The National Infrastructure Plan reiterates the Govt wants KiwiRail weaned off its $90m-a-year operating subsidy “over time” but says there are unanswered questions related to rail’s potential higher value under the Emissions Trading Scheme, smarter demand management and more targeted road pricing. What the Plan does do is note consideration must be given to “preserving the option value of key rail corridors” by catching up on deferred maintenance, a signal decades of neglect could be addressed, where lines make economic sense.

KiwiRail’s total freight load was down marginally in its first half, even taking into account strikes which disrupted coal haulage across the South Island. The railway’s performance is a work in progress, with net profit in the half year at $125.6m, two thirds below the target in its statement of corporate intent. Full-year EBITDA of $59.6m is still the railway’s target.

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NZ’s freight, transport, distribution and infrastructure news authority. Takes a critical look at understanding and analysing policy and initiatives from Govt and industry. Covers road transport, shipping, rail, air, ports, fuel taxes, supply chain sustainability, security, dangerous goods transportation and warehousing This analysis of news and trends is vital information for all those involved in the import and export sectors. Published every Thursday 46 issues per year.

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The infrastructure plan shows a preference for allowing organic development of the national rail network. Lines which thrive and those which decline will be determined “to a large extent by the decisions of our major exporters and by the configuration of our ports.” KiwiRail’s natural advantage in the transport of bulk commodities and in servicing ports has been recognised and the Plan acknowledges rail will continue to play an important role in transport infrastructure.

Trucking companies and rail freight customers can look forward to improved inter-island freight services with KiwiRail considering expanding the Interislander ferry Aratere to boost its capacity. General Manager for Interislander Thomas Davis says the company is looking at increasing the capacity of the Aratere, in order to handle more passengers, vehicles and rail freight in some critical key time slots when the present capacity is at a premium.

Davis adds rail capacity between Auckland and Christchurch is constrained on the Cook Strait with only two rail ferries with limited capacity at key times. Increasing capacity will allow more freight to move by rail on existing trains and ferry sailings improving the productivity of the rail network and removing trucks from the road.

Interislander is investigating a 29 metre extension to the ship, currently 150 metres long and the project would also include a revised bow design to boost the ship’s sailing qualities. “The alterations to the hull and bow will improve the way the Aratere cuts through the waves, boosting the ability to achieve on time performance and reducing fuel consumption. The results of initial computer modelling also show the changes will reduce the wake produced in the Marlborough Sounds by as much as 30%.”

Black box technology as used in aircraft to help determine the cause of crashes is unlikely to be introduced in NZ trucks in the short term due to the cost of introducing the technology. The devices continuously record information, such as speedometer readings, and if a crash occurs, the few seconds preceding impact are stored for retrieval. Overseas “black-box” technology is being incorporated in vehicles to record things such as speed and braking in the run-up to a crash. But Road Transport Forum CEO Tony Friedlander says it would be exceptionally expensive to retrofit the technology in the existing truck fleet, as proposed in Aust.

The issue has arisen after the recent Asia-Pacific transport ministers’ meeting in Melbourne which discussed a proposal the recorders be required in commercial vehicles to store data about the last few minutes leading up to a crash. In Aust, Linfox Logistics is steadily installing “event data recorders” in vehicles, but Friedlander notes the rest of the Australian fleet “has a lot further to go.”

Asia-Pacific Economic Cooperation (Apec) countries - of which NZ is one - are also working out if it is feasible to adopt the recorders. Truckers have expressed concern about data from them being used in court. But event data recorders have been used for years in aircraft and more recently incorporated in cars by makers such as Ford, Holden and Toyota to monitor speed, seat belt use and air bag release after a crash.

After grounding planes in 2009, Qantas CEO Alan Joyce plans to add some 340,000 seats of capacity in the next 12 months. Adding capacity comes as Air NZ’s biggest rival begins a radical re-shape of its fleet, cutting back on First Class seats and spending $A400m upgrading in-flight entertainment and seating. The refit follows Air NZ’s roll-out of new so-called cuddle-class seats which can double as small beds and a push to offer ‘premium’ economy.

Qantas disappointed analysts with a 72% decline in first-half earnings to $A58m, missing estimates, and Joyce highlighted the steady decline in demand for First Class as business passengers trade down. The Sydney-based airline’s best performance came from its low-fare Jetstar unit, where profit almost tripled to $A121m. Qantas withdrew its own-brand planes in NZ in favour of Jetstar. Qantas plans to reconfigure 29 aircraft including eight Airbus A380s on order, which now will feature business, premium economy and economy but no First Class. Nine Boeing 747-400s will get the same treatment.

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NZ’s freight, transport, distribution and infrastructure news authority. Takes a critical look at understanding and analysing policy and initiatives from Govt and industry. Covers road transport, shipping, rail, air, ports, fuel taxes, supply chain sustainability, security, dangerous goods transportation and warehousing This analysis of news and trends is vital information for all those involved in the import and export sectors. Published every Thursday 46 issues per year.

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How will this impact on Air NZ? The national airline is keen to put its own stamp on new long-haul routes using fuel-efficient planes able to reach into Asia and India. Expect Qantas to aggressively market its new capacity on the already-busy trans-Tasman routes. Air NZ reports its interim earnings on Friday, which will reflect a drop in yields, offset by lower fuel costs. The short-term outlook for earnings remains negative. IATA has estimated the airline industry will lose $US5.6bn this year, an improvement from 2009’s $US11bn of losses.

Auckland City Council’s submission to the Govt on the third Auckland Governance Bill raises concerns about how council-controlled organisations, such as Auckland Transport, will operate. Council-Controlled Organisations (CCOs) will be set up before the new Auckland Council is established and will control key functions such as transport, water, regional facilities, and economic development. However, the council argues greater guidance should be provided on when CCOs should be established, which should be when the activity has a well-defined purpose and focus.

The submission supports the additional accountability requirements for CCOs but advocates Auckland Council should be given power to make its own governance arrangements as other local authorities do. The submission argues for Auckland Transport to be responsible for strategic transport assets and functions, focusing on delivering regionally significant transport activities. However, it wants to leave decision-making for local transport with the Auckland Council, including local community boards.

The submissions says “It is essential that there is good integration between transport and other Auckland Council functions.” The Regional Governance Committee also suggests Auckland Transport be established in the same way as all other CCOs under the Local Government Act 2002. Chairman of the Regional Governance Committee David Hay says “transport is a key driver for change to Auckland’s governance, so it is essential that we get it right.”

The Govt and its transport agency are at odds over the Govt’s pledge to complete the Waikato expressway within 10 years with new figures released by the NZ Transport Agency indicating it will not be completed within the promised timeframe due to funding constraints. Data tabled at Waikato’s regional transport committee meeting by NZTA show the Hamilton bypass section of the expressway, expected to cost $550m to $650m, is not now scheduled for completion until 2024-25, with construction not starting until 2018-19.

News of the delay has surprised local politicians. Chairman of Hamilton City Council transport committee Dave Macpherson expressed concerned the new timeframe is six to seven years after the 10-year promise made by the Govt with construction not even starting until the expiry of the original timeframe. Transport Minister Steven Joyce has moved quickly to try to play down the prospect of delays. He says the NZTA suggestion the Hamilton bypass section completion date has been revised is “not the final word” and is subject to change as the Govt does all it can to complete the project within the planned timeframe. He adds the Hamilton bypass is “a challenging one” to complete but he doesn’t accept the agency’s timetable as “final” and the Govt will get as close as possible within the 10-year window.

Fonterra and KiwiRail are yet to hold formal talks on any serious expansion of rail freight from its South Island plants but the potential for bulk milk haulage is clear. Gary Romano, managing director for Fonterra Trade and Operations, floated the idea of a “milk train” potentially providing a more efficient link between Edendale and a wider milk catchment. Potential routes would include Oamaru to Edendale (near Invercargill) and Sterling to Otautau, giving Fonterra access to dairying areas in north and south Otago.
Fonterra is already leaning more heavily on KiwiRail since announcing it is cutting back on the number of ports it uses and trimming its key supply routes. The ability of KiwiRail to win more business may come down to the efforts of CEO Jim Quinn since his appointment in March 2009. Romano says Quinn has brought “a totally refreshing commercial perspective on life.”

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The commissioning of the ED4 drier at Edendale, the biggest such plant in the world, is already providing spin-off benefits to KiwiRail, which has added a return train between Dunedin and Edendale. Fonterra has an inland port development at Mosgiel on the old Fisher & Paykel Appliances site. KiwiRail says additional product from Edendale will be added to existing services.

Transit times for road freight could potentially increase if a safety star system for the country’s state highways is adopted. The rating system could provide the Govt with a basis for reviewing speed limits according to roading standards with the prospect more dangerous routes will have lower speed limits imposed. Transport Minister Steven Joyce says the issue of variable speed limits will be tackled in a national road safety strategy, for which he expects to present recommendations to the Cabinet next month.

A Ministry of Transport discussion paper emphasises reducing speed limits on high-risk rural roads and cutting open-road mean speeds by 5km/h could save up to 60 lives a year. The safety strategy is being finalised as a working group of Govt organisations and the AA is busy allocating star ratings to the country’s 10,900km-long state highway network.

Traffic Institute vice-president John Gottler supports the move saying his organisation of consultants and local govt transport politicians and engineers believe blanket speed limits are outdated in many instances. The institute wants a scientific basis for setting limits according to the characteristics of each road. The star rating exercise is being conducted as the second stage of a road assessment programme called KiwiRAP, and has involves videotaping the country’s state highways to provide in-built safety ratings for them all.

Cargo volumes at South Port fell 8% to 984,000 tonnes in the first half, contributing to a 24% drop in profit to $1.7m, reflecting the waning fortunes of the global economy. Chairman John Harrington says it may take a further 12 - 18 months before complete confidence is restored to global markets, while NZ’s economy still has “a sense of fragility.” Trading for the remainder of the financial year “appears more buoyant” than 12 months ago.

Global demand for dairy, meat and forestry goods is relatively strong and should help underpin a steady resurgence in export activity, Harrington says, predicting a full-year profit of $3.5m. Full-year profit will be affected by the outcome of arbitration with New Zealand Aluminium Smelters which cut output last year when a transformer failed.

Don’t expect any movement on consolidation of North Island ports this year. Any discussions involving Ports of Auckland will have to wait until after elections for the new super city in October. Ports of Auckland CEO Jens Madsen says Port of Tauranga is “no longer on our radar” after an approach for an amalgamation of container activities was rejected by Tauranga a year ago. He says whether a tie-up can be revisited in future remains to be seen “but perhaps in 3 to 5 years.”

Auckland and Tauranga account for 60% of NZ’s container trade and Madsen sees some sort of alliance, stripping out duplication, may help ensure NZ continues to attract shipping lines which will gradually move to larger ships and fewer ports. Madsen says the risk of an Aust port maneuvering to become the hub to NZ’s spokes “is a real one.” With ports across the Tasman spending hundreds of millions to expand and upgrade, winning business from NZ would be the “icing on the cake.”

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NZ’s freight, transport, distribution and infrastructure news authority. Takes a critical look at understanding and analysing policy and initiatives from Govt and industry. Covers road transport, shipping, rail, air, ports, fuel taxes, supply chain sustainability, security, dangerous goods transportation and warehousing This analysis of news and trends is vital information for all those involved in the import and export sectors. Published every Thursday 46 issues per year.

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Pressure from shipping companies looking to stem losses by cutting costs will continue for the next few years. Alphaliner fleet projections www.alphaliner.com are for a global capacity glut to remain until 2013, with idled vessels amounting to 1.44m TEU capacity currently. Madsen says it’s a once in 20 years situation. At a container shipping conference in Sydney, he urged port shareholders to be patient and accept lower returns as companies adjust to the changing shipping sector.