More than 50 staff will likely be made redundant as Dunedin Railways Limited (DRL) mothballs its track and equipment in a bid to avoid closing entirely.
In a statement released on Monday, chairman Kevin Winders said mothballing was 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”.
Consultation began on Monday on proposals which would result in 51 job losses, Mr Winders said.
“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.”
DRL would retain a skeleton staff of four to prepare the company for hibernation, and to maintain selected assets that will be kept.
DRL’s existing business challenges, even when operating in a buoyant tourism market, were well known, Mr Winders said.
“The impacts of Covid-19 exacerbate these challenges severely because the company is largely reliant on international tourism which makes up 80% of DRL’s total passenger numbers.
“We are unlikely to see international visitors return in the 2020/21 summer and the outlook beyond that is uncertain at this time. With this outlook, it is simply not possible to keep the business operating as normal.”
The Dunedin City Council has agreed to meet the ongoing costs of mothballing the operation, he said.
Dunedin Mayor Aaron Hawkins said the job losses were “heart-breaking”.
Mothballing the company was the only realistic alternative to full closure, Mr Hawkins said.
DCHL had advised the council that continuing to run Dunedin Railways would cost about $750,000 per quarter ongoing through winter, with little hope of any significant revenue for at least another 18 months.
The company was not able to sustain these costs and would quickly become insolvent without a significant contribution from its shareholders, Mr Hawkins said.
The council has agreed to meet up to $1.05 million of the ongoing costs of mothballing Dunedin Railways from June 30, 2020.