KiwiRail focuses on future as Commercial Review released

27 April 2016 6:06AM

KiwiRail is today releasing the Commercial Review it undertook in 2014 and that has helped shape the company’s current focus on improving its productivity and competitiveness. 

The Review was commissioned in order to understand the capital requirements of New Zealand’s rail freight corridor, and also to consider the challenges and opportunities for KiwiRail in supporting tourism, exporters and domestic freight movements. Government Ministers encouraged KiwiRail to be “bold” in the scenarios it considered in the Review.

Consequently, the Review developed four major options; a ‘Trimmed Network’, separate North and South Island networks, an Upper North Island business only, or largely closing the rail freight business.

KiwiRail chief executive Peter Reidy says that when reading the review, the public should, from the outset, bear in mind two salient points.

“The first point is that the Auckland and Wellington metro networks were never part of the Review. Under all four scenarios the metro networks were presumed to continue.

“Secondly, in Budget 2015, the Government confirmed that it was committed to a national rail freight network, ie not pursuing any of the four scenarios, though at that time, Ministers urged KiwiRail to reduce its reliance on current levels of Government investment.

“KiwiRail is now simplifying  the business, working to improve reliability for customers, and investing in its assets and people so that the company can play a  greater role in enabling New Zealand’s growth agenda.”   

Mr Reidy says it is also important to note that, as its name suggests, the Commercial Review was about only the economics of rail and did not include rail’s many social, public and environmental benefits.

He says that when considering KiwiRail’s costs, it is helpful to think of the operational side of the business – running the trains and ferries – as the “above rail” costs. Those are largely covered by the revenue that the company earns. Meanwhile, the Government’s annual investment in rail contributes to the “below rail” costs – including maintaining and improving tracks, bridges and tunnels. 

Apart from the Interislander services, KiwiRail runs about 3,500km of operational rail track which requires maintenance and upgrades even where there are no passenger services and very little freight.

“The Commercial Review found that there is not enough demand for rail to enable KiwiRail to fully fund the infrastructure, including tracks, signals, bridges and tunnels so the company will always rely on a level of government support,” Mr Reidy says.

“But none of the debate about how and by how much KiwiRail is supported distracts us from the task of helping to enable the growth of New Zealand exports and tourism.   We are prioritising investment to key parts of our network to achieve these goals and to lift our service for our freight customers.

“We are also focussing on network resilience in Auckland to reduce congestion and to enable smoother flows of freight and passengers.

“Finally, while acknowledging that some parts of the network are currently uneconomic, we have no plans to close any lines.”

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Click here for the Commercial Review document