Alaska Railroad Corp. took $7.8M loss amid pandemic
The Alaska Railroad felt the brunt of 2020 on multiple fronts, ultimately absorbing its largest loss in decades, according to its annual report published April 2.
Sharp reductions in both the state-owned railroad’s passenger and freight businesses led directly to a $7.8 million net loss last year following three years of annual profits in the $20 million range.
The railroad’s ridership fell by 94 percent in 2020 to just more than 32,000 passengers after years of consistent growth that put annual ridership at more than 500,000 passengers.
Much of the growth in passenger service was the result of cruise companies contracting with the railroad to pull their passenger cars on various tour trains between Seward and Fairbanks; however, pandemic restrictions issued by the Centers for Disease Control last spring prohibited any large cruise sailings last year.
Passenger service revenue fell similarly from nearly $40 million in 2019 to just $3.3 million last year.
The prospect for this year’s large ship Alaska cruise season also remains muddied as the CDC issued guidance April 2 for the second phase of a gradual, five-step process for large cruise companies to resume domestic sailings. The Canadian government’s continued ban on large cruise ships at its ports this year also indirectly hurt the chances for traditional Pacific Northwest-to-Alaska cruises because of an antiquated U.S. law that requires foreign-built passenger vessels to stop at a foreign port on trips between domestic ports.
Despite all that, Alaska Railroad Corp. CEO Bill O’Leary said that he believes the time railroad officials have had to plan this year’s schedule, which is still scaled back from recent norms, will lead to improved operating costs and a schedule that better matches demand compared to 2020.
Railroad officials were “scrambling” last year to salvage summer passenger service that did not start summer service until July 1, O’Leary acknowledged; this year the usually popular summer trains will start running in early June.
The railroad has also partnered with Alaska Airlines on a promotion to attract passengers with discounted rail and plane tickets.
“Demand is not 2019, that’s for sure, but it’s certainly looking better than what we saw last year,” he said in an interview.
The 2020 hit to the Alaska Railroad’s flagship freight service came in the form of a roughly 25 percent reduction in tonnage to 2.6 million tons and a 14 percent year-over-year loss in revenue, from $85.3 million to $73.6 million, according to the annual report.
It all led to an operating loss of $18.3 million that was partly offset by the railroad’s real estate holdings, which netted $10.4 million last year.
The railroad’s total revenue decreased by nearly 27 percent last year to $150.7 million.
Railroad leaders expect to generate approximately $4.2 million in revenue from passenger service and $75 million from freight service this year, and the railroad’s overall net financial position is forecast to improve by approximately 0.2 percent, or about $700,000 this year.
O’Leary said those budget projections made last fall appear to be holding close to accurate even with all the closely tied and economic and public health uncertainties still clouding the near-term, particularly on the freight side where North Slope oil activity is ramping back up.
“Dozens” of capital projects planned for last year were put on-hold when the full severity of the pandemic became clear, according to the report, and much of the capital work this year will be funded with $94 million in federal CARES Act relief the railroad received as a public transportation provider.
Alaska Railroad officials also expect to receive some level of funding via the $1.9 trillion American Rescue Plan signed by President Joe Biden last month “but it won’t be anything near the $94 million,” O’Leary noted.
The 2021 capital plan calls for $66.5 million worth of projects, with CARES grants covering $20.4 million of that, according to the report.
The Alaska Railroad ended 2020 with $32 million in cash, down more than $50 million from the end of 2019, but O’Leary said he believes the corporation is still in a solid financial position with $99 million in total current assets at the end of last year.
“We came into this thing with a strong balance sheet — very good liquidity. It’s not as strong a balance sheet as we’re heading into the meat of 2021 but we’re comfortable with where we’re at,” he said.
All told, he expects the Alaska Railroad to have much smoother 2021 as long as the late spring and plentiful snow across much of the southern half of the state doesn’t lead to widespread flooding and unexpected track repairs.
“We’re looking forward to a better 2021 and a lot of that is going to be how the passenger season plays out,” O’Leary said.
Elwood Brehmer can be reached at [email protected].