Alaska railroad see substantial revenue loss

The Alaska Railroad is riding out tough times. The state-owned railroad has seen revenue drop substantially. According to railroad President and CEO Bill O’Leary, the decline has largely been driven by losses in its primary freight hauling business.

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”Just on a tonage basis, by about 44% since 2010,” O’Leary said.

O’Leary said the decline reflects loss of a contract for transport of petroleum products after Flint Hills shuttered its North Pole Refinery in 2014. He said the railroad’s freight business has also taken two other major hits.

”The drop in export coal. Where we take coal from the Usibelli mine in Healy and take it down to Seward from export to places like Chile, Korea and Japan,” O’Leary said. “The other area we had experienced growth in that has of course since fallen off was supporting North Slope activity.”

O’Leary said combined, the freight losses have dragged down net earnings, which had ranged between $10 and $14 million in previous years.

”We’re anticipating net earnings of in the $4-4.5 million range,” O’Leary said. “So as those drop in freight tonage have been going on, we’ve done our best to shed costs that goes along with that. That’s been extraordinarily difficult of late here, and we’ve reached some level of diminishing returns on that.”

O’Leary said the railroad has reduced the number of trains it operates, and cut daily freight service between Anchorage and Fairbanks from seven to five days per week. He noted that passenger numbers are a bright spot, up 22 percent since 2010.

”Alaska’s viewed as an exotic but safe destination and the railroad really is a key piece of many people’s activities when they come to Alaska,” O’Leary said.

O’Leary said passenger numbers are the best the Alaska Railroad has experienced in its history. He said the railroad is also refocusing on new revenue areas, including real estate ventures on its substantial land holdings, noting a new Anchorage condominium development announced last week