After six years as one of South Florida’s longest running startup companies, Brightline, the high-speed railroad line, has finally reached its desired inflection point: Most of its passengers are now traveling to and from Orlando.
In a recently released monthly ridership report to investors for June, the company said total ridership was 223,369 at an average fare of $55, with long-haul customer numbers rising month over month to a record of 139,307 passengers “due to growing repeat customers as our service to Orlando ramps up.”
“In June, repeat customers booked over 60,000 long-haul trips, a 7% ratio of our marketable database of approximately 860,000 individuals as of June 1,” the report said.
But short-haul ridership consisting of commuters sharply declined to 84,062 versus 149,536 in June 2023, reflecting “ongoing seat capacity constraints and the discontinuation of our commuter pass product in June.”
Brightline management has repeatedly said that its ultimate goal was to attract long-haul passengers traveling between South and Central Florida.
The company started service in 2018 with a focus on stations in West Palm Beach, Fort Lauderdale and Miami. It later added stations at Boca Raton and Aventura in north Miami-Dade County before it completed and opened its long-awaited 170-mile extension to Orlando International Airport in September of last year. It has since elected to add stations in Stuart and Cocoa long the extension to Central Florida.
Focus on original business plan
Since the Orlando startup, the company has shifted its capacity to focus on more lucrative long-haul trips, essentially reducing short-haul traffic due to the limitation of available train sets. The company has said it is ordering more, with initial reinforcements coming later this year.
The rail line has been offering daily discounts during its recent “Brightweek” on fares from Aug. 2 to Oct. 15 between Orlando and South Florida.
The shift in emphasis has drawn substantial criticism from patrons who signed up as regular South Florida-oriented passengers. Many had become inter-county commuters from their homes to workplaces, using monthly passes that offered discounts.
The shift to Orlando has also incurred a heavy dose of new operating expenses, incurring a first quarter loss of $116 million despite a strong surge in revenues driven by the Central Florida segment. The company had a net loss of $306.68 million in 2023 on higher operating and interest expenses
A company spokesman did not immediately respond to questions concerning the emphasis on Orlando.
Still, the company expects a strong upside in passengers as it takes deliveries of additional equipment and works out a variety of joint marketing initiatives with cruise lines, airlines and travel agencies.
“We expect our ridership to grow meaningfully in the coming months as a result of the additional seat capacity coming online, ongoing organic growth, and a series of key initiatives,” Brightline said in its report. “We believe the combination of capacity additions and the successful implementation of … initiatives positions us to carry in excess of 400,000 passengers per month initially and approach our stabilized goal of approximately 650,000 passengers per month (or 8 million per year) in 2026.”
The report cited three initiatives with three travel-related industries:
- Cruise Lines: The report estimates there are more than 1 2 million annual cruise passengers departing from Port Everglades and PortMiami. “We estimate that 25% of these passengers originate by car from points north of our system and could use our service, for a total addressable market of 3 million roundtrips annually, or 500,000 one-way trips per month.” The company said it has “co-marketing partnerships” with Royal Caribbean, Celebrity, and Princess Cruise lines, “with several others in discussion.” The partnership with Princess includes baggage service for their passengers arriving through Orlando International Airport, “at which point Princess Cruise coordinates with Brightline to take the passengers baggage and deliver it directly to their cruise cabin.”
- Theme parks: “The top three primary theme park companies enjoy 90 million gate visits per year, with an estimated 4.9 million one-way annual trips originating from South Florida,” the report said. “We are in discussions with all major Orlando theme park companies on co-marketing agreements.” The arrangements involve the parks promoting Brightline “through website, email and social media.”
- Airlines: The report notes that the international airports in Fort Lauderdale, Miami and Orlando serve a combined 85 million passengers annually, raising the possibility of partnerships with Brightline that “would allow [airlines] to offer their customers a convenient ‘interline’ connection to our 5 stations in South Florida.”
Advocates encouraged
“This is the beginning of the rail revolution,” said Andy Kunz, president and CEO of the U.S. High Speed Rail Association in Washington, an industry advocacy group. “For long-distance trains this is the first time we’ve invested something new since the original rail system was built.”
“Internally they’ve said it’s already profitable if you weren’t writing down the cost of the tracks,” he added.
In May, Brightline Holdings CEO P. Michael Reininger told a CNBC interviewer at an association-sponsored conference in Washington that Brightline was making profits from its operations and expects to do the same with its $12 billion Brightline West high-speed train project between Las Vegas, Nevada, and Southern California.
“Our business has built rapidly since we launched the Orlando-Miami service and we are now generating profits off the operation in Florida,” Reininger said. “We recently received an investment grade rating for our operation in Florida and consequently have refinanced our investment stack there.”
In April, the company broke ground for Brightline West, which would see electric trains traveling up to 200 mph, well above the top speed of 125 mph reached by Brightline trains along the Cocoa-Orlando leg in Florida. The Brightline West project is financed differently than the one in Florida, which is backed by private investors. It was awarded $3 billion from the Biden Administration’s Bipartisan Infrastructure program. The $9 billion balance will be privately funded via private activity bonds from the U.S. Department of Transportation.
As for the prospects for Brightline West, Reininger said: “We wouldn’t be investing $9 billion of private capital in Brightline West if we weren’t highly confident that it’s also going to be a profitable business.”
Shortly before Reininger made those remarks in May, the credit rating firm S&P Global gave $2.219 billion in senior secured debt for Brightline Trains Florida a lukewarm “BBB-” rating with a “stable” outlook. The firm assigned an “AA” rating to another $1.133 billion of bonds that are guaranteed by an insurer. The analysts noted the company has sufficient financial reserves and growth prospects to navigate through what they termed as a “ramp-up” period that runs through 2028.
“Brightline notes that total daily bookings have increased by about 52% to approximately 4,300 in February 2024 from about 2,800 in October 2023,” S&P Global analysts wrote in a report in early May. “Notably, repeat long-distance bookings have increased at a rate of about 15% month-over-month during this period. These figures should continue to climb as Brightline captures more of its addressable market and strengthens its distribution network. As competing highway networks become more congested and Brightline’s customer base grows, the value proposition of rail travel should further improve.”
