Amtrak on Friday threatened to discontinue all long- distance train service in October if Congress doesn't give it $1.2 billion in the next budget year.

The national passenger railroad, facing a possible restructuring by Congress, said it will cut staff by 4 percent and make cuts in hiring, training, advertising and supplies.

"Everyone knows that you can't make a profit while running a network of unprofitable trains but that is exactly what we are expected to do," said Amtrak President George Warrington.

Amtrak said service will not be affected in the current budget year, which ends Sept. 30.

Amtrak plans to lay off 700 workers and cut costs elsewhere to trim what it says is a $200 million shortfall this year, according to two sources knowledgeable about the moves, who asked not to be identified.

The sources said Amtrak began broaching the idea of cuts in long-distance trains to members of Congress on Thursday. That prospect likely would get the attention of lawmakers, many of whom would be loath to accept any reduction in service to their states.

Amtrak is under growing pressure to improve its finances. The congressionally appointed Amtrak Reform Council will recommend next week that the government break up Amtrak and open passenger rail to competition.

Amtrak has used more than $25 billion in federal subsidies since its inception in 1971. Congress five years ago gave Amtrak until December 2002 to end its reliance on annual operating subsidies.

Amtrak has broadened its ventures to try to increase revenue and was hopeful the introduction of the nation's first high-speed train -- Acela Express -- would give it the boost it needed. Systemwide ridership has increased every year since 1996, to 23.5 million passengers in 2001.

But last week the Transportation Department's inspector general reported that Amtrak lost $1.1 billion in 2001, the most in its 30-year history, and is no closer to operational self-sufficiency than it was in 1998.

Last summer, Amtrak had to mortgage parts of New York's Penn Station -- its most valuable asset -- for $300 million to keep trains running through the end of the fiscal year.

This time, Amtrak plans to trim costs by laying off 700 people, including 300 managers, the sources said. Amtrak also plans to scale back the maintenance on train cars.

Currently, when a train car is brought in for a specific reason like brake work, Amtrak performs comprehensive repairs, right down to torn upholstery. In the future, Amtrak will fix the immediate problem only.

Amtrak leaders have long said the federal government needs to invest more in tracks, rail yards, stations and other assets. The sources said Amtrak reported it has a $5 billion backlog of needed improvements that have not been made through the years because of a shortage of capital funding.

The railway will ask for $1 billion in the fiscal year that begins in October, on top of the $200 million it wants immediately to cover the shortfall in the current fiscal year, the sources said.

Amtrak announced last summer that it would offer early retirement and voluntary separation incentives to its 2,900 managers as part of a cost-cutting effort. It is not known has many took the offer.

At the time, Warrington said Amtrak would spend four to six months seeking ways "to eliminate overlapping operations, tighten cost controls and improve revenue opportunities."