Proprietary and Confidential Two Pricing Optimization Applications at Amtrak: ShareFares – Amtrak’s Small Group Fare OneTouch – Amtrak Group Optimization Model INFORMS June 6, 2006 Proprietary and Confidential

ShareFares - Background Almost 96% of Amtrak customers in the northeast corridor travel by themselves or with one other person Current Fares discourage groups larger than 2: We d charge from $68 to $120 one-way off-peak travel between Washington and New York on or Regional trains. The one-way fare for groups of 3 or more exceeded $200. Most families are more likely to take the bus or drive. ShareFares includes a deeply discounted fare for the 3rd through 6th traveler in each group: 90%-off for the 3rd, 4th, 5th, and 6th rider; Even with the 90% discount, Amtrak’s incremental revenue has been significant, because it includes the first two riders at full far. Proprietary and Confidential September 20, 2018

Pricing Example; NYP to WAS Number in Group Avg. Fare Share Fares Price per Rider Discount Amount, All Adult Percent Discount, All Adult Fare w/ 2 Adults plus Children Discount Amount, w/Children Percent Discount w/Children 1 $76 none 0% 2 $152 3 $228 $160 $53 ($68) 30% $190 ($30) 16% 4 $304 $167 $42 ($137) 45% ($61) 27% 5 $380 $175 $35 ($205) 54% $266 ($91) 34% 6 $456 $182 $30 ($274) 60% ($122) 40% The first two riders pay the prevailing price. Starting with the 3rd rider, the average price per rider drops significantly, especially for larger groups. For a group of all adults, a group of six save 60% ($274) from what we are charging today. Before ShareFares, a group of two adults and four children paid $304. With ShareFares they pay $182, a 40% discount. Proprietary and Confidential September 20, 2018

Dilution Has Been Minimal Number in Group Distribution of Riders before ShareFares Percent of Purchase made in compliance with 7 day APR Expected Groups Subject to Dilution (as a percent of riders on each departure) 1 83% 30% N/A 2 13% 3 2.0% 0.60% 4 0.9% 0.27% 5 0.2% 0.06% > 6 0.3% 0.09% Total 1.02% Almost 96% of Regional reservations were for only 1 or 2 riders. Dilution was minimal, due to offer only applying to groups of 3 or more. Dilution was further reduced with a 7-day APR. Proprietary and Confidential September 20, 2018

ShareFares has Been Very Successful In it’s first 12 months, it generated over $4 million in incremental revenues Displacement is controlled with Revenue Management Dilution is minimal due to small customer base of groups of 3 or more and use of 7-day APR This was accomplished with little advertising (we couldn’t afford it!) With dilution and displacement under control, we could afford to let demand build by word of mouth and PR It is an Active Promotion – We encourage or reservation and sales agents to offer it whenever it fits We recently have changed the discount to 75% to measure price elasticity Proprietary and Confidential September 20, 2018

Group Pricing - Background In FY05, Amtrak received approximately $14 million in group business This is a little over 1% of total revenue ($1.3 billion) However, Revenue Managers spent 15% to 20% of their time on pricing groups Their efforts were primarily defensive, protecting higher-demand departures from selling out due to to many through-seats sold to short distance groups Group decisions were done manually, resulting in a bias to keep all groups away from higher demand departures Requests took 24 to 48 business hours to be priced Proprietary and Confidential September 20, 2018

Solution = OneTouch – Amtrak’s Group Optimization System OneTouch solved three problems: Speed of Response – Now most group requests are priced within 30 seconds Better utilization of resources: Reservation center operators do not have to call back customers to quote the price Revenue Managers now spend less than 1 hour monthly reviewing pricing decisions (versus hours each day) Pricing is optimized, increasing group business Proprietary and Confidential September 20, 2018

OneTouch fixed Manual Pricing Bias Against Groups Most Revenue Managers saw all groups as a risk not worth taking unless there was no risk of selling out Groups traveling longer distances (with higher fares) were automatically refused, or priced at highest bucket Revenue Managers did not consider that many times the average price at the peak leg was well below the lower buckets of the longer distance markets OneTouch both forecasts non-group demand to determine displacement risks as well as optimizes the peak leg seats when displacement is likely The length of market (and value of fare) plays a bigger role than bucket in optimization decision. Proprietary and Confidential September 20, 2018

Overview of Optimization Process Leg Value Computation. Demand forecasting at leg level. Group Evaluation Displacement Displacement Value Group value Group Denial or Acceptance Future Enhancements Proprietary and Confidential September 20, 2018

Proprietary and Confidential Leg Value Computation A leg demand has a composition of different markets High demand short haul market Low demand long haul market Demand farther out in the booking cycle Demand closer in to the booking cycle. Proprietary and Confidential September 20, 2018

Proprietary and Confidential What is it Worth? $40 – 5 Legs $90 – 12 Legs $80-10 Legs $150 – 16 Legs CHI CUM PGH CLE TOL HMI CHI Proprietary and Confidential September 20, 2018

Group Evaluation - Displacement Capacity = 80 Group Size = 25 Displacement = 15, Non Displacement =10 Displacement Value = $76 * 15 Non Displacement Value = Lowest fare for the Market * 10 Group Value = Displacement Value + Non Displacement Value Proprietary and Confidential September 20, 2018

Proprietary and Confidential Future Enhancements Expected Demand based on the time of arrival of the group request Value of the leg as a function of days before departure Step-wise displacement Proprietary and Confidential September 20, 2018