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Dunedin Railways Ltd (DRL) is closing for the forseeable future with the likely loss of 51 jobs.

The company operates tourist trains from Dunedin including the Taieri Gorge Railway tour and Pacific Coastal railway lines, which are popular with visiting cruise ship passengers and international tourists.

Chairman Kevin Winders said the track and equipment would be mothballed as the effects of Covid-19 on tourism compounded the company's existing financial challenges.

It was not being closed permanently but trains would be parked up indefinitely, effectively going into hibernation, he said.

PAMELA WADE The Taieri Gorge Railway is popular with overseas visitors.

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"Mothballing is a way of preserving DRL's assets with a view to exploring future options for the company in what will undoubtedly be a very different tourism environment," he said.

The decision did not directly involve Dunedin's famous railway station, which is owned by the Dunedin City Council and leased by the railing company.

DunedinNZ Dunedin Railways Ltd leases space in the Dunedin Railway Station.

The company is majority owned by Dunedin City Holdings Limited (DCHL), a subsidiary of the council, and the council would meet up to $1.05 million of the ongoing costs of mothballing the operation.

Consultation had begun with staff and the union on proposals which would result in 51 job losses, Winders said.

It was proposed that a skeleton staff of four remain to prepare the company for hibernation and maintain the assets.

SUPPLIED A train is seen crossing a bridge on the line through Taieri Gorge.

"We deeply regret the impact on our staff and their families. This is a very difficult time for them and we will work hard to do everything we can to look after them."

The company was facing significant business challenges before Covid-19 struck including a $10m deferred maintenance bill for the Taieri Gorge track, Winders said.

International tourists accounted for about 80 per cent of passenger numbers and the future of that market was uncertain.

"With this outlook, it is simply not possible to keep the business operating as normal."

As part of the decision to mothball the company, the Otago Excursion Train Trust would sell its 28 per cent shareholding of Dunedin Railways Ltd, making DCHL the sole shareholder.

The trust began operating the tours in the 1970s, before going into partnership with the council about 20 years later. It continues to provide volunteers on train charters.

Dunedin mayor Aaron Hawkins said the decision was the only realistic alternative to full closure, but heart-breaking for those involved.

DCHL advised council it would cost about $750,000 per quarter to continue running the railway, with little hope of any significant revenue for at least another 18 months.

The company was not able to sustain those costs and would quickly become insolvent without a significant contribution from its shareholders, Hawkins said.

Rail and Maritime Transport Union general secretary Wayne Butson said innovative thinking was required in the face of unprecedented challenges.

"A forward looking council in Dunedin must work with the Government to explore any and all opportunities to prevent long term economic damage to the Otago region," he said.



The cost of restarting rail operations, especially finding skilled staff, would be considerable.



The longer mothballing went on, the greater danger the iconic brand would lose its profile, and company assets would inevitably degrade, he said.