Alaska Railroad income beats expectations in 2018
The Alaska Railroad Corp. managed to turn an $18 million profit in 2018 despite a one-third decrease in activity in its primary business line, according to its annual report released this month.
The $18 million net income is down from a $22.4 million profit in 2017 but an improvement over other recent years. Operating revenue fell $1.7 million year-over-year in 2018 to $163.4 million, while operating income fell further — from $6.4 million in 2017 to $1.5 million last year — on slightly higher expenses.
As has been the case in recent years, the state-owned railroad’s profit was largely built on its real estate business, which generated a $13 million profit for the year.
The railroad is a significant landowner with title to about 37,000 acres across the state, roughly half of which is on revenue-generating properties.
While a state-owned corporation, the Alaska Railroad does not receive state funding as part of its normal business operations.
The $18 million profit also was better than expected. Railroad leaders had forecasted a $13.5 million profit for 2018 early in the year and the annual report lists a $21.7 million profit forecast for 2019, which would jive with a general expectation for an improving state economy this year.
The railroad ended 2018 with a net position of $356.6 million in 2018, according to the report.
A longer-term drop in the railroad’s freight resumed in 2018, as it’s overall freight tonnage fell sharply from nearly 4.8 million tons in 2017 to 3.2 million tons last year. Freight business historically has accounted for 40 percent or more of the railroad’s operating income.
Spokesman Tim Sullivan said the drop in freight volumes was mostly due to a decline in gravel demand after a series of large road construction projects in 2017.
“When there are big construction projects going on we’re moving gravel and we’re a pretty steady representation of what’s going on there,” Sullivan said, noting that 2017 was an anomaly to an overall trend of declining freight volumes.
The Alaska Railroad’s annual freight tonnage has gradually declined from 6.3 million tons in 2010.
The railroad has also seen increased competition from trucking for fuel transports between Anchorage and Fairbanks, according to Sullivan.
However, the revenue generated from moving 3.2 million tons of freight last year very nearly matched what was made off of moving 4.8 million tons of building materials and equipment in 2017. In fact, revenue from the nearly $72 million freight business line decreased just $354,000 in 2018.
That’s because the railroad saw an 8 percent increase in its high-value rail-barge business, primarily from additional North Slope oil exploration and development activity last year. The rail-barge link allows railcars loaded in the Lower 48 to be barged to Whittier where they are added to Alaska Railroad trains.
The railroad also hauled U.S. Army supplies and equipment for deployment and training at Fort Wainwright in Fairbanks, according to the report.
Activity in the passenger segment of the railroad’s business continues to increase.
Employment at the railroad stayed steady at about 550 year-round workers in 2018 after several rounds of layoffs and organization restructuring in prior years that were necessitated by declining business, according to railroad officials. The railroad also hires up to about 140 seasonal workers each year to match summer passenger train demand.
The strong Lower 48 economy has helped to consistently grow Alaska’s tourism industry over the past five-plus years and railroad ridership has followed suit. Ridership increased about 5 percent to nearly 532,000 passengers in 2018 and the report notes that “offseason” ridership has more than doubled over the past five years as well.
Train ridership bottomed out at 405,000 passengers in 2010 following the Great Recession.
Sullivan said the number of winter passengers has gone from roughly 5,500 to more than 11,000 passengers per season as the railroad has added more trains between Southcentral and the Interior.
“We’ve seen quite an increase in locals traveling between Anchorage and Fairbanks as well as big increases in Asian winter tourism and they take advantage of those extra trains as well,” he said.
Fairbanks-area tourism businesses have also expanded their offerings in recent years, particularly to attract Asian visitors seeking out prime aurora-viewing opportunities.
Elwood Brehmer can be reached at [email protected].