KiwiRail locked into a non-virtuous cycle

A KiwiRail goods train and engine near Huntly. Photo by Lynn Grieveson

KiwiRail said that it was locked in to a “non-virtuous cycle” as it struggled to balance high safety standards with the commercial realities of an ageing fleet and infrastructure.

KiwiRail Chairman, Trevor Janes, Chief Executive Peter Reidy, Chief Financial Officer Kate Jorgensen and General Manager, David Gordon appeared before the Transport Select Committee to report on the State Owned Enterprise’s performance in the past year.

When asked what risks flowed from current levels of funding, Janes said Kiwirail had made a commitment to safety, but without significant investment, this made it inherently less competitive. Janes said the company was locked into a “non-virtuous cycle”.

“The train has to go much slower for safety reasons — so that it has the ability to stop quickly,” said Janes.

“We’re competing with commercial companies which have assets that are four years old. When we slow down the trains for safety reasons, we become less competitive," he said.

“We can’t give confidence that rail will be there. There’s a massive customer confidence issue.”

As customers lost their confidence in rail, volumes would decrease, depriving KiwiRail of revenue and compounding the problem. They said that when companies delivered cargo to one train station by truck and then picked it up from another station by another truck, KiwiRail had to be able to promise an efficient service to discourage companies from completing the whole journey by road.

If trains were regularly delayed by two hours, forcing companies to pay truck drivers overtime to await the rail deliveries, they might consider pulling cargo off rail.

The average age of locomotives in the South Island is now 46 years. KiwiRail argued that it was the only form of freight that could move large amounts of freight quickly, for example when a ship docks at port and needs to quickly offload its cargo. Tauranga, for example, would grind to a halt without the support rail provided to its busy port. There would be 1.6 million additional truck movements without rail.

The capacity of rail keeps freight costs low. When the main line from Picton to Christchurch was out of action following the Kaikoura earthquake, the cost of freight in the South Island increased 20 percent.