The Alaska Railroad Corp., faced with dwindling revenues in recent years, is preparing to lay off an estimated one-fifth of its work force in an attempt to rein in costs, according to a memo sent to employees by its chief executive.

In the Aug. 31 e-mail, Patrick Gamble tells employees that revenues are falling rapidly and that, without immediate action, the state-owned business will lose millions next year in train operation costs. He says railroad officials are studying ways to run more efficiently, but that's not going to be enough.

"There would also need to be a significant reduction in funded manpower positions across the railroad, estimated by me to be about 20%," Gamble wrote. "I directed those position reductions to be finalized and ready for approval as quickly as possible. ...

"Let me be very clear. The financial condition of the Alaska Railroad is seriously threatened by the economic downturn of profitable business and the future holds no promise of a quick reversal."

In a January report to the state, the railroad reported it employed 715 year-round employees. Railroad spokesman Tim Thompson said that number holds roughly true today, though seasonal hires bring up the workforce to between 800 and 850.

A 20 percent cut applied only to year-round employees would mean about 143 layoffs.

Thompson said Friday that no decisions had been made regarding the exact number of employees to be laid off or from what departments they would come. Railroad executives were not taking questions on the matter, he said.

An employee newsletter posted to the railroad's Web site Friday afternoon said the corporation has already eliminated nearly 100 positions through hiring freezes and attrition since fall 2007.

"We've made a lot of cuts and we're obviously into the meat," said Jeff Davies, president of Alaska Railroad Workers, the railroad's largest union. "There's no doubt that the positions that are being vetted right now are positions that are needed."

Davies and other union officials said they were still waiting to hear how deep the cuts would be and from where they would come.

The employee newsletter indicated the railroad board of directors would meet Wednesday to discuss final position reductions. The cuts will be implemented after an Oct. 2 meeting and be completed by the end of the year, the newsletter says.

In a report to the state prepared by the railroad in January, Gamble characterized 2008 as "highly challenging" for the business. Cargo shipped by trailers and containers dipped 12 percent and associated barge-rail tonnage declined 16 percent from 2007.

In an Aug. 20 e-mail to employees, Gamble says decreases in tourism have pulled down passenger revenue "to a point well below what our original conservative budget estimates were for 2009." And the Flint Hills petroleum refinery in North Pole, the railroad's largest customer, has also continued to drop production in recent years, he wrote.

Earlier this year, the refinery announced it had shut down one of three processing units at the North Pole refinery because of lower demand. It reopened in May but was again closed in August because of lack of demand, Flint Hills spokesman Jeff Cook said Friday. The refinery employs about 175 people, Cook said.

The refinery provides just over 50 percent of the jet fuel used at Anchorage Ted Stevens International Airport, he said. Fuel shipments between North Pole and Anchorage account for about 35 percent of overall railroad revenue, Thompson said. At its peak in 2003, the railroad was hauling more than 800 million gallons of petroleum products from the refinery. Next year, the railroad is expecting to move about 400 million gallons.

In his memo, Gamble said the corporation will suffer between $10 million and $12 million in losses from train operations alone in 2010 unless it takes immediate steps to cut expenses. While running trains is by far its main business, the railroad also brings in money from its real estate and federal grants.

"It is therefore imperative that the Railroad act without hesitation to cut more of its overall expenses, and those cuts must unfortunately include one of our largest areas of corporate expenditure -- personnel," Gamble wrote.

The railroad reported a $13 million profit in 2008 and in January projected a $16.8 million profit for this year. According to the employee newsletter, railroad officials are now expecting to bring in a profit of $10 million this year.

The newsletter addresses the question of why layoffs are needed when the company is still turning a profit.

"Corporate net income is an indicator of financial health, but it does not mean a pile of extra cash exists at the end of the year," Chief Financial Officer Bill O'Leary is quoted as saying. "Rather, every cent of revenues in excess of expenses (i.e. net income) is used year-round to invest in capital, pay debts and contribute to employee benefit funds. Without net income, the railroad would be in very bad shape."