The most pressing short-term issue is the ongoing disruption to inter-island rail freight services caused by the magnitude 7.8 earthquake which struck the north east of the South Island on November 14. This severed the Picton - Christchurch line and led to the suspension of inter-island rail freight services. KiwiRail moves around a million tonnes of freight a year on the corridor, which links Auckland and Christchurch, New Zealand’s two largest cities and principal manufacturing and distribution centres.

Kiwirail1The exact cost and duration of the repairs is unknown with some suggestions that clearing the millions of cubic metres of slips caused by the earthquake could take up to 18 months. It is expected the government will pay for the cost of repairs along with damage to other infrastructure destroyed in the earthquake, which is now estimated at $NZ 3bn ($US 2.1bn).

Faced with the prospect of losing key line-haul customers, KiwiRail has turned to coastal shipping to move containerised freight three times a week between Auckland and Lyttelton, the port of Christchurch.

A potential problem with this alternative service is the possibility that coastal shipping may not be able to cope with the demands of time-sensitive freight and the sheer additional volume, especially as the only alternative road route between Picton and Christchurch is also cut. KiwiRail CEO Mr Peter Ready says customers need to be have reliable and timely deliveries of freight within 48 hours to avoid costly logistics problems.
Utilising coastal shipping will incur additional costs for KiwiRail although in part these will be offset by the operational cost savings arising from not operating trains and reduced maintenance costs on the 320km Christchurch - Picton part of the rail network.

Looking to the longer term, KiwiRail continues to face an uphill battle to maintain and enhance its competitive position with road hauliers, which account for more than 80% of all freight movement within New Zealand.

The challenge is becoming all the more difficult as the national government continues with the biggest road-building programme in the country’s history. This will see more than $US 30bn pumped into enhancing and maintaining the highway network up until 2030.

In contrast, KiwiRail continues to receive very limited funding from central government, totalling $NZ 190m in the 2016-17 financial year. In addition, future funding is not guaranteed while pressure mounts on KiwiRail to further reduce costs.

While the overall reliability of the rail network and services has improved since KiwiRail was formed in 2008, there is still a huge backlog of maintenance work. Many large bridges and viaducts, such as those on the Midland coal route, will need major upgrading or replacement in the near future as they are now more than 100 years old.

In addition to the ongoing maintenance issues, much of the network suffers from very tight curvature and steep gradients which makes offering competitive transit times with road transport very difficult. Some parts of the South Island Main Trunk line between Christchurch and Dunedin, for example, have had no alignment and gradient improvements since the route opened in 1878. Only part of the North Island Main Trunk Line, which was electrified between Palmerston North and Hamilton in the early 1980s, has been subject to any significant improvements.

The effects of this are wide ranging and profound. Levels of rolling stock utlisation and overall operational efficiency are lower than they should be and KiwiRail lacks the ability to become more competitive in the profitable time-sensitive freight sector. Consequently, KiwiRail’s freight volumes are dominated by low-value bulk commodities such as coal, logs and containerised shipments of milk powder and other agriculture primary products hauled to ports from distribution and processing plants.

KiwiRail is also unable to tap into the potentially lucrative domestic travel market between fast growing cities such as Auckland, Hamilton and Tauranga in the upper North Island, which is dominated by the private car. Longer distance passenger services have been reduced to just two tourist-focused trains - the year-round Christchurch - Greymouth Tranz Alpine and the summer-only Northern Explorer operating between Auckland and Wellington three times a week.

KiwiRail, and the government as its 100% shareholder, needs to address the railway’s huge infrastructure deficit in the coming years with sustained funding at much higher levels. This will allow the state-owned railway to reach its full potential both financially and in terms of making a much bigger contribution towards meeting the growing demand for the movement of freight and people around New Zealand.