Transdev Auckland doubles profit, eyes KiwiRail's Wellington contract

Friday 20th June 2014

Transdev Auckland, a unit of the French transportation company that runs commuter rail in New Zealand's largest city, more than doubled profit last year and is now preparing to challenge KiwiRail when its contract for Wellington expires in 2016.

Transdev has partnered with South Korean-based Hyundai Rotem, the supplier of Wellington's new electric Matangi trains, to bid for the contract to operate and maintain the city's fleet. The companies are already partners in Line 9 in Seoul, the only privately operated line on the Seoul Metro, which carries 440,000 passengers a day and claims a punctuality rate of 99.8 percent.

KiwiRail has held the Wellington contract since 2006 but can't be assured of keeping it because the government last year introduced a new public transport operating model, known as PTOM, for bus, ferry and rail, in an attempt to get better value for money by linking payment to growth in patronage and reduced reliance on subsidies. Transdev lifted profit by 103 percent to $4 million in 2013 as it benefited from a change to its contract with Auckland Transport the previous year that rewarded improved management of the city's rail system rather than simply reimbursing costs. Sales rose 15 percent.

“We have been following Wellington rail for a lot of years, waiting for the opportunity,” Transdev NZ managing director Terry Scott told BusinessDesk. “It’s a good fit. It’s what we do already in Auckland. We have a rail safety license so we have good credentials, we have certainly made a difference in Auckland and I believe that we can come down here and also make a difference.”

Greater Wellington Regional Council, which has said it wants greater focus on performance in the new contract, held a market sounding for potential operators of bus, rail and ferry in March and will soon be seeking expressions of interest for rail through a tender slated for completion by October next year. The city is undergoing a transition to electrification and is expected to have completed its transition to a Matangi fleet by late 2016.

Paris-based Transdev, the world’s largest private transport operator, first won an eight-year contract to operate trains for Auckland Transport in 2004. That contract was extended for four years from 2012 while the city replaces its fleet of diesel multiple units and locomotive-pulled carriages to electric trains. In January, Transdev brought all the drivers under its control, ending an agreement with KiwiRail to supply drivers and saving Auckland Transport the premium it paid the state-owned railway on top of wages.

A spokeswoman for Greater Wellington Regional Council said the tender for its commuter rail services would be for a "performance-based partnering contract" with incentives such as a share of revenue growth and an opportunity to extend the contract if the operator meets targets of improving reliability, punctuality and customer service.

"We’ll also be focusing on patronage growth – we and central government have invested heavily in the Wellington rail network over the last few years and we’d like the train to become an increasingly viable alternative to the car for more people,” the spokeswoman said.

Transdev's Auckland contract also comes up for renewal in 2016 and Scott says he will be seeking to win it again while eyeing opportunities further afield, including Wellington's rail and plans for a bus rapid transport network, expansion to Christchurch and into other ferry and bus services.

Under the company's performance-based Auckland contract it achieved 88 percent of arrivals within five minutes of schedule at final destination in April, up from 83.7 in April 2013 and 82.6 percent in the same month of 2012, on a 12-month rolling average basis, Scott said. Passenger numbers rose to a record 11 million in February.

Transdev is hoping to secure a longer contract from 2016 following the transition to electrification, although Scott expects to face competition. Auckland Transport is asking prospective operators to attend a market sounding event on July 2 where it is seeking interest for the city’s passenger rail services for mid-2016, passenger bus routes from mid-2015 and some ferry services for late 2016. Rivals for bus contracts include Ritchies Transport Holdings, Infratil and Brian Souter’s Stagecoach business.

Scott took up the job in October 2012 and had previously spent 32 years in bus operations, most recently running Transdev's bus services in Perth, Australia.

Greater Wellington Regional Council agreed this month to end its contract for trolley buses in 2017 and move to hybrid diesel buses during the transition to an electric fleet. Its bus contract is currently held by Infratil-owned NZ Bus. In March, the Wellington Regional Transport Committee decided to push ahead with planning for a Bus Rapid Transit system in central Wellington, which would involve a dedicated thoroughfare for rapid transit buses.

Transdev runs BRT systems throughout the world and would throw its hat in the ring if it liked the model on offer, Scott said. He is also planning talks with city officials in Christchurch.

BusinessDesk.co.nz

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