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Alaska Railroad cost-cutting will bring 29 layoffs

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Posted: Friday, March 8, 2013 8:15 am | Updated: 8:38 am, Mon Mar 11, 2013.

FAIRBANKS — The Alaska Railroad announced Thursday that it plans to eliminate 54 jobs as part of a broad cost-cutting effort, following a $45 million drop in finances since 2011.

The cuts include 29 layoffs and the elimination of 25 vacant positions. The bulk of the cuts will fall in Anchorage, railroad President and CEO Chris Aadnesen said in an interview Thursday. Three positions, including two that already are vacant, will be eliminated in Fairbanks.

The job cuts follow a previous round of 52 positions that were slashed in June.

The majority of the most recent layoffs were effective Thursday, but Aadnesen said a small number of positions will remain until July, September or December.

The cuts will eliminate 20 management positions and 34 union jobs. That represents about 8 percent of the railroad’s year-round and seasonal workforce.

“The only way we can try to justify this in our minds is the railroad will be more stable for the employees that are left behind,” Aadnesen said.

Revenue at the state-owned railroad dipped for a variety of reasons; some were anticipated but at least one was a frustrating surprise.

Lower freight revenues hit the hardest, costing the railroad about $15 million this year. Lower production of petroleum products from the Flint Hills Resources refinery in North Pole brought a major revenue drain, while a softening global coal market resulted in a 60 percent dip from freight revenue in that category.

Those factors were largely behind the railroad’s shift from daily freight transit to five days per week.

Some of the decrease in revenue is a result of a Federal Transit Administration clerical error in the multi-year transportation funding bill that was submitted for the railroad last year, Aadnesen said. The mistake, which the Alaska Railroad has been unable to reverse in subsequent legislation, cost an additional $4 million in federal funding.

The estimated annual cost savings in the latest round of job cuts is $4.5 million, but Aadnesen said the similarity between those numbers is coincidental.

An unfunded federal mandate to add new safety equipment to trains is resulting in an added expense of about $15 million per year through 2018.

Overall, the result is an “incredibly huge” revenue loss for the railroad, Aadnesen said, which has annual operating revenues of $140 million, not including money collected through federal grants.

Aadnesen said the job cuts are part of a larger overhaul of railroad operations, which officials hope will stem the losses the company has endured in recent years. He said the railroad will review its finances later this year and evaluate its progress.

“What we’re hoping to do is go forward and have a much better company that we did from a financial standpoint,” he said.

Contact staff writer Jeff Richardson at 459-7518. Follow him on Twitter: @FDNMbusiness.

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