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Strait ferries weigh on government books

Published: 6:01AM Thursday February 12, 2009 Source: NZPA

  • Interisland ferry in Wellington harbour (Source: NZPA / Ross Setford)
    Source: NZPA / Ross Setford

The government faces some big investment decisions in the Interislander ferry business it now owns at a time when ferry passenger numbers are tumbling.

The Arahura ferry, which had a $9 million refit last year, will need to be replaced by 2016.

The need for expensive replacement Cook Strait ferries is among a number of issues raised in a briefing to shareholding ministers compiled by KiwiRail.

Government-owned KiwiRail runs the Interislander ferries, which compete with privately owned Bluebridge.

The ferries also compete with airlines in the passenger travel market and suffer when airlines discount.

The briefing reveals that passenger numbers on the Interislander ferries are down 6.5% on budget and 8.9% on last year.

Other issues include that Maritime New Zealand wants a new charging regime based on passenger capacity, trebling what the Interislander currently pays.

The Interislander ferry business does not have a clear hedging strategy for its fuel costs and is unable to recover increased fuel costs from the passenger business.

The Interislander pays $10 million to CentrePort and Port of Marlborough a year.

The ports will not cut charges to their "captive" ferry customer, or reveal the costs the charges are calculated from.

The long mooted option of moving from Picton to Clifford Bay "is in abeyance but not off the  agenda", according to the document.

The 25-year-old Arahura, which can carry 538 passengers, is the only ferry owned by KiwiRail. The Kaitaki is leased to 2010, with a option for a three year extension, and the Aratere is now leased.

The Arahura underwent a refit in 2008 to keep it compliant with Safety of Lives at Sea regulations for carrying passengers beyond September this year.

The vessel is now able to carry 1,150 tonnes on rail decks, up from a maximum of 900 tonnes previously.

"The refit was commissioned as a stop-gap measure pending the outcome of negotiations on the future of rail in New Zealand.

"It is intended that the Arahura will need to be replaced by 2016 or before," the document said.

A new vessel will also require investment in new road and rail link spans and passenger gangways at ports.

The Aratere may also need replacement at the same time, though there is an option of reconfiguring it to increase its capacity, speed and reliability.

The Aratere cost $132 million to build and it quickly earned the nickname "El Lemon' after a number of breakdowns and near disasters.

The vessel was repaired by previous owners Toll Holdings.

Another ongoing issue of the imposition of 18 knot speed limits in the Marlborough Sounds by Marlborough District Council. At that speed ferries cannot achieve three sailings a day. The Arahura and Aratere are protected under a grandfathering clause.

KiwiRail itself is the Interislander's biggest customer, spending $28 million a year on ferry travel for its freight. This is six times more than the $5 million a year spent by second biggest customer Mainfreight/Owens and the $4.9 million spent by Strait Freight. Halls Refrigerated Transport spends $4.5 million a year.

Commercial road freight provides 34% of Interislander revenue, while passengers and passenger vehicles provides 45%. KiwiRail as a customer provides 18% of revenue.

The Cook Strait ferries are traditionally built to be rail capable, which means trains can be driven on the ferries. This kind of ferry is rare and is difficult to lease second hand.

The Arahura and Aratere were purpose built and contain dedicated rail decks for rail freight. The Kaitaki, leased when Toll Holdings owned the business, cannot accommodate rail traffic.