worcester-Framingham line one recent day, unable to find a seat because the train had fewer cars than usual. “I’ve been taking it for three years, and it just keeps on getting worse.”

As Keolis heads into its third year of the biggest operating contract in Massachusetts history, a Boston Globe review finds a decidedly mixed performance.

After failing spectacularly during the blizzards of 2015, the company is now operating significantly more trains on time. But it is bleeding money each year and estimates it is losing up to $35 million a year for the MBTA because of uncollected fares and fare evasion. In recent weeks, it has struggled to mitigate crowding and delays while using new service schedules meant to improve performance.

Transportation Secretary Stephanie Pollack said much work remains, but she is optimistic about the progress of the company, which provides commuters 129,000 rides a day across 175 communities.

“In the second year of its operating contract, Keolis has been a good partner for the MBTA, and their performance has been progressing in the right direction,” Pollack said in a statement.

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Keolis officials have said they wanted to invest significantly in the system in the first few years of the contract, and that the increased delays under the new schedules are temporary.

“A period of adjustment is to be expected when there’s a major schedule change like this,” Leslie Aun, a Keolis spokeswoman, said in an e-mail.

But many customers dismiss such explanations as sorry excuses, especially as a hefty fare increase looms in July and several lines continue to face crowded and delayed trains.

“I have not seen this train on time once since they’ve changed the schedule,” said Natick commuter Tony Kowalewski, as he followed a horde of riders Wednesday afternoon to a Framingham train that would eventually depart 10 minutes late and with fewer seats than normal. “It’s only been this cattle call.’’

Early warnings

The commuter rail system and its outdated equipment were far from perfect before Keolis took over.

Under the former operator, the Massachusetts Bay Commuter Railroad Co., customers fumed about chronic delays during the winter in 2011, fares that frequently went uncollected, and contracts that gave the company bonuses even when service was poor.

When Keolis won the commuter rail contract in 2014, it promised better, more modern service. Its price — about $2.68 billion over eight years — also looked like a veritable bargain. The bid was 6 percent cheaper than that of MBCR, but still within range of the T’s own estimate of how much a company would need to run the railroad and make a reasonable profit, officials said.

But after taking control in July 2014, Keolis lost nearly $10 million in its first year. In 2015, the company reported a net loss of $30.4 million, according to its financial statement. Keolis officials expect another net loss in 2016, but have not said how much.

The losses bring into question whether the contract price was too low and whether the arrangement is financially sustainable over time — a concern first raised by the former operator in 2014.

Keolis officials said some of the big losses in 2015 stemmed from record-breaking snowstorms, which drove up overtime expenses and led to penalties imposed for late and dirty trains under a stringent contract with the T.

MBTA officials also note that the financial losses are unlikely to affect riders because the company has substantial financial backing. Keolis is the Boston arm of an international company that also runs the French national railroad and is able to borrow millions from it each year.

“The company’s fiscal recovery plan calls for cutting unnecessary expenses, reducing penalties, and operating more efficiently at all levels of the company,” Keolis’s financial statement reads. “The company is continuing to work closely with the MBTA to make changes, including modernizing operations, which are increasing efficiencies.’’

Some critics, however, say the big losses shouldn’t come as a surprise. When MBCR filed a lawsuit protesting the T’s decision to hand the contract to Keolis, officials said Keolis’s bid was too low and even accused the T of coaching Keolis throughout the process, giving it an unfair advantage.

While a judge refused to block Keolis’s takeover, other allegations in the lawsuit have proven to be true. MBCR had accused Keolis of hiring a subcontractor, Transit Safety Management, that was posing as a woman-owned business to meet requirements for the bid.

Officials accused James Stoetzel, who once ran the commuter rail system, of setting up and running the firm, while his wife, Susan Madigan, essentially pretended to be the owner.

When MBCR made the allegations, Keolis said it dumped the contractor. This month, the contractor pleaded guilty in federal court to making a false statement to a state agency and was sentenced to five years of probation and an $84,000 fine.

As Keolis continues to lose money on its Massachusetts venture, company officials are searching for ways to make up for their losses.

The T and Keolis are negotiating several proposals that could funnel more money to Keolis, including offering employees extra work refurbishing old locomotives and splitting fare revenue if Keolis invests in ways to help the T collect some of the $35 million that currently goes uncollected.

The T has also allowed Keolis to take on extra work. In 2015, Keolis performed about $27 million worth of services outside its contract, according to Keolis’s financial statements. Those included jobs such as inspecting bridges and moving equipment.

Additionally, the MBTA will adjust the Keolis contract, paying more because the new commuter rail schedules require additional train sets and hours.

And in July 2015, T officials began allowing Keolis to use the penalty money it incurred for bad performance to hire more fare attendants and customer-service employees. Keolis and the T have defended the move, saying the money allows the company to provide services it is not contractually obligated to perform.

Getting financial help

But some argue that the MBTA has essentially been helping Keolis financially. “They won the contract with the conditions known,” said Mary Z. Connaughton, a director at the fiscally-conservative-leaning Pioneer Institute. “To that extent, the T is subsidizing Keolis” by not imposing the penalties, she said.

The cooperation reflects a new relationship between the MBTA and Keolis, which was strained during the winter of 2015, when Keolis ran reduced schedules for weeks after snowstorms walloped its trains. On-time performance dropped to just 33 percent in February of that year.

The MBTA general manager at the time sent angry e-mails about the company’s “MIA” leadership, and Governor Charlie Baker even rebuked Keolis during a press conference, saying he was “done with excuses.”

But the administration’s and the agency’s attitude toward Keolis has since softened. Whereas an angry Baker chastened Keolis publicly in early 2015, he later went to the MBTA’s commuter rail headquarters to meet with some of the agency’s union officials. It impressed Don Wheaton, the president of the union that represents conductors.

“They’ve taken steps to try to improve things,” said Wheaton, who said he had never seen a governor do that in his decades of years on the railroad. “But it’s kind of a mixed bag.”

Strained resources

This past winter, Keolis’s performance began to improve. The company operated 92 percent of its trains on time in December 2015, and the number hovered around 92 percent in March and April of this year.

The T notes that the train lines from North Station have had the best performance in the last five years — surpassing MBCR — for most months since August 2015. And though new locomotives phased in over the past two years have had a host of problems, they still operate for longer periods without breaking down.

The MBTA said new train schedules — which took effect May 23 — would help reduce delays even further and make the schedules more reliable. But so far, riders have mostly seen an uptick in delays.

On the first day of the new schedules, the company was able to operate only 77 percent of its trains on time. For the rest of that work week, the on-time rate hovered between 78 and 84 percent, the T said. The next week, the company’s on-time rate surpassed 86 percent only on Memorial Day, when hardly any commuters were aboard. Last week, the percentage reached 92 percent Thursday but stood at 86 percent or lower during the other weekdays.

Thomas Murray, who heads the union of workers who clean the coaches, called the schedules “ambitious” and “aggressive,” and said the learning curve has been steep.

“We’re strained with the resources that we’ve got,” said Wheaton. “We’ve got to get more equipment into service because of the new schedules.”

But Aun and T officials say the agency is providing enough locomotives and coaches to do the job, and that the company is just going through a transition.

“We know that in some cases the trains have not had the right number of coaches — sometimes too many, sometimes too few,” Aun wrote. “With the new schedule just rolling out, it wasn’t possible to predict with 100 percent accuracy how many people would be riding which trains. . . . Our teams gather the data from each day in order to make changes as needed.”

T officials also point out that some lines are affected by things outside Keolis’s control. The Worcester/Framingham line, which often has the worst on-time rate, must deal with speed restrictions from construction and a large maintenance project on the line. Several lines are frequently delayed by a signal system maintained and owned by Amtrak.

Some employees and close watchers of the commuter rail say they’re waiting for next year for Keolis to show how it will improve the system in the long term. Even union officials previously critical of Keolis say they believe the company wants to make the commuter rail better.

“I think they’re committed to making the system work,” Murray said. “But whether it’s doable or not, I don’t know.”


Nicole Dungca can be reached at nicole.dungca@globe.com
Follow her on Twitter @ndungca.