KiwiRail chief executive Peter Reidy says Auckland's transport network is at "crunch point" with demand from freight and passengers increasingly at odds.

Reidy said KiwiRail was working with Auckland Transport, which contracts train operators to run Auckland's commuter train services, and the New Zealand Transport Agency, responsible for an integrated transport system nationwide, to build more network resilience.

"Auckland is at crunch point and if we don't get it right, it's really going to cause problems," he said. "We can't build our way out of this."

On Auckland's rail network, passenger services every 10 minutes are clashing with an increase in freight services to and from the port and inter-modal transport hubs, he said. Nationally KiwiRail handles 25 per cent of the country's exports and over 2.7 million passenger trips.


Reidy said the Auckland Transport Alignment Project, which released an interim report in June on developing Auckland's transport system over the next 30 years, hadn't really considered the rail freight challenge.

Some groundwork on joint planning for rail over the next 15 to 20 years has now been done and the boards of AT and KiwiRail have met a few times on how to deal directly with this issue, he said.

The Government confirmed this year it would continue to pour money into KiwiRail despite the likelihood it will never be able to generate profits because its cashflow-positive freight business is overshadowed by the high cost of maintaining the rail network. The rail operator has been told to reduce its reliance on the level of government investment which is currently running at around $200 million a year. KiwiRail's full-year results are due out this month. It reported a $16.2m net loss in the six months to December 31, 2015, following falling revenue from the rail network due to a drop in coal and milk freight and one-off restructuring costs.

Reidy said $39 million in costs were cut last year and staff levels have dropped 15 per cent in the past two years. He'll put figures before government within a few months on what funding levels it will need for the next few years, including optional investment such as new tunnels and further electrification and expects decisions on those early next year.