Subscribe to RSSKiwiRail Gets Off Track
KiwiRail is revising its financial targets downwards for the current financial year. KiwiRail’s end of year result would be around 12 percent or $15m below target.
Its TranzCoastal rail service, between Christchurch and Picton - suspended because of the Christchurch quake- now will not run until August 15 to minimise the financial impact on the business.
Chief Executive Jim Quinn said that despite strong results in the first six months, KiwiRail’s end of year result was below target as a result of the Christchurch earthquakes, the loss of coal production following the Pike River mine explosion and the softer economy which is impacting on domestic freight volumes.
KiwiRail’s initial EBITDA target was $120.8m and the revised forecast is now $105.5m.
Of the difference, $11m is directly attributed to Christchurch earthquakes and the Pike River mine disaster.
KiwiRail: not on track for its financial target
In addition, the dry spring has affected the volume of bulk milk moved in the second half of the dairy season and passenger numbers on the
TranzAlpine and TranzCoastal services have taken two significant hits since the first earthquake.
“We set ourselves some very steep targets for this year, and our inability to meet those is largely due to external events that no one could have anticipated,” Mr Quinn says.
“Support from our key freight customers remains strong, but many of them are experiencing the same difficult trading conditions we are. Encouragingly we are still growing our customer base.
“We will continue to drive to close the gap as much as possible over the remaining months of the financial year, but we are moving into the winter months when both freight and long-distance passenger volumes are softer. Forecasting will continue to be difficult until the market settles again after the mixed effects since the second earthquake.”
Mr Quinn says the impact on the number of people booking on South Island long distance rail passenger services has prompted a review of these as the business heads into its low season.
Bookings are low with the TranzAlpine running at 45 percent of the same period last year.
“The TranzAlpine can continue to marginally contribute at these levels, which are better than we forecast at the time of the earthquake. However the TranzCoastal is a more marginal service normally and will lose money through the low season on these levels.
“For this reason we have decided to suspend the TranzCoastal until August 15 to minimise the financial impact on the business. By committing to a restart date we believe that we can provide confidence for the wholesale market and be part of the upswing into the summer season and Rugby World Cup.
“We will work through the implications for our affected staff, our goal is to retain them in the business for when the service resumes.
“We know these rail journeys are well regarded internationally and are a key tourist attraction. We are continuing the project to modernise the capability with the new carriages being built in our Hillside workshops. We are looking to partner with an entity who is interested in investing to assist the modernisation of our passenger fleet and also to grow this market.”
12 Comments
If the tranzalpine still terns a profit at 45% of normal loading it must have been very profitable under normal loading. I didn’t realize it was doing so well.
As mention a couple of months ago, I had a feeling something was up in Kiwirail.
With KR announcement last month about their deal with the Great Wellington Regional Council for the Wellington suburban network and the latest announcement in regards possible partnership for the TranzAlpine & TranzCoastal, I think that KR wants to dissolve Rail Passenger Group (The Tranz Metro & Tranz Scenic brands) to save costs.
I think the next to go, will be Ontrack who looks after the track, signalling & track infrastructure, with a new company being created with the Government having 51% stake in a PPP. relationship.
This means the track network could be open up to any rail operator how wants to pay track access fees.
The new KR will own the rail freight business and Interislander ferries.
It will be interesting to see what happens after the election.
Kris, interesting, Ontrack should go into NZTA, that’s the funding body for our land transport assets, isn’t it?
Will need a different government for something that rational though.
Patrick R - you’ve got to be kidding me on this issue:
‘Ontrack should go into NZTA, that’s the funding body for our land transport assets, isn’t it?’
In an ideal world yes, in our NuZild middle earth I’d say that Ontrack and NZTA have fundamental religious differences. I’d love to be proven wrong.
tuktuk; exactly.
For Patrick R
The Government is cash strap at the moment with a sluggish economy coupled with the Christchurch earthquake.
It would make economical sense for the government to enter in PPP relationship to pay for the rebuilding of the rail network instructure, especially with the volatile nature of oil.
You never know, Len Brown might get is CBD rail loop through PPP.
Secondly, it would be in KR best interest to have a credible international rail operator making Tranz Scenic to be more commercially minded, like building a decent long distance passenger rail network for the locals and tourists.
It would nice to travel say from Dunedin to Christchurch, Wellington to Auckland by train, especially if you add the Taieri Gorge train/bus service from Queenstown to Dunedin & regional trains from Tauranga to Hamilton and Auckland train service, the reintroduction of the Wellington to Hastings/Napier service and if it could be pushed, a regional train service - Wellington/Wanganui/New Plymouth/Auckland train service.
I guess that dreams are free
For Patrick R
The Government is cash strap at the moment with a sluggish economy coupled with the Christchurch earthquake.
It would make economical sense for the government to enter in PPP relationship to pay for the rebuilding of the rail network instructure, especially with the volatile nature of oil.
You never know, Len Brown might get is CBD rail loop through PPP.
Secondly, it would be in KR best interest to have a credible international rail operator making Tranz Scenic more commercially minded, like building a decent long distance passenger rail network for the locals and tourists.
It would nice to travel say from Dunedin to Christchurch, Wellington to Auckland by train, especially if you add the Taieri Gorge train/bus service from Queenstown to Dunedin & regional trains from Tauranga to Hamilton and Auckland, the reintroduction of the Wellington to Hastings/Napier service and if it could be pushed, a regional train service - Wellington/Wanganui/New Plymouth/Auckland.
I guess that dreams are free
For Patrick R
The Government is cash strap at the moment with a sluggish economy coupled with the Christchurch earthquake.
It would make economical sense for the government to enter in PPP relationship to pay for the rebuilding of the rail network instructure, especially with the volatile nature of oil.
You never know, Len Brown might get his CBD rail loop through PPP.
Secondly, it would be in KR best interest to have a credible international rail operator making Tranz Scenic more commercially minded, like building a decent long distance passenger rail network for the locals and tourists.
It would nice to travel say from Dunedin to Christchurch, Wellington to Auckland by train, especially if you add the Taieri Gorge train/bus service from Queenstown to Dunedin & regional trains from Tauranga to Hamilton and Auckland, the reintroduction of the Wellington to Hastings/Napier service and if it could be pushed, a regional train service - Wellington/Wanganui/New Plymouth/Auckland.
I guess that dreams are free
dreams are free that the private sector will come in and open up lots of new passenger routes. Remember when passenger services were split off in 20001 thats when we lost trains to Napier, Tauranga, Rotorua and Dunedin/Invercargill.
I’m going to say - respect for Jim Quinn and the team. To his credit, and also the lobbying power of a previous Jim in command, Kiwirail actually got the go ahead to see what it could achieve with the Auckland-Christchurch corridor. Investment money for things such as the Aaratere refit are not to be taken for-granted.
However, it has to be also remembered that in the eyes of some in power, Kiwirail is effectively a company operating under receivership. Jim Quinn and the others working hard with him are but, employees answerable to “the bank”.
Any private sector enterprise coming to cherry-pick bits off Kiwirail will only ever do so if profits are assured and the risks are low enough to entice them halfway round the world.
Kiwirail is a real-life Cinderella story. However, like Cinderella herself no doubt, Kiwiral staff have learnt to make a little go along way over many years. This sort of mindset has its pluses and minuses. Any overseas party entering the fray should respect those skills while at the same time introducing new ideas, and most particularly overseas connections and synergies that can fundamentally add potential revenue/customers.
Remember, the Govt has plenty of $$$$ to throw at completely uneconomic roading projects. The only thing holding back KiwiRail right now is Steven Joyce and Bill English. Get rid of them and rail has fair chance.
Joyce and English both have the Trucking Lobby in bed with them so rail will suffer. No other country in the Western World is doing what the Govt is doing to KiwiRail.
I think KiwiFail is heading off the rails. Apart from extracting a considerable amount of government money and paying their executives extremely well regardless of what they do, there’s little if any proof that any of the government’s investment is going to be recouped in the distant future. History is simply repeating itself my friends, it’s all been tried before, with hundreds of millions of dollars of losses accrued to the taxpayer. What is KiwiFail doing differently or better than Toll to give us confidence here?
I agree, a freight company should not be in the passenger transport business or in infrastructure.
Government should merge road and rail under NZTA with some solid principles to unlock real economies of scale for procurement, construction, management and maintenance and remove KiwiFail’s monopoly over the tracks so efficient operators have an opportunity to make rail actually work well and support itself.
Passengers need to be treated like real people, not cargo to be herded into wagons.
It’s about focusing at what you’re best at, not doing a half a$$ed job on all sorts of weakly related things and paying based on performance. It really is that simple guys!
Government has made a lot of foolish investments, no reason to add further to the list!