The international company that runs commuter rail trains in and out of Boston racked up $29.3 million in losses over the first year of its long-term contract, requiring its French parent company to subsidize its Massachusetts operations.
According to state Transportation Secretary Stephanie Pollack, Keolis Commuter Services likely failed to fully account for the cost of providing service to the region.
In an interview with the News Service, Pollack attributed the net losses that Keolis reported in its first year of operation to costs the company didn’t factor into its bid.
“My understanding is the primary reason is that Keolis failed to understand the full extent of the costs associated with meeting their contractual obligations,” Pollack told the News Service. She said, “My sense is that it has been a more costly endeavor than Keolis assumed going into it.”
Keolis won the contract in January 2014 with a bid that would pay the company $2.69 billion for the first eight years with an option to extend an additional four years for a total cost not to exceed $4.26 billion. The company beat out the incumbent commuter rail operator, which proposed a contract $184 million more expensive for the first eight years and potentially $254 million pricier over 12 years.
The former system operator, Massachusetts Bay Commuter Railroad, claimed the T, under the oversight of Gov. Deval Patrick at the time, prized price above all else while MBCR would have provided the best value.
The general manager of Keolis Commuter Services, a joint venture of Keolis Rail Services America and the French national railway known as SNCF, declined to say what steps Keolis might take to start making a profit on the contract that began July 2014.
“I’m not here to talk about the financial statement,” General Manager Gerald Francis told the News Service at a recent hearing on MBTA fare hikes and commuter rail schedule changes in Lynn. Francis, who took over as general manager months after Keolis won the contract, said, “We’re here to operate and maintain the system.”
The commuter rail offers diesel rail service to more than 130 stations and over 664 miles of track, providing 33.5 million trips in the first year of the Keolis contract, according to MBTA data.
As Keolis has racked up losses, its backers have stepped in to fill the void, according to Pollack.
“The parent company has been willing to infuse resources into Keolis Commuter Services to ensure that they’re meeting their contractual requirements in Boston and improving their on-time performance,” Pollack said.
Pollack said she believes SNCF is assisting Keolis with covering its contract losses to date. Francis declined to answer whether the riders of the French national railway are aware of the subsidy for commuter rail in Boston.
The parent company of Keolis North America is a transportation giant in its own right, boasting more than 3 billion passengers in 2014 and about 60,000 employees, the majority of them in France.
