Haggling begins for passenger services

By DANIEL RIORDAN transport writer

Tranz Rail's decision to close several of its long-distance passenger services and sell most of the rest to Australian firm West Coast Railway has dismayed unions and politicians.

And the investment community has been served a paucity of details.

Tranz Rail managing director Michael Beard said yesterday that the company had signed a heads of agreement with West Coast Railway as the preferred buyer and was negotiating exclusively to complete remaining details of the sale. Those negotiations should take no more than two months, said Mr Beard.

The sale is part of Tranz Rail's strategic plan, outlined last October, to focus on freight services.

Mr Beard would not say how much the assets being bought were worth, nor provide other financial details of the sale.

Under the proposed sale process, Tranz Scenic assets, including 13 operating mainline locomotives, nine other locomotives, 76 carriages, three railcar sets, 16 power or observation vans, brands, selected station buildings around the country and carriage maintenance depots in Christchurch and Otahuhu, would be sold to a new holding company.

Tranz Rail would have a financial stake in the holding company, but how much was still being decided. Mr Beard stressed that it would be a passive investor, and said the relationship would be useful because West Coast would use Tranz Rail's tracks.

West Coast is buying the Northerner and Overlander (between Auckland and Wellington) services, the TranzCoastal (Picton-Christchurch), the TranzAlpine (Christchurch-Greymouth) and the Capital Connection (Wellington-Palmerston North).

The Geyserland Express (Auckland-Rotorua), the Kaimai Express (Auckland-Tauranga) and the Waikato Connection (Auckland-Hamilton) will close after the sale.

Mr Beard said these services had suffered from falling patronage over the past five years, and there had been no interest from any parties in buying them.

Although the closures were predictably criticised by unions and local politicians, Rail and Maritime Transport Union general secretary Wayne Butson gave a vote of confidence in West Coast, saying that union colleagues in Australia considered the company a good employer.

"It's very very sad to have to close services but it's simply a matter of economics."

The Southerner (Christchurch-Invercargill) and the Bay Express (Wellington-Napier) are not included in the sale and are in danger of closing, although West Coast chief executive Don Gibson said he was keen to find ways to make them viable.

"We don't close our mind to the opportunities that some of the other services may have a future and a proposition to be put. There might be options we haven't looked at."

Mr Beard said everyone affected by the closing services would be offered a job elsewhere.

About a quarter of Tranz Scenic's 80 staff might have to relocate.

Mr Beard said he met key Government ministers last week to let them know what would happen.

Mr Gibson said West Coast wanted to introduce more modern carriages, and would consider increasing locomotives in service.

Some of the variables still being negotiated between the parties included the number of services and the extent of involvement by other parties in the holding company.

Mr Gibson said West Coast was looking at other parties becoming involved in the holding company, but nothing had been settled yet.

One of those parties was Connex, an ultimately French-owned company that operates services in Sydney, Melbourne and Perth.

Mr Gibson said West Coast carried about 340,000 passengers a year, compared to Tranz Scenic's 450,000 passengers.

Its turnover is $A10 million ($12.5 million), which had grown from $A4.5 million in 1993.

The privately owned Australian company runs a thrice-daily passenger service between Melbourne and Warrnambool - a distance of 267km.

Like Tranz Scenic, the business it owns its trains and workshops and is contracted to the Victorian Department of Infrastructure, which specifies service requirements. Like Tranz Scenic, West Coast has a sizeable tourist component alongside predominantly commuter services.