KiwiRail has mothballed its Christchurch-Picton TranzCoastal service until mid-August, blaming the Christchurch earthquakes and the Pike River mine disaster for tough financial times.

Chief executive Jim Quinn made the announcement to staff in Christchurch yesterday and suggested in a statement last night that KiwiRail was seeking a partner to help modernise its South Island service, which includes the TranzAlpine.

Rail and Maritime Transport Union general secretary Wayne Butson said the suggestion seemed to be a "euphemism for privatisation".

"All of this has been tried in the past and failed," he said. "The Tranz Scenic service was privatised and purchased by Australian operator West Coast Rail, but it didn't work and Toll had to reabsorb it back into the business."

Quinn said suspending the TranzCoastal until August 15 would minimise financial losses during the low season.

Bookings were low on the Christchurch-to-Greymouth TranzAlpine, running at only 45 per cent of the same period last year.

"The TranzAlpine can continue to marginally contribute at these levels, which are better than we forecast at the time of the earthquake," he said.

"However, the TranzCoastal is a more marginal service normally and will lose money through the low season on these levels.

"For this reason we have decided to suspend the TranzCoastal until August 15 to minimise the financial impact on the business. By committing to a restart date, we believe that we can provide confidence for the wholesale market and be part of the upswing into the summer season and the Rugby World Cup."

The aim was to retain TranzCoastal staff for when the service resumed, he said.

Butson said members would be forced to take leave until then.

Quinn said KiwiRail's end-of-year result would be about $15 million below target, at $105.5m, as a result of the Christchurch quakes, the loss of coal production after the Pike River mine explosion and the softer economy.

- © Fairfax NZ News