Alaska Railroad reports 23 percent drop in net income

Company attributes decline to fuel costs, reduction in freight

Posted: Monday, April 20, 2009

The Alaska Railroad Corp. reported a 2008 net income of $12.6 million, a 23 percent decrease compared to the year before.

The railroad attributed the decline to high fuel costs, a reduction in freight and fuel transported, and a downturn in the economy.

Operating revenues - from freight, passengers, grants and other funding streams - totaled $158.8 million in 2008, an increase of about $10 million from the previous year. But operating costs for the year saw a 12 percent increase, to $155.5 million, and capital spending declined 13 percent, to $92.7 million.

The ARRC board had budgeted 2008 profits at $16 million, but those estimates were derailed by high-energy costs, board Chairman John Binkley wrote in the report.

At the direction of the board, the railroad's management tightened costs and reduced its non-union workforce by 80 positions and streamlined its departments.

One of the main sources of the railroad's revenue declines was attributed to the Flint Hills refinery, one of the agency's largest customers.

Flint Hills in 2008 cut production of petroleum products by 14 percent over the previous year.

Shipments of trailers and containers were off 12 percent, while the railroad's barge-rail business dipped 16 percent. The railroad business also saw a decline in 2007, when Flint Hills discontinued the production of naphtha, used as a feedstock fuel.

ARRC moved 6.1 million tons of freight and over 500,000 passengers last year, according to the railroad's president and CEO Patrick Gamble.

On a positive note, the Alaska Railroad managed to increase its net worth by $20 million to total $853 million, and increased its revenue from passenger carrying services.

Other 2008 accomplishments by the railroad included the largest military mobilization ever attempted by moving more than 1,000 military vehicles from Fort Wainwright to the Port of Anchorage for the 125th Stryker Brigade Combat team's deployment to Iraq.

In the 2008 report, Gamble reminds the public that railroads can move two tons of freight 500 miles on one gallon of diesel, making rail transportation both energy and environmentally friendly. As part of the ARRC's agenda to become more environmentally effective, the railroad switched fuels.

"To support environmental regulation the Alaska Railroad has burned ultra-low sulfur diesel fuel in all of our locomotives since 2007, well ahead of the federal 2010 deadline," said Gamble.

The president also said that the ARRC began transforming the 1940s-era freight shed in Anchorage into Alaska's first Leadership in Energy and Environmental Design-certified historic office building in the state.

The Alaska Railroad Corp. is a self-sustaining, full-service railroad serving ports and communities from the Gulf of Alaska to Fairbanks with 467 miles of track.

The state of Alaska purchased the Alaska Railroad the from federal government in 1985 for $22.3 million.

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